Get control of commercial real property leases

Contrary to popular notions and the wishes of some landlords, there is no such thing as a standard lease form. A lease is a complex document that contains hundreds of agreements. The idea that one party to a lease can present the terms of each of these myriad agreements in a manner that equally serves the interests of both sides is absurd. Whoever is responsible for the drafting of the lease document will skew the document in their favor.

What is more vital is to recognize is that any lease can and should be negotiated. It is interesting that the landlords that slap a so-called “standard form lease” in front of you and ask for its execution, also expect you to respond with comments about the document that may request changes to its language. This is when the services of both your real estate agent and your attorney will be greatly appreciated, as costly as they may be.

So if a form lease can be negotiated, does it make any difference whose form one starts with? Yes. But what’s even more important is how critical it can be to find out who drafted the document in the first place, because that is the person who will ultimately control the negotiation (usually it’s the lease provided by the landlord whose attorney drafted the document). For example, if the lease is to be based on the landlord’s form, the landlord’s attorney or representative generally does the drafting of any changes to the form. Similarly, if the tenant’s original form is placed into negotiation, the tenant’s lawyer or representative generally does the drafting of any changes. Even if the landlord’s form is placed into play with an agreement that the tenant’s lawyer would submit changes, it is still better to be in the position of the landlord. Why? Because the person who drafts the document will ultimately control the drafting of any concessions.

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Active negotiations between two relatively equal parties can be an arduous, lengthy process, but sooner or later intelligent parties genuinely interested in making a business deal will want to stop negotiating and sign the lease. When that stage in the negotiation is reached, all minor outstanding points will end up being conceded by the party who does not control the document simply because the party who does control it refuses to make the final requested changes to it.

As another example, if the parties are arguing over a seemingly unimportant question such as whether the holdover rent should be 125 percent or 150 percent of the rent at the end of the term, this becomes such a minor item on the battlefield that either party who is not doing the drafting will eventually concede the point as being an issue not likely to occur. Five years later, when it does become a real issue on expiration of the lease term, that battle long ago will have been lost — just an unnoticed body on the negotiation battlefield. Therefore, in any lease negotiation, get control of the document! The party who controls the drafting of the lease document will win all the small battles and probably the war.

Contact Jim Ditzel of Niwot-based Summit Commercial Brokers at jim@summitcbr.com or 303-931-7341.