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Protections A Landlord Should Include in The Lease Agreement
Protections A Landlord Should Include in The Lease Agreement
4. Specific use clause The lease should contain a specific use clause
so that the tenant cannot change their business use during the lease
term into something that is not desirable or conflicts with other
tenants in the building. This also allows the landlord to control the mix
of tenant uses and the synergy created by the different businesses in
the building.
5. Control of the approval of the transfer right Landlord needs to
be able to accept or reject the transfer of the business ownership to
another person or persons. It also ensures that any new tenant will
need to conform to the specified use provision. Landlord will also be
able to assess the financial strength, run a credit and background
check, and analyze the probability of success of the new owner, before
committing to any transfers.
6. The right to sublease Landlord may allow the right to sublease
after accepting the new business after assessing the strength of the
principals. Landlord may not allow sub-leasing and may prefer to
terminate congruently an existing lease agreement, while
simultaneously approving a new lease agreement with a new party.
7. Buildout approval rights- Landlord will want to approve all plans to
alter the building before they occur, to protect any detrimental
changes that could negatively affect the building and or other tenants.
This allows landlord to avoid a situation where a tenant wants to
perform unwanted construction or wants to place undesirable signage
on the building.
8. Establishing rules for the use of the property Clearly specified
rules and guidelines for the use of the property should be spelled out
in the lease agreement. Tenants should be made aware that nonconformity to these rules and guidelines will result in being in default
of the terms of the lease.
9. Adequate Tenant Insurance Landlord needs to specify what
insurance is required and the minimum dollar amounts for each
category. Insurance must be obtained from a highly rated carrier, e.g.
A+ and which covers all potential catastrophes. Furthermore, the
landlord should be named as a co-insured on tenants policy. All
policies should contain endorsements waiving the insurers right of
subrogation against landlord for any reason whatsoever. Certificates of
insurance must be provided to landlord on an annual basis and
insurers are required to notify the landlord by giving at least 30 daysnotice before termination or cancellation.
10. Specify the pass through expenses Leases should detail exactly
which expenses are pass through expenses to the tenant, so that there
are no disputes.
11. Landlord and tenant responsibilities - To avoid confusion of
responsibility, leases should delineate which responsibilities are the
landlords and which are the tenants.
12. Witnesses and notary All leases should contain the signature of
two witnesses who have witnessed the signature of the principal, to
ensure legality of the document. The personal guarantee should be
signed by a notary public. Each page of the lease agreement should be
initialed by both parties for further protection.
13. Default clauses Commercial leases should contain a list of what
constitutes a default of the lease agreement. Usually a time to cure, a
default is specified so that tenant knows he has a limited time to
perform.
14. Landlord lien for rent clause landlord should require that the
tenant pledge all furniture and fixtures, signs and goods and chattels
to the landlord as security for the payment of rent.
15. Surrender of the premises Landlord should specify how the
premises are to be left at the termination of the lease. Tenant should
be required to repair any damages.
16. Waiver of jury trial This is usually included in a lease agreement
that both parties agree to waive a jury trial, otherwise legal expenses
may be extensive and prohibitive.
17. Exculpation clause The lease should contain an exculpation
clause that specifies that tenant can only look to landlords interest in
the property, of which the tenants demised premises are a part, for
the satisfaction of any claim, judgment, decree, or ruling of any court
action.