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Before You Sign; Have a Lawyer Review Your Lease

By sedoo

Many business owners are eager to start a new venture and part of that process often involves leasing a space from which to conduct their business (the “Premises”). Sometimes an offer to lease for the Premises will be negotiated for the general terms of a future lease for the Premises, but the actual lease that is created for the Premises is often signed without a review of the terms of the lease by a lawyer representing the tenant. More egregious situations for a lease will have a signed lease that is contrary to the terms contained within the offer to lease for the Premises or the lease that is executed is missing key terms that were contained within the offer to lease for the Premises.

More commonly, the lease for the Premises does contain the terms of the offer to lease for the Premises but the lease itself contains many other provisions not contained within the offer to lease that require serious consideration. One example is a fixed term of the Premises may have been negotiated but has the tenant considered the need for future extensions of that term? If so, at what rate and standard should rent be determined for this extension period? The availability of options to extend should be considered by a tenant when negotiating a lease with the landlord.

Another example of a critical aspect of the lease that is often overlooked are the terms in the lease for leasehold improvements. Often tenants will need to make changes to the Premises in order to make the space suitable for their business but the landlord for the Premises may or may not require the removal of all of the tenant’s leasehold improvements at the end of the term of the lease. This can often become a very costly exercise that was not realized by the tenant when the lease for the Premises was signed but is a situation that is very common.

Another critical aspect of a lease has to do with demolition and relocation clauses. Often these clauses empower a Landlord to change the location of the Premises or even prematurely terminate the Lease in order to make way for renovations or development.

Another aspect of a lease that is often overlooked are the repair and replacement obligations for the Premises. Tenants may believe that they are not responsible to repair or replace certain systems or equipment within the Premises but what matters is what is stated in their lease. It is therefore vital for a tenant to determine what they may be potentially responsible for within the Premises to determine if the Premises is worthwhile for their own business needs.

The examples above are just a few of many aspects of a lease that require serious consideration and review. Before you sign a lease, think about having a lawyer review the terms of the lease so that you are informed about what you are committing yourself to for the Premises.

 

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Spencer S. Duggan

Spencer S. Duggan is an Associate with Kormans LLP. His practice areas include employment issues, the purchase and sale of businesses, mergers, joint venture agreements, organizing business structures, shareholder agreements, re-organizing existing businesses and corporate structures, leasing, commercial real estate, debt finance and dispute resolution. You can reach Spencer at sduggan@kormans.ca.

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