Dos & Don'ts

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A tenant that moves out before the lease expires may create costly problems for you—namely, finding a replacement tenant. Despite the breach—and the aggravation and cost it has caused for you—the tenant may try to recover its security deposit. That is what happened to a New York owner who, fortunately, had protected himself from such a situation by including a security deposit clause in the lease.

Most commercial leases contain an indemnification clause specifying whether and for what amount of money a tenant and owner must indemnify one another when they are sued. A lease may also include an insurance procurement clause that requires the owner and tenant to insure specific areas of the property. However, you shouldn't argue that, regardless of the terms in the indemnification clause, you are not required to indemnify your tenant for accidents that occur in t...

Resist the temptation to allow a good tenant to stay after the lease expires, without signing a new one. It will become a “tenant-at-will,” giving it a potentially powerful status—even without a lease. A shopping center owner in Georgia was faced with this situation when a tenant-at-will claimed that it did not owe operating costs for the time period that it continued to run its dry cleaning business after the lease had expired.

Three years into a tenant's five-year lease, the tenant and a new business signed a new lease with the owner under which the new business owner was to take over the space, but the tenant would remain responsible for the remaining two years of its original five-year lease.

An owner claimed that a tenant failed to pay rent and other charges in its lease when due and additionally owed holdover rent for the third and fourth years of the tenancy. According to the owner, the tenant owed it more than $3.1 million.

The tenant alleged that the owner was unjustly enriched by the tenant's expenditures—including monies expended for landscaping, water, and garbage collection.

A tenant alleged that after he entered into possession of two units in a commercial building under a rental agreement, he found that the door lock had been changed and a “for rent” sign had been put up. He was told that he had been “locked out” because he failed to pay rent. He was let back in two days later. The tenant sued the owner for lost wages.

If your retail tenants install arcade machines in their spaces to attract customers and boost revenue, chances are you're not collecting all the percentage rent you're entitled to. Many retail tenants install assorted arcade machines—such as video game machines, virtual reality computer games, and pinball machines—in their spaces. These arcade machines (whether coin-, computer-, or credit-card operated) provide entertainment to customers and children...

If a tenant with a successful Web site turns its store into a service center, a display room, or merely a counter where customers can return or exchange purchases from its Web site, there may be no merchandise for sale—and that could spell bad news for your bottom line. The service center won't generate any percentage rent if the tenant doesn't make any sales there. And a space used only as a service center will probably draw fewer people to your center th...

Pay telephones can be a good source of additional revenue. Despite the popularity of cell phones, many people still rely on pay phones because they don't have a cell phone or it isn't working properly. But your lease may not give you the unfettered right to install pay phones on the exterior walls of a tenant's space, without getting the tenant's permission first. And the tenant may withhold permission unless you agree to share the revenue generated by t...

Under unusual circumstances, an oral understanding may lead to a legally enforceable contract. But in the leasing area, that's rarely the case.