We review many leases for prospective clients and I’m continually surprised with some of the clauses that I read. I’m surprised because these tenants signed a document that in the vast majority of cases does not adequately protect them from unbudgeted cost increases or provide clear flexibility to grow or contract. Why is this? I believe it is for the following reasons – 1) tenants and/or their brokers don’t understand how all of the details tie together in a particular lease clause, 2) tenants and/or their brokers want to stay “big picture” and not get lost in the weeds, 3) the landlord makes verbal representations that we will deal with these issues “down the road” or 4) the tenant did not want to hire a real estate lawyer that specializes in office leasing early on in the process.
Here are my thoughts on how tenants can better protect themselves during the life of a lease.
- There are too many commercial brokers in Denver and most of them are very good at sales. There is a wide variance in a broker’s skill level and knowledge, even among brokers with a long tenure in the business. Be smart about who you are hiring to represent you.
- In today’s world it is easy to understand why people don’t want to focus on details. In a lease this approach will typically cost you in ways that may not show up for a few years. If you are OK with that, great. If not, take the time to understand the issues and/or hire a representative that you trust will pay attention to the details.
- Written agreements trump verbal representations, every time. This is real estate 101. Many landlords do try and do the right thing and stand by what they say. That being said, most buildings will sell during the term of your lease and you will be dealing with a party you’ve never met. When an issue arises they will reference what is written in the lease. Make sure the really important clauses are written with a level of detail that will protect you the tenant.
- Quite often tenants utilize their in house legal team. While this is better than not having a lawyer many times these lawyers are not specialists in real estate law or are spread too thin with their primary corporate role. The worst case is not hiring a lawyer which I can only guess is about money. In most cases this is a small investment with a positive return.
In summary, the most tenant favorable lease document will be achieved by working with a representative that is an expert and having legal counsel that specializes in real estate law. It is even better when these two professionals work jointly together all the way through document execution.