Drafting Tips

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Depending on the particular synergy of tenants that you are going for, renting space to a restaurant tenant may be a desirable way to fill up space in your building or draw customers to your center. But problems can arise with restaurant tenants that just don’t apply to retail tenants. For example, if the restaurant tenant draws so many customers that long lines form, or crowds gather in the common areas near the restaurant, someone could get hurt if a queue or cr...

CRE owners should be aware of situations in which a license agreement may prove to be more beneficial than a leasehold interest. The key factors that distinguish a license from a lease are the ability to revoke the licensees’ use at will, and the degree of control that the property owner maintains over the licensed premises.

Rent acceleration clauses in commercial real estate leases are often the subject of contentious negotiations between the parties, and increasingly, the subject of review by courts when enforcement is challenged by tenants and guarantors.

Rent acceleration clauses protect the owner by providing it with the ability to demand immediate payment of all future rents outstanding upon default by the lessee. They provide an obvious benefit to the owner, but will give rise ...

In a strong tenants’ market, you might find yourself fighting for good tenants that help the synergy at your center or serve as a destination spot that will draw and keep foot traffic. You may be forced to offer incentives, like a tenant improvement allowance (TIA) that’s bigger than you want to give. If giving a higher TIA than you planned won’t work for you, you can offer the tenant a figure you can live with and then loan it the extra amount that it...

Ideally, you’ll want to keep square footage and dimensions out of your lease or attached floor plan because those numbers can easily become the focus of a dispute. But you may have to include square footage or dimensions in certain circumstances—for example, if you’re dealing with a highly desirable prospective tenant that demands this inclusion, or the fixed rent or a rent escalation is governed by a formula that includes the square footage number.

Many tenants need major improvements made in their space in order to accommodate their businesses. Franchisee tenants need space that looks a certain way, retail clothing stores need shelving, and restaurants might need built-in seating. This will probably be spelled out in the tenant improvements section or other sections of the lease.

Office building tenants with long lease terms may be concerned that their office space will begin to look shabby in the future. These tenants argue that the rent they’ll be paying in the last few years of the lease won’t reflect the reality of wear and tear like peeling paint and stained and frayed carpeting. If they demand that you refurbish items in the space at a set future date—and pay for all or part of the work—should you agree to it in the...

Commercial real estate lease assignments might seem straightforward for both office and retail space: A tenant that wishes to leave its space finds another tenant willing to take over the space and the original tenant’s lease. And, typically, the lease’s assignment clause will dictate the requirements that both the new and original tenant must meet in order to do this. But don’t be fooled into thinking that because the concept of an assignment is basic...

If you have a tenant that fails to pay its rent, you may decide to send it an eviction notice so that you can kick it out of its space—and even start the eviction proceeding. But if the tenant pays you some—but not all—of its overdue rent after getting your eviction notice (and after you’ve started the eviction proceeding), there might be an unexpected problem. If your lease doesn’t say whether you can continue to evict the tenant after acc...

A prospective tenant that’s negotiating to lease an entire building or a large space may want to inspect the condition of the space or the underlying property before signing the lease. For example, it might want to do environmental testing or have an engineer or contractor check the condition of certain aspects of the property. Don’t give a tenant unfettered access to enter the building before you’ve signed a lease with it.