Top Ten Things to Look For in a Lease
- Distinct term: does the lease clearly spell out when the rental period begins, when it ends and whether any renewal options are available?
- Distinct description of property: Is the property to be leased clearly described either through a physical address or through a legal description, such as would be found on a deed?
- Distinct description of rent payments: Is the amount of the rent clearly noted along with when the rent is due, where payable, and what are any penalties for late payment?
- Permitted uses (primarily commercial): Does the lease state what is and isn’t permitted on the property being leased? This particularly applies to a commercial property, but can also apply to a residential property. Landlord’s don’t want tenants performing activities that are either illegal or prohibited within the zoning of the property.
- What constitutes a default and an opportunity to cure (fix the problem): What specific violations are a breach of the lease? How long does the breaching party have to “cure” or fix the violation? What happens if the breaching party doesn’t cure?
- Is an assignment or subletting permitted: This, as most provisions are, is a case-by-case determination and depends on the needs and wants of the landlord and the tenant. However, this still needs to be clearly spelled out in the lease.
- Improvements and who owns any improvements made: Is the tenant allowed to make any improvements to the property? What notification and/or approval is required by the landlord for the improvements? Who owns the improvements after they are made? Are there any conditions on the ownership, such as whether or not the improvements can be removed without damaging the leased property?
- Insurance: What insurance is required to be taken out by landlord and tenant? Is the other party to be a “named insured” on any insurance policy? This will differ greatly between commercial and residential leases.
- Liability and indemnification: Who is liable for what actions? Does liability include only intentional acts or also negligence? If the other party is sued, does the party that committed the act have to pay for the damaged party’s defense (indemnification)?
- Choice of law and choice of venue: Which state’s law governs any disputes? Do any lawsuits due to disputes over the lease have to be brought in a particular jurisdiction?
Although this list is by no means all-inclusive, unlike that resort vacation, it is intended to give you as a landlord or a tenant some things to think about when negotiating a lease. Above all else, have the lease reviewed by an attorney. It is much easier and less expensive to pay an attorney to review and negotiate terms in the lease that will try to protect you in the future than to pay an attorney to try to fix a problem that arises later. “Pay me a little now, or pay me a lot later!”
This is not intended to be and should not be construed as legal advice. For more information, please contact us.
Copyright 2011: The Klinkenberg Law Firm, LLC, all rights reserved.