Is Your Form Lease Outdated?

Has this ever happened to you? A Tenant client asks you to review a Landlord’s proposed lease for space in an established shopping center. You start reviewing the lease and find that it contains provisions related to delays in Landlord’s original construction of the center. It may contain a site plan exhibit which names occupants who have already come and gone from the center. Or it may contain a construction exhibit appropriate for a new center but not for an established one. You also find an exhibit listing exclusive use rights granted to other tenants in the center. When compared to the current marketing materials for the center, you realize that several of the tenants who possessed exclusives no longer occupy space in the center. You also suspect that some of the tenants named in the marketing materials may have exclusive use rights that are not listed on the lease exhibit you just reviewed.

From the Tenant’s perspective, this is a very frustrating situation. The Tenant’s attorney must now help the Tenant decide how much time and effort should be expended in cleaning up the Landlord’s outdated form. The Tenant does not want to pay its attorney to do the Landlord’s job. But the Tenant needs a good lease with terms and exhibits that match current conditions, not those of 20 years ago. In conjunction, the Tenant needs a lease that contains a clear delineation of each party’s obligations, particularly with respect to the condition, maintenance and replacement of things like the HVAC.

From the Landlord’s perspective, having an outdated lease can cost money. The Landlord is possibly at risk of misrepresenting material facts. The Landlord also needs a lease that clearly delineates the parties’ obligations. The Landlord may also be missing out on additional rent if the lease contains an outdated percentage rent provision that does not adequately address all the ways its Tenant may be generating sales, some of which may be outside the scope of an outdated definition of “gross sales.”

Whether you are a Landlord or a Tenant, it is well worth the relatively small expense of retaining a qualified real estate attorney to review, negotiate and revise your lease.