The fact that the lease document is important is not new news. What is changing is what we have to focus on in the document.
Now is clearly dangerous time to be a tenant. We still have to make sure that the document accurately reflects the business deal, but with landlords defaulting to their lenders, and with foreclosures rampant, we are beginning to see a whole host of legal issues spotlighted. If you are the person responsible for your company’s real estate leaseholds, you simply must get this right. Many millions of dollars are likely at stake, and missing some of these protections can be career limiting to say the least.
As a general comment, it used to frustrate me to no end that landlords would create long leases with pages of tenant duties and obligations, but the landlord’s own duties or penalties for not performing were negligible. We always work hard for our clients to make the document more fair and balanced. Today, we have leverage as tenants but we must know the issues in order to protect our tenancy. You have a loaded gun, but you need to know where to shoot.
At a recent CoreNet Global Summit, I participated in a panel along with Kitty Henry, a Partner and leasing expert of Munsch, Hardt, Kopf & Harr, P.C., and Trex Morris, who is the head of real estate in the Americas for Ernst & Young. The panel was very well received by a large audience consisting of global real estate leaders and senior service providers. The fact that they care about these issues means that we all need to be alert.
I’m including two documents with the post: the first is Negotiating Leases During the Downturn: Creating Value and Avoiding Cost, which is the Powerpoint deck we used in the panel. The second is a wonderful supplemental piece authored by Kitty O’Henry, who is an outstanding commercial lease attorney. I have worked with Kitty on a deal where she represented the other side. She is very talented and next time I want her on our team!
Many times lease concepts can be arcane and complex. In order to make the panel a little more fun and the lease points easier to understand, we came up with the format of a relationship between a couple and tied the lease points to different points of a relationship. We had to stretch on tying some of the lease issues to the relationship, but I bet you’ve never been to a lease class where folks laughed! They did in this one because relationships are funny many times without even trying. As far as I could tell, no one cried.
I hope you find the attached helpful. Feel free to comment to this post with your own war stories. You can also reach out to me directly with issues or questions.
And on this Valentine’s Day, I wish you the best for the human relationships in your life!