South Carolina Lawyer
Vol. 13, No. 3, Pg. 30.
David v. Goliath: Negotiating a commercial lease on behalf of the tenant
30David v. Goliath: Negotiating a commercial lease on behalf of the tenantBy W. Leighton Lord IIIA war story illustrates an important truth about negotiating commercial leases on behalf of tenants. In the story, the attorney's client is opening an office outside of South Carolina. The client found a good location in Atlanta. The attorney and the client spent time reviewing the lease and drafting proposed revisions to the document to make the lease more favorable to the tenant. When the attorney and the client arrived at the landlord's office in Atlanta, the landlord's attorney informed them that the landlord will agree to only five changes to its form lease, so they had better ask for only the most important changes. The landlord was a large institutional landlord, and the tenant was going to be a small tenant in the building. The market was fairly tight, and the landlord had most of the bargaining chips, leaving the tenant with little leverage.
Although the landlord's approach in the story may be extreme, the story illustrates one of the central truths of commercial leasing-the landlord would rather not change its standard lease at all. In fact, the landlord has a legitimate need to keep some uniformity with its leases, so that the landlord will not have to review every lease every time a specific tenant issue arises. In addition, the landlord's lenders and any prospective purchaser of the building will look more favorably on the landlord if the landlord has maintained some uniformity in its leasing terms and conditions.
That does not mean that the tenant's attorney has no obligation to carefully review the lease, advise the client as to the terms and conditions of the lease, and make a good faith attempt to obtain revisions to the lease more favorable to the tenant. Some landlords and their counsel realizethatt certain provisions of their form lease are unfair and will revise those provisions with little or no struggle, if asked. On the other hand, there are always standard provisions of the landlord's document that are essentially non-negotiable, and the client merely needs to be informed of this fact and the consequences of that provision. In other words, some landlords are never going to revise certain lease provisions, so the tenant must understand how the provisions work and determine if they can live with that provision.
This article is a brief overview on how to best represent the tenant when negotiating a commercial lease. Before discussing the actual terms of a lease, it is important to mention the three types of commercial leases. The first type is the pro-landlord lease. The pro-landlord lease weighs most lease provisions in favor of the landlord. The second type is the pro-tenant lease. No landlord will have this lease, but some large tenants have their own form lease and insist that it be used. If you represent such a tenant, then you are Goliath and the landlord is David. The third type, which large landlords are using more and more is the so-called fair lease or neutral lease. Landlords who want to keep costs down and get leases signed fast have moved toward...