Who Says A “Standard Lease” Is Non-negotiable?

In acquiring a dry cleaning business, most buyers focus on (1) location, (2) the historical and projected income and expense picture of the business, and (3) the remaining term of the lease to be assumed.  It is my experience that most purchasers don’t spend much time reading the fine print of a lease.  I am frequently told that since the lease was a printed form and it was entitled “Standard Lease,” it must contain “standard” provisions that everyone accepts in the industry.

Tenants generally do not gather together and form an association for the purpose of preparing and printing a "Standard Lease".  Landlords, on the other hand, frequently do.  As a result, the Standard Lease regarding your business location has probably been prepared by an association funded by landlords.  Business leases are thus generally slanted toward the concerns of landlords rather than tenants.  Notwithstanding the fact that the lease is a printed form, many of the provisions may be subject to negotiation since the landlord wants your money as much as you want his location.

Everyone always enters into a lease with the expectation that the other side will perform.  What if it doesn't work out that way?  What if the tenant encounters difficulty in the payment of rent and the lease contains some type of late charge?  What if the late charge turns out to be a substantial penalty that could have been avoided if discussed with the landlord prior to signing the lease?

Another common problem that might be addressed during lease negotiations is the concept of tenant or employee parking within the shopping center parking area.  The idea of having a fast-food outlet within the shopping center near your dry cleaners may initially seem appealing; however, if delivery service vehicles monopolize the parking spaces, your customers may look for another nearby dry cleaners.

Do the common area maintenance expenses to which you contribute a proportionate share include administrative fees or management fees?  Some of these fees are entirely legitimate and are incurred by lessors who employ secretarial and bookkeeping services, or a property manager.  Other lessors, however, do little in the way of administration, but nonetheless impose substantial administrative fees upon their tenants.

Look further under the lease.  You will see phrases such as "Operating Expenses" or "Maintenance, Repairs, Alterations and Common Area Services", or "Liability Insurance - Lessee", or "Property Insurance" or "Real Property Taxes".  A number of words will follow each one of these phrases, defining what is meant, but not setting forth a specific dollar amount.  If you want to understand the nature of each one of these charges or potential charges, you need to ask questions of your lessor, before you sign the lease.  If you don't understand the phraseology of the lease, you need to retain an attorney to assist you, so that he can explain the terms of the lease to you and ask the proper questions on your behalf.

The only way to properly protect yourself is to carefully read and understand your lease, preferably with the aid of an attorney, before you take pen in hand.  After the signature ink has dried, your negotiating leverage will also have dried up!

[This column is intended to provide general information only  and
is  not intended to provide specific legal advice; if you have  a
specific  question  regarding the  law,  you  should  contact  an
attorney  of your choice.  Suggestions for topics to be discussed
in this column are welcome.]


Reprinted from Fabricare
Myles M. Mattenson © 2006