What tenants need to know about leases

Should tenants hate those leases to pieces?

Landlords are not very nice. Once you understand that they get a lot easier to deal with. Something seems to come over people who own property and rent it out. I know of some people who may not be landlords but instinctively have the temperament for it, whereas most of us Landlords struggle to be nasty, although we normally manage it in the end.

The main tool of the Landlord is the lease. When landlords select a form of
lease they generally opt for the Terminator variety rather than the Winnie the Pooh model. Leases are a minefield for the unwary. They contain delayed action mines that can go off months or years later, usually when your
business is facing its darkest hour. With most new businesses failing within the first two years you can probably understand why Landlords are a little paranoid.

Over and above trying to find out where to sign (made easier by helpful red “sign here” stickers) often 25 page plus commercial leases remain unthumbed by the Tenant.

Here are just a few things that can go wrong: 
• No assignment clause. So you cannot offload the lease if you run into trouble.
• You assign the lease to another but you still remain liable for their nonpayment or anybody they assign it to. So get options to renew rather than long leases.
• If you got a bargain rent (or at least one that you could afford), a market review after one year could make the rent go way up.

I cannot deter the red blooded prospective tenant from the “Just do it approach”, it certainly worked for Nike, but leases are what a solicitor does best. Some solicitors even enjoy reading leases, sad but useful if you are a Tenant who does not wish to lose their shirt.

© Paul Brennan 2005. All rights reserved. 

This was first published in  "The 10 Greatest Legal Mistakes in Business...and how to avoid them" by  Paul Brennan

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