Best Practices for Drafting Commercial Leases in 2021

The last year has revealed uncertainty in the commercial real estate market.  More than ever, commercial landlords need a watertight lease. It is essential that you assess your commercial lease templates and make any necessary changes to best protect your investments.

Take Steps to Avoid Future Pandemic Liability

Include provisions in the lease that ensure the tenant will take all reasonable steps to ensure the leased space is kept safe for employees, customers, and visitors in compliance with applicable OSHA guidelines, and federal and state regulations.  Likewise, landlord should have systems in place to ensure that common areas under their control are kept safe for employees, customers, and visitors to the property, and are in compliance with applicable safety regulations.

Envision Another Pandemic Shutdown

The COVID-19 pandemic has shown how crucial force majeure clauses are.  Moving forward, you will need to specify how tenants can expect the landlord to respond to these kinds of events. You will also want to address how possession of the premises and the enforcement of the other terms of the lease will be impacted if a force majeure event occurs.

Detail Sublease Permissions and Expectations

Many businesses were forced to close their doors last year.  The lease needs to specify whether tenants may sublease their space. The lease should detail the circumstances under which these agreements may be made and what allowances a tenant may make.

It is also advisable to have a sublease agreement – like a lease agreement – that the landlord, the tenant, and the sublessee will sign to help the protect all parties to the lease and sublease.

Identify Tenant Costs in Addition to Rent

Landlords will want to specify the expenses tenants are responsible for during the term of the lease.  This can include insurance requirements, common area maintenance, property taxes, and improvements.

Specify the Use of and Conditions for the Return of Space

Landlords should ensure that the lease documentation details what tenants are permitted to do within their leased premises.  The COVID-19 pandemic saw many businesses forced to modify or alter their business models.  For example, restaurants saw in-person dining come to a halt, but carry-out business with increased vehicular and pedestrian traffic increased significantly.  How should that affect the terms of the  lease?  Similarly, the lease should document how tenants are expected to return possession of the leased space. You can detail guidelines for cleanliness and damage and specify what consequences may await tenants who do not meet these expectations.

Prepare and Position Yourself for Litigation

The lease should be written in a way that anticipates having to go to court to enforce the lease.  Your attorney will recommend that you detail the jurisdiction that governs the property and where a dispute over the lease must be brought.  The landlord should also note which actions it can take – called Landlord’s remedies – if the tenant breaches the lease.

The commercial lease should include a provision that awards attorneys’ fees to the prevailing party in litigation over the lease. This provision helps makes the party who is not at fault whole if it must go to court to enforce the lease.  The losing party will have to pay the winner’s attorney fees and litigation costs.

When in Doubt, Put Everything in Writing

It is common practice to have a written lease.  Oftentimes, however, the landlord and tenant will discuss and agree on additional terms relating to the lease – additional concessions, limits on use, additional monetary obligations.  Every term discussed and agreed on must be put in writing.  If one of these additional terms is breached, it will be much easier to prove and prevail if the written lease contains all materials terms.  Make sure to document and have all parties sign any amendments or addendums to the lease that the parties agree to over time.

Contact The Frazer Firm for Help With Your Lease

A business attorney with experience litigating key provisions of commercial leases can identity and help you address loopholes that might cost you money in the future.  Let the experienced business and real estate litigation attorneys at The Frazer Firm help you draft, revise, and negotiate your commercial leases this year. Reach out to schedule an initial consultation today.