Volume 1, Issue 5
Table of Contents

Cover Story:
The World is Flat
When it comes to Global business, the view looks good

RBD Round-Up:
RBD is On the Air!
WRCR teams up with RBD Co-publisher for weekly show
RBD Business Survey
Take part in RBD's 1st On-line Business Survey

DEPARTMENTS:

Economics Round-Up
• The Local Economy
Construction industry confidence rebounds, managers predict greater optimism
• The Smart Investor
Investing From Within: The key to becoming a smart investor
• Economic Viewpoint
It All Adds Up: The Fed takes delight in the economic numbers

Business Round-Up
• The Work-Life Minute™
Small business owners need innovation to battle burnout
• Marketing By Design
There Ought'a Be a Law: Marketing is nothing more than long-distance selling

Ask The Experts
• Business Start-ups
Negotiating a lease - from the tenant's view
• Expensing & Depreciation
Tax incentives for small business

Retail Round-Up
• Who's Hiring?
Summer employment program offers benefits to all
• New In Town

Invest in Your Community
• Provident Bank Charitable Foundation
Works to support help from People to People
• Red Cross Celebrates March
Partners with local business people for the good of all

Odds & Ends
• From The Publishers
• Letters to the Editor
• Rockland Newsmakers

Dedicated Section:
Rockland Business Association:

The President’s Desk
The State of the RBA

RBA/United Way Golf Outing
The Rockland Open: Monday, May 21st

RBA Happenings
• Committee and Council Info
• Calendar of Events
• New Members

One of the challenges that small businesses have from time to time, unless they own their own property, is the review and negotiation of a commercial lease with a landlord for office or retail space. After an exhaustive search, you’ve found the right space at a prime location, and negotiated the basic financial terms with the landlord. Now you have received the landlord’s version of the lease. That usually means it’s time to retain counsel to review the document, if you haven’t already done so.

The comments below highlight certain issues that typically arise and can serve as a “check list” of those issues. Of course, this is not intended to substitute for review of a commercial lease by a lawyer. The generalities discussed here may not apply to a particular lease. In addition, the amount of leverage to negotiate which a tenant has, varies from case to case depending on a number of factors, including how much square footage the tenant is renting.

Repairs. Generally the lease states that tenant will make all non-structural repairs to the demised premises, fixtures, etc. or in and about the premises. It is important to limit the repairs that tenant is responsible for to those within the premises itself. In addition, certain repairs which require substantial expenditure such as replacement of an entire HVAC system should be exempted, as in many cases, they would result in capital improvement to the property which will remain there long after the tenant leaves and should be borne by the landlord. As for structural repairs, the lease should specify that landlord is responsible for structural repairs.

Alterations. A commercial lease generally requires a landlord’s consent to alterations in the space. The lease should state that landlord’s consent will not be unreasonably withheld to those alterations. In addition, tenant should attempt to exclude minor alternations, such as putting up secretarial stations and baffles, etc. Also, work already agreed upon which is done before the start date should not be subject to consent, although landlord should be entitled to review the drawings or renderings.

Landlord’s Work. Many times the landlord has agreed to do the work in the demised space. It is essential that this work and the time table is clearly specified in a rider to the lease.

Rent Abatement. It is not uncommon for the landlord to allow for a rent abatement during the period of time the initial work is undertaken by tenant. It is important for the tenant to specify the length of time and that, if there are any delays, to be entitled to additional time, particularly if delay is the result of the landlord’s actions or failure to act (such as holding up approvals or reimbursements).

Rent Commencement Date. Closely aligned with the issue of rent abatement is defining the start date for purposes of commencement of rent. Oftentimes, the possession date and the rent commencement date do not coincide. In those cases, it is important for everyone to be on the same page as to when the rent commencement date begins.

Signage. The issue of signage can be important to the tenant, particularly if it is a retail establishment. If the property is in a shopping center, the tenant would want the lease to confirm that it will be able to place its signage on a monument or pylon at the entrance or on the road.

Right of Assignment. This can be one of the most important aspects of the lease terms, particularly if the location is essential to the business, or to sale of the business. Tenant would want to insure that the clause states that the landlord cannot unreasonably withhold his consent. Specifying the standards as to what constitutes “reasonable” is also a good idea. In addition, a tenant should attempt to negotiate a clause wherein if the assignment is in connection with the sale to a purchasers who will continue the same business, no consent is needed.

Real Estate Taxes. Many times the lease contains escalations based on real estate taxes. It is important to specify which year constitutes the base year. Obviously the tenant wants the base year to start as far out as possible from the current year.

Common Area Maintenance Charges. Often times, particularly in the context of a shopping center, common area maintenance charges or “CAM” is part of the additional rent. With respect to CAM charges it is important to make sure that the percentage is based on a fair allocation of the square footage (preferably usable square footage rather than rentable square footage). In addition, it is important to obtain a precise definition of what is included in CAM in an attempt to limit the landlord’s ability to use CAM as an open account for any charges he deems appropriate to charge off on the tenant.

Other Money Items. Most businesses want to know the bottom line, and hate surprises, especially when they come in the form of an unexpected bill from the landlord. Therefore, it is important to identify all of the money items in the lease (e.g., sprinkler charge, electric meter charges, if any, garbage and office cleanup, etc). While we’re on this topic, it is also good to get the historical data on items such as CAM, real estate taxes and similar reoccurring items.

Non-Compete Clause. In the context of a retail establishment it is important to seek a clause in which the landlord covenants that it will not rent any store space, in the center, to a competing business.

Landlord’s Maintenance. In both retail establishments and office space, it is important to establish that the landlord is responsible for maintaining and repairing the parking areas and to establish if appropriate, that the landlord is maintaining and repairing the sidewalks and lighting in and around the property and in the common areas.

This is essentially a short list. There are many more items which are necessary to review and often times negotiate with a landlord, but this should give you a good start. RBD

Mr. Graifman is a partner with the firm, KANTROWITZ, GOLDHAMER & GRAIFMAN, a general practice firm located in Rockland County, NY and Bergen County NJ. Mr. Graifman heads the firm’s Corporate Transaction and Commercial Litigation Department.