When presented a commercial lease, you will often hear the phrase “boilerplate language.” The first few pages of the lease agreement generally contain the relevant business terms, and the back 2/3’s of the document contain many words, phrases, and acronyms that take your mind to the evening meal, golf course or another place of respite. After pouring the third cup of coffee trying to stay focused, the term “boilerplate” comes to mind, and you rationalize there is no need to read this part. This would be a common mistake.
Commercial Leases are essential contracts that must be read thoroughly for full understanding. While most people understand base rent, term, and rate per square foot, some ignore terms and clauses that could directly affect their bottom line. Some of the common vital phrases or clauses that can cost are as follows: the RSF or USF designation reflected in the square footage of the leased space. Who pays legal fees in the event of a breach of contract? Do both parties have the same notice rights? What is the common area, how is it defined, and what percent is reflected in the RSF? How are disputes resolved? What is the Base Year, and how does that get reconciled? What are the CAM charges, and how are they passed back to the Tenant? If you do not understand these, and other terms in the lease document, please seek an experienced commercial real estate broker or the counsel of someone else who does. A commercial lease is no less binding than a bank loan and should be treated with the same deference.
