Mark Pestronk
Q: Our agency is going to move into a small, stand-alone office building where we will be the only tenant. We will have to pay all utilities and operating costs. The landlord has presented us with a 56-page lease to review before we sign it. What are some typical traps to look out for, and what changes can you suggest to avoid falling into them?
A: Here's a practical checklist for agencies negotiating office leases such as the one you describe, as well as for those that might be moving into retail and office spaces of all kinds under leases that require tenants to arrange or pay for services.
First, the lease probably states that you are renting the premises "as is," which means that the landlord is not going to fix anything for you before you move in, or even after you move in if the problem existed beforehand. However, unless you are an office real-estate expert, you cannot really know what might be wrong with the place before you move in, so try to add a clause stating that the landlord represents and warrants that all the structural elements and building systems such as heat and air, plumbing, electrical, fire safety and sprinklers, as well as the grounds, landscaping and parking lot are all "in good condition" and "in compliance with all applicable laws."
Second, if you have to pay for all services and all repairs, you should try to make an exception for repairs of latent defects that you could not have known about, such as mold in the walls. In addition, if you have to pay for repairs that have a useful life that extends far beyond the lease term, such as a new air system, try to provide that the landlord will reimburse you for the value of the remaining useful life at the end of the lease.
Third, if each party is responsible for some services and repairs, make sure that there is a very clear description of which party is responsible for arranging which services and what services you must pay for. Is the landlord in charge of emptying trash or are you? If a plate glass window gets smashed, who calls the glazier and pays for the new glass? There will probably always be gray areas where it is not very clear which party is responsible, but the sharper the delineation of responsibilities, the more likely you will be able to avoid arguments later.
Fourth, if the landlord is responsible for some services and repairs, such as fixing the air conditioning, and if the landlord fails to do so within, say, seven days after you gave written notice, specify that you can get the repairs done and deduct it from the rent. Most landlords would say no to this change, but it is certainly worth trying to get.
Fifth, although all office leases state that the tenant cannot make any alterations without the landlord's consent, try to get consent in the lease for cosmetic alterations such as paint and carpeting without having to get permission later.
Sixth, try to delete any clauses enabling the landlord to lock you out if you are in default on the rent or otherwise allegedly in breach of the lease according to the landlord. In most states, such self-help measures are legal for office leases (but not apartment leases).
Finally, show the landlord how financially strong your agency is and then try to talk the him out of any personal guarantees in the lease. That way, if your corporation or limited liability company goes out of business and has no assets left, the landlord cannot come after you personally.