Letter of Intent (the “LOI”)

Review carefully before you sign. Although typically not legally binding, LOI terms could be hard to break during the actual lease negotiation.

Rent Commencement Date (the “RCD”)

Hundreds of thousands of dollars are at stake. Is the RCD tied to Tenant’s receipt of permit (as opposed to lease signing)? Even if yes, chances are that the lease provides RCD acceleration, if Tenant fails to strictly comply with the plan drawing / permitting timeline. What if the delay is not even Tenant’s fault? Even if Tenant is responsible for a number of days’ delay, the RCD should just be accelerated for the same number of days, rather than being reset to an arbitrary date that is patently unfair to Tenant. In addition, if the lease is Triple-Net, make sure the NNN does not commence until the RCD either.

Tenant’s and Landlord’s Work

Review Tenant’s and Landlord’s Work provision with your construction professionals. Expensive details are many. For example, is Landlord fixing old or providing new HVAC units? If latter, what’s the tonnage? If Tenant improvement allowance is part of the deal, make sure the payment is not unreasonably conditioned on documentation or timing.

Delivery of the Premises

Unless Tenant specifically bargains for some “delivery conditions” in the lease, Tenant would probably take the Premises entirely “as-is”. Tenant should tour the Premises and surrounding area with construction professionals carefully. Is the sprinkler and HVAC units in “working condition”? Is there any pothole in the parking lot that needs fixing? Tenant would definitely want to spot any such issues prior to lease signing. Additionally, Tenant should request the right to terminate the lease if Landlord fails to deliver the Premises to Tenant within a certain number of days.

Opening for Business

Much more so than you’d imagine, Landlords are obsessed with Tenants’ timely opening for business. Draft leases often contain costly consequences if Tenant fails to do so. Watch out for language providing that the rent would immediately double, or that Landlord may even declare lease default (and evict Tenant) for the same reason.

Maintenance

Landlord should typically be responsible for maintenance of the Premises’ structural components, including roof, exterior walls and foundation. Be aware of any lease language that relieves Landlord from such maintenance obligations (e.g., if Tenant inadvertently uses its own contractor to penetrate the roof). Also, watch out for limit of liability language in the lease - try to hold Landlord accountable for any failure to timely respond to Tenant’s maintenance request.

Tenant’s Exclusive Use

Tenant should try to eliminate or limit any “incidental use” carve-out. Also, the Tenant’s Exclusive Use clause should provide some monetary damages as “teeth”, if Landlord fails to stop any other tenant from violating Tenant’s Exclusive Use within a reasonable amount of time after Tenant’s notice to Landlord.

Landlord’s Review of Sublease/Assignment

There might be unrealistically high approval standard for sublease/lease assignment. You definitely want to be released from personal guaranty after lease assignment and sale of business. Also be aware that Landlords are often requesting the right to recapture the premises once Tenant asks Landlord to review sublease or assignment.

Default and Damages

Lease default could potentially cost the Tenant millions of dollars. Thus, Tenant should request reasonable notice and cure period(s). Upon lease default, Landlord almost always seeks the broadest remedy possible (e.g., rent for the entire lease term). Tenant should at least push back on rent acceleration and request Landlord to remedy damages (by reletting the space, for instance).

Personal Guaranty

Make sure the personal guaranty has at least some sort of limitations. Good guy, rolling or complete burn-off after 3-5 years after the RCD is quite common.