39 – Litigator Discusses The Top 10 Lease Clauses To Avoid A Lawsuit

Hello, and welcome to Episode 39 of the Corporate Real Estate Podcast, brought to you by LeaseSmart.com. Your host is Craig Melby, the founder of LeaseSmart, whose objective is to find companies the best facilities and get them the best terms, making their business more profitable and less vulnerable to future, unpredictable circumstances.

Today Craig welcomes special guest Taylor Speer with Turner Padget Law. There are so many informative tips in our episode today.

Disclaimer: The content of this episode is not to serve has legal council or solicitation of legal services.

1. At 5 minutes and 40 seconds Taylor Speer gives a real-life example of a lease that he litigated over. The issue is found in the acceptance of a build out clause. This is an issue because you aren’t a tenant yet, you don’t have physical possession of the property. You aren’t in a position to have a conference and see if construction noise is an issue. He would not recommend agreeing to that term because it doesn’t create leverage for his client moving forward if there is an issue.

What if there is a hidden defect or what if the code is changed. First of all make sure that your have such provisions in your lease. Your landlord’s reaction to the mention of inserting protective clauses in your lease will be a good indication of how it will be to work with him or her.

2. At 12 minutes Taylor tells us not to waive any counter claims against the landlord. Watch out for “counter claim” or “set off” language in your lease. That means that if someone gets a judgement against you you can’t set off that judgement for any other things such as what judgement you get in a compulsory counter claim. Also, do not waive your right to a jury trial. There are reasons to be in front of a jury and there are reasons to not be in front of a jury, depending on your situation. A judge will be more formal and follow the lease to the letter. A jury may feel a little more pulled toward following their gut and may tend to agree with a tenant more than a landlord.

3. At 20 minutes and 20 seconds Taylor talks to us about reciprocal attorney fees and how to navigate certain fee assignments. This section is super helpful if you are making a strategic decision about your case.

4. At 25 minutes and 10 seconds Craig and Taylor discuss the personal guarantee. You must always try to ask to not be tied by a personal guarantee. You might not succeed in this separation, but it can happen and it would be to your great advantage if you could protect yourself personally.

5. At 33 minutes. Don’t allow there to be a waiver of negligence claim against the landlord if you can help it. We want to be able to seek retribution for another’s negligence!

6. At 37 minutes and 20 seconds Taylor Speer tells us to make sure that the lease will provide for certain conditions that are a default under the lease: not keeping the premise insured, for example. There is a provision that says that the tenant will keep the premise free from liens. The problem is that you can’t keep someone from filing a lien against the property. Some property that you hire to come and do a repair may claim to have not gotten paid and may file a frivolous lien. Surely it is reasonable for a landlord to want to make sure that there are no liens taken against their renters, but the provision should be worded different.

7. At 44 minutes and 20 seconds make a provision for a renewal so that you aren’t forced to move when you don’t want to. There is a value in your location and if you lose that location you may not be able to sell your business or retain your great traction.

8. At 45 minutes and 50 seconds Taylor and Craig talk about how to avoid exorbitant late fees. A late fee should be a deterrent, but not take you under!

9. At 46 minutes and 40 seconds Taylor Speer talks about CAM charges. In some cases the landlord will refuse to provide documentation for what the utility bills, insurance policy specifications and CAM expenses truly are. Make sure that there is a provision in the lease that requires the landlord to provide you with the records and what the negative consequence to the landlord is if they fail to do so. Trust by verify!

10. At 48 minutes and 40 seconds Taylor Speer mentions consent provisions on assignment on a sublease. Make sure that the lease is clear on the difference between an assignment and a sublease. Let’s have specific parameters that permit an assignment. Also, if there is a cost associated with reviewing a lease for a reassignment and it is anywhere near 20 grand, then realize it is a deterrent and not a fee. Make sure that you do not stay on the hook for rent for an assignment. For a sublease, expect to stay on the hook.

11. At 54 minutes and 20 seconds Taylor reminds us that the lawyer is no the exclusive resource. He says not to expect your lawyer to be the only advisor that you will need. He can’t give tax advice. He’s not an accountant or a broker. And, he can’t give industry-specific insight into what is market appropriate. The attorney does the legal review and they don’t necessarily negotiate the business terms of the lease because they won’t know what is fair now versus 6 months ago like your broker will.

In summary: leave time for negotiation. Watch out for these critical clauses discussed above. And, remember that in any negotiation you have to give and take in order to get what is most important to you.

Thanks for listening!


Click here to contact Taylor Speer.

He can also be reached at (864) 552 4618 and tspeer AT turnerpadget DOT com.

For more information, be sure to visit LeaseSmart.com

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