A review of important lease terms, Part 2

Leases are long, comprehensive, and complex documents; as well they should be. Most leases lock you into a contract for a year or more. The last thing you need is a lease that is poorly constructed and leaves you vulnerable to lawsuits. As discussed in a previous post, you need to carefully include all necessary terms, such as time, who bears improvements, and the party names. This post will go over some lesser-known clauses.

You should always include a clause that describes the property. This is especially important in commercial property. You and your tenant need to understand the limits of their leasehold, to define their repair responsibilities and to clarify what they can change and by how much. Furthermore, describing the space is crucial for tenants who rent less than the full space. You can try to get away with assigning “unit numbers” to spaces with discrete walls and doors. But it is always safe to identify each one specifically (i.e. by orientation in the building, square footage, and other key descriptors).

Second, you may want to consider including “term” clauses. Term clauses are provisions that automatically require the tenant to fulfill certain obligations for their lease to remain viable. For example, you could require renter’s insurance by the first month, move-in dates, rent due dates, improvement dates (many commercial lessees need to modify the space you rent to them). These clauses allow you to control the tenant’s actions without involving yourself too much in their actual decision process.

Are you looking to lease some properties? If yes, you may want to review your properties and lease terms with an attorney. A lawyer can walk you through your obligations as a lessor (such as anti-discrimination, warranties of habitability, and other duties), she can also advise you of your rights against your tenant. You don’t want to risk your real estate investments with a needless lawsuit. An attorney can anticipate potential problem areas and help you address them early.