Commercial Real Estate in Kansas City — A Checklist
Imagine this: You’re a business owner in Kansas City and business is booming-now it’s time to expand in the Kansas City Metro with a new retail location or more office space.
You’ve found the perfect location for your business — the only thing left to do is sign the lease. Maybe you’ve used a broker or maybe you haven’t, but the landlord seems like a great fit, so why would you want to have your lease reviewed by an attorney?
There are lots of reasons to have a lawyer review your commercial lease before signing it. Here are six of them:
Simply explaining the “legalese” contained in the lease
In my experience, most commercial leases are between 35 and 100 pages. Even the best-intentioned, well-written lease is going to contain legalese. An experienced attorney can quickly spot legalese and can provide their clients an overview of the terms. If there is a section of the lease that doesn’t make sense to you, don’t be afraid to ask your business attorney for their interpretation.
Warn you of potential legal issues that may cost you money in the future
I was recently reviewing a short-term lease when my client informed me that she was “ready to sign” and just needed someone to read it over for them. As I was reading the lease, I identified terms that were heavily weighted in favor of the landlord. When I asked my client if she had agreed to the terms as part of their negotiation, they emphatically responded that they had not. It’s important to spot costly clauses now rather than when a dispute arises.
Make sure all terms of the negotiations are part of the Lease
During a lease negotiation, there are many back and forth conversations and often between multiple parties. Once the parties have agreed to all of the terms of the Lease — including rental rate, rental term, insurance costs, utility costs, etc. — it becomes imperative to memorialize all of the terms. Did you get the Landlord to agree to do something that he normally doesn’t do? Was this agreed to with the Landlord’s broker? If so, this term might not have made it into your lease. In many instances, a Landlord or their attorney will be working off of a template to begin drafting their lease. It’s entirely possible that a lease presented to you as the tenant for execution may not contain the specifics of your deal.
Have an additional advocate in your corner
It’s never a bad idea to have an additional advocate working for your best interest. Your lawyer should be an advocate for your best legal and business interest. I work closely with my clients to identify terms that might be negotiable in a lease and then strategize with the client to form a plan to request more favorable terms.
Leases are Landlord favored
Leases are almost always provided by the Landlord. The lease was written with the Landlord’s best interest in mind — not the tenants. It is important to remember this before signing a commercial lease. It can be extremely beneficial to have a second set of eyes review the lease before you sign it.
Exclusives, Permitted Use
Recently, I had a client who was about to sign a commercial lease that had a very narrow description for his Permitted Use. Basically, the Permitted Use allowed her to operate the core of her business, which made up about 70% of the company’s revenue, but it prohibited her from doing the other activities that generated about 30% of her revenue. The terms were not meant to be so restrictive, but had I not pointed this out, her Landlord would have had the legal right to terminate her lease for operating her business.
A commercial lease is a binding contract. If a dispute arises in the future, courts are likely to use the language of the Lease to settle the dispute. The assumption with commercial leases is that both sides are sophisticated businesses and neither side was induced into signing an “unfair” contract.
If you need a business lawyer in Kansas City, call Jeff today.