Commercial Landlord-Tenant Law
Commercial Lease Negotiations, Drafting, Review, and Litigation Services.
Lease Negotiations, Drafting, and Review: It is not uncommon for a commercial lease to be over 50 pages long. As such, you need an attorney with the patience and diligence to review each page, understand your business, and negotiate key points. I like the acronym DRAFT.
D- Damages
R- Rate
A- Allowances
F -Flexibility
T- Term
While this is not all-encompassing, it is an excellent starting point for developing your negotiation strategy.
In terms of Damages, what happens if a lease does not go as planned is just as important as the monthly rental payment. For landlords, you want clear terms on sub-leasing, assignment, bankruptcy, default, and so on. For Tenants, it is important to seek flexibility, guideposts on what types of damages are and are not allowable, and provide a procedure for mitigating damages.
In terms of Rate, this is all dealing with the cost of the lease including Rent, Operating Expenses, Maintenance Expenses, and so on. Both parties need to ensure they are receiving a fair deal.
In terms of Allowances, this is dealing with the bonus stuff such as a construction allowance, promotional items, and so on. Again, these are all highly negotiable items and both parties need to ensure they receive a fair deal.
In terms of Flexibility, you want a strong lease that provides some flexibility. This is important for both Landlords and Tenants. An unbending sword shatters when tested in battle. Similarly, Landlords need to be able to enforce the lease while Tenants need to be able to comply with the lease. Damages should never be the goal for either party. Ideally, both the Tenant and Landlord should seek to have a very long and profitable relationship without much drama.
Term deals with how long a lease will last plus renewal options, buyout options, and so on. Again, all are highly negotiable depending on the business.
Litigation: The most common problems that arise in a commercial landlord and tenant relationship are lease violations such as failure to pay rent, failure to comply with building provisions, and so on. As such, breach of contract is a common claim. To learn more please read my article on breach of contract litigation. In addition, other various claims may stem from the landlord-tenant relationship including theft claims, unjust enrichment claims, defamation claims, and so on.
It is important to address problems early on to prevent them from snowballing. Relationship building is your 1st line of defense. If the landlord and tenant have a good working relationship it may be possible to avoid costly litigation with a simple sit-down conversation. If that does not work, then you may consider a more formal type of negotiation known as mediation. Then if that does not work, litigation is always a viable option but a more costly option. What is appropriate will depend on the specific situation.
General Tips:
Contact An Attorney Before The Term Ends: Often, leases have provisions that address what happens when the term ends. If you want until after the term ends to contact an attorney, then you can create issues. Unbeknownst to many tenants (surprisingly), you may not need to renegotiate your entire lease. Many commercial contracts contain renewal terms where you may just have to send an email to renew or schedule a time to address rental value. IE, why make life difficult? Contact an attorney before your term ends.
Do Not Stop Paying Rent: Tenants, I am going to give away the secret ingredient to creating leverage in litigation. Do not stop paying your rent without talking to an attorney 1st. Do not google ways not to pay rent. A smart landlord has already had an attorney review their lease and it includes specific provisions for what happens when you stop paying rent. If you have paid your rent on time, the landlord has breached the contract, you have not breached the contract, and you are ready to sue, then you are in a good position to negotiate. Magic can happen when you take the bullets out of your opponent's gun. As such, talk to an attorney 1st.
There is No Such Thing As A Standard Commercial Contract: Contrary to popular belief, there is no such thing as a standard commercial contract that everyone uses. There is no statutory form in Colorado. There may be common forms in use. For example, a large landlord may have a standard template they developed or an organization developed, but that does not mean it will be the same template the landlord down the road uses. As such, you should never believe that you are just signing a standard contract.