Commercial Leases Are Crucially Important to the Success of Your Business

As a New Jersey real estate lawyer, I actually enjoy negotiating and reviewing commercial leases and not because I love legalese, but because I know how crucially important the terms of a lease are to the success of my business clients. A commercial lease is one (1) of the most important factors to the success of any business, and also one of the most litigated areas of the law. This is due in part to the fact that too often a tenant is willing to sign a bad lease if the business terms look right (e.g. below market rent). It is also due to the fact that most tenants are not able to understand the wording of the lease, and are afraid of the costs of having an attorney review and negotiate the lease for them.

Don’t Be Penny Wise and Pound Foolish When It Comes to Negotiating a Lease

This rational – as referenced in a previous post, and a recurring theme throughout this blog – falls under the old saying “penny wise, pound foolish”. The reason being is the majority of the time it is much better to have an attorney experienced in commercial leasing review the lease prior to signing it. This is due to the fact that an experienced leasing attorney will understand how the wording can effect the value of a tenant’s business. For example, depending upon how the wording is structured in the assignment section of the lease may impact whether or not the landlord’s consent is required for the sale of shares in a corporate tenant, as it may be deemed an assignment under the lease.

If such consent is required, it can devalue the worth of the business, because it creates an additional hoop that the parties (the business owner and purchaser) need to jump through (i.e., the landlord’s consent). Depending on what the lease says, if the landlord withhold’s its consent as permitted under the verbiage of the lease, the deal can die and there is nothing the parties can do about it. Understanding this risk, many potential purchaser’s do not want to risk bidding on a business and spending money on diligence, when they not only have to obtain the tenant’s consent, but also the consent of the tenant’s landlord; which thus, devalues the business.

An experienced leasing attorney would know how to deal with the above issue (e.g., craft it in a way that is more favorable to the tenant) or at least make the tenant aware of the risk, prior to entering into the lease. As such, by spending a little bit of money up front to hire such an attorney, may save the business owner (tenant) thousands of dollars in the long-run if at a later date it decides to sell its business.

Over the next several weeks/months, this blog will try and address other issues in commercial leasing that a business onwner needs to be aware of, and why it is important to have an experienced leasing attorney review and negotiate your lease.

*The information in this blog posting is for general information purposes only. Nothing in this blog or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. The information in this blog is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

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Commercial Leasing: Do Not be “Penny Wise, Pound Foolish”

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