January 18, 2016
In our November newsletter, I discussed three key factors that you should address when negotiating a letter of intent and your lease. Please click here if you'd like to review those items. In this second part of my two-part article, I detail two additional factors which should be considered in the negotiation process:
Utilities/Services: It is imperative that every utility that you may need to run your business is either provided by the landlord or available from the utility company serving your space and that the necessary capacity, level or amount of each such utility being provided by the landlord or the utility at your space is sufficient to run your business. If services are being provided by the landlord and you intend upon the same being included in your base rent, then make certain your lease provides for that. If you need to obtain certain utilities or services directly from a utility company, make sure they are available and can be brought to your space at a reasonable cost..
Bottom Line: Know what you need and what it will cost to power your business.
Assignment/Subletting: Many tenants take it for granted that they will have the ability to sell their business without needing the landlord's consent, but typically any transfer of control of a company will constitute a transfer under the lease. Unless you negotiate for certain permitted assignments and sublets to successor entities and affiliated entities, it is likely that before you sell your business or enter into a corporate restructure requiring a transfer to an affiliated entity you will need to obtain Landlord's consent. If you have a significantly sized business and/or a number of affiliated companies, then you need to negotiate transfers to your successors or affiliates without the landlord's consent as you should not be in a position where the landlord is holding you hostage to such sale or transfer.
Bottom Line: Keep an eye on the future when negotiating in the present.
Spending more time doing your homework and thinking more specifically about your space, your arrangement and the future of your business will allow you to be better prepared to negotiate your lease, best protect your interests and potentially save you a lot of money and disruption of your business down the road.
About the author:
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Michael Sobel is a Partner in the Real Estate practice at Wilk Auslander. He focuses on the representation of landlords and tenants in retail, office, and mixed-use commercial leasing transactions, and buyers and sellers in the acquisition and sale of office and retail properties. He may be reached at: 212-981-2304 or via email at: msobel@wilkauslander.com |