Commercial leases are one of the biggest commitments a business owner will make in the course of his or her business. A lease is a contract which binds the business owner for a long period of time (usually three to ten years) and usually involves one of the largest monthly payments that a business will have to make. Yet many business owners are hesitant to spend the money on a real estate attorney to review the lease.



Why Do I Need A Real Estate Attorney?



An attorney costs money, complains the business owner. However, put everything into perspective. Let’s suppose you rent a space for a monthly rental amount of $7,500 and enter into a three year lease. You are binding yourself to a $270,000 commitment. Doesn’t it make sense to spend maybe $2,000 to make sure that the lease is fair and that there are no hidden surprises?



What Are Some Of The Surprises In A Commercial Lease?



Landlords often use a form lease. Experienced real estate attorneys are usually familiar with the form lease. Therefore your review should not take long or cost too much money. In Los Angeles, for example, many landlords use the AIR Commercial Real Estate Association form leases. They have forms for net leases and gross leases, single tenant and multi-tenant leases and more.



However, there are still certain issues that you should be aware of.



1. Common Area Maintenance Charges



The biggest issue in a The biggest issue in a commercial lease that has the potential to raise your payments is common area maintenance charges. An experienced leasing attorney will be aware of which items are typical in your market and which items are not. While certain common area expenses are small and to be expected, a tenant should make sure that he understands his responsibility when the landlord makes capital improvements. Who is responsible for paying for the new HVAC equipment and how will the costs be allocated over time? What you thought was going to be a $7,500 monthly payment could easily become a $10,000 monthly payment or more.



2. Tenant Improvements

A new tenancy often also includes certain tenant improvements. A tenant improvement is the construction necessary to make the space fit the need of the tenant before occupancy. Agreements regarding tenant improvements can be short or lengthy but they must address certain basic questions. Who is responsible for doing the work? How long will it take (and will you be paying rent during that time)?



3. Complying With Applicable Law



Another clause in a typical lease states that the tenant will comply with all applicable laws. Be careful not to fall in this trap for the unwary. Is your building compliant with the Americans with Disabilities Act? How much will it cost to bring it up to acceptable standards? Who is responsible for doing that?



4. The End of The Lease



If you are making alterations (tenant improvements) to the space, what are your obligations when the tenancy ends? Many leases give the landlord the option of demanding that the space be returned to the way it was prior to the improvements or of keeping the tenant’s improvements. This could be a costly fix at the end of the lease. It is better to negotiate this issue at the beginning of the lease.



Breach of Lease Litigation



These are just a few examples of the issues that can arise in a lease for which you need an experienced leasing attorney. Another way to analyze the cost and benefit of an attorney review at the beginning of the lease is to look at the potential costs of breach of lease litigation at the end of the lease. Litigation is extremely expensive. Most leases are written in favor of the landlord and will include a clause that awards attorneys’ fees to the prevailing party. A $30,000 issue can quickly turn into a $100,000 issue when the landlord’s attorneys’ fees and costs are added to the bill. Having a real estate attorney review your lease before you commit yourself can help avoid litigation later over misunderstandings. Attorney review of your lease makes a lot of sense.