Leasing Pitfalls to Avoid

Before signing any lease agreement, ensure that your tenant representative has thoroughly researched and addressed any potential issues that could arise. It is the tenant representative's job to protect each client from potential challenges throughout their tenancy. Additionally, at WRA we take all necessary steps to position each client for success, ensuring that a lease does not hinder the business in anyway. Below are just some of the potential pitfalls that we look out for:

Certain Landlords

• When signing a new lease, you are going to be calling that space home for years. Therefore, choosing the right landlord is an important factor. Consider the points below before signing a lease. 

  • Financial Stability: Given current market conditions, make sure the landlord is financially stable. Asking for the landlord to provide financials, can alleviate any concerns.  

  • Does the landlord have a history of being unresponsive?

  • Ask to look at recent build outs within the building that the landlord has recently completed.

  • Different negotiation tactics.

  • Landlord’s Track record

    
    

Obtaining an Early Access Period

• An early access period is when a tenant will have access to their new space to install Furniture, fixtures, and equipment. On the date the lease commences, a tenant should be able to start running their everyday business operations out of their new space.

  
  

Protection Against Landlord Delays:

• Certificate of Occupancy: 

  • Ensure the landlord is required to provide a certificate of occupancy upon delivery.  

• Outside delivery date:

  • An outside delivery date protects a tenant, if the landlord is unable to deliver the space by the lease commencement date. If the landlord is not able to deliver the space by the outside delivery date, a tenant should have the right for additional free rent or be given the option to terminate the lease altogether.

    
    

Evergreen & Relocation Clauses

• An evergreen clause automatically renews tenants lease unless the tenant provides written notice within the timeframe specified within the lease.

• A relocation clause allows the landlord to move your business to another location within the property. All the landlord needs to do is provide notice and that notice period will be outlined in the lease document. Relocation clauses can be a problem for several reasons, including:

  • Business disruption

  • Added Costs

    • Moving & Assembly costs

    • Data/IT Wiring

    • Audio/Visual

    • Change of business address

  • Less desirable location within the building

  • Changes in the floor plan

  • Lower quality finishes and buildout

    
    

Restoration Clauses:

• A restoration clause in a commercial lease requires the tenant to restore the leased premises to its original condition at the end of the lease term. This can be costly, highly disruptive, time consuming, and lead to potential legal conflicts with the landlord.

  
  

High Security deposit

• Two of the biggest determinants a landlord considers when determining a security deposit are:

  • The amount of money the landlord is putting into the deal.

  • Tenants’ credit worthiness

• If a tenant is faced with a high security deposit, consider the following:

  • LOC (Letter of Credit) à Although with rates as high as they are right now, this may not be the best decision for a business.

  • Security Burn Down over the first few years of the term.

  • Prepaying several months or the first year of rent to make the landlord feel more comfortable.  

    
    

Sublease flexibility

• It is important to carefully review the sublease clause. Make sure to fully understand the landlord’s approval process and other stipulations that may restrict a tenants’ ability to sublease space.

  • Are there restrictions on the number of subtenants you can have within the space?

  • Does your sublease require landlord’s consent for a permitted transfer?

At WRA, we conduct a thorough due diligence process with every client to ensure a smooth transition. The terms mentioned above are just a few examples of potential leasing pitfalls to avoid. Taking a proactive approach to address any potential issues during your tenancy is crucial to ensuring that your lease coincides with long-term business goals.