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Office Leasing Toolkit (National and Select States)
Practical Law Toolkit 5-506-2518 (Approx. 41 pages)
Office Leasing Toolkit (National and Select States)
by Practical Law Real Estate
| Maintained • ExpandCalifornia, Florida, Georgia...Illinois, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, Texas, USA (National/Federal) |
Resources to assist landlords and tenants in understanding and effectively negotiating their office leases and related agreements.
All companies need office space to house their employees and run their businesses. At the onset, companies invest a lot of time and money in finding the right space and finalizing the lease agreement. Most office leases are long-term commitments, often five years or more, with ongoing obligations and risks. Companies should negotiate and enter their office leases with an understanding of how to:
- Identify short- and long-term business goals. The clearer the business goals, the more likely the finalized lease agreement will be an effective and useful tool for the company and its business vision. For example, if the company believes it will encounter growth soon, the company should ensure that additional space options are negotiated during the letter of intent and lease negotiations.
- Effectively negotiate the business terms and lease provisions. The company should understand what specific issues and lease provisions affect the company's ongoing obligations under the lease. For example, a tenant's obligation to pay to the landlord its proportionate share of the building's operating expenses under the lease can be negotiated by the tenant to allow for a more fair and balanced clause that effectively saves money for the tenant each lease year.
- Obtain appropriate protection. The company should consider the time and money it invests in the space and whether it should negotiate certain protections to ensure the lease is not prematurely terminated by intervening interests. For example, in many instances a landlord's lender has priority over a tenant's lease and may be able to terminate the tenant's lease if there is a foreclosure action. A tenant may want to obtain a subordination, non-disturbance, and attornment agreement from the landlord's lender, to ensure that the landlord's default under its loan, and the subsequent foreclosure by the lender, would not permit the lender to prematurely terminate the lease.
The continuing costs of an office lease can affect a company's bottom line. A company planning to lease office space should use general practice tips and negotiating techniques to better assess and allocate the costs and other risks associated with an office lease.
This Office Leasing Toolkit provides resources designed to:
- Assist companies in negotiating and managing their office leases.
- Best reflect the business terms while recognizing market trends.
- Achieve cost-savings over the lease term.
- Provide for a certain amount of flexibility that suits the company's business needs.
- Protect the tenant from unexpected risks and intervening third-party interests.
Additionally, leases are generally governed by the laws of the state where the premises are located. The following resources are designed to provide guidance to companies with multi-state leases:
- Real Estate Finance: State Q&A Tool: Question 9 (discussing the landlord's rights in a tenant's personal property in the premises).
(See also, State-Specific Content.)