Legal Procedures: LEASE

Information to Obtain

LEASE

1. New York or New Jersey?
2. Do you have the lease?
3. Would you like to fax the lease or bring it in?

Lease Review = $350 to $1,500

If we deal with the landlord…
More we deal with the landlord, the more Legal fees ---- Relative.


Give the attorney the above information to quote the client and to see if he might ask you for more information.

Ask soon as you exchange information try to persuade the client to retain our services by asking to send the lease and/or making an appointment.

LEASE - A contract by which one conveys real estate, equipment, or facilities for a specified term and for a specified rent; also: the act of such conveyance or the term for which it is made

New York and New Jersey follow the same rules but please note the standard language on the Lease is slightly different. There are generally two types of Lease: Residential and Commercial.

Residential Leases are short. It’s about 2-5 pages depending on the form the landlord uses. It usually contains the following information:

• Date of Lease Agreement (The day Lease is signed/executed by the landlord and the tenant)
• Landlord’s Name & Address
• Tenant’s Name & Address
• Current Rent & Rent Escalations (Usually the rent figures are in dollar value followed by a percentage. But if there is no percentage, do the math. Sometimes the landlord will use a “fixed rent” without using percentage increases. Further, an increase does not have to be annual it might be set for two years or three years.)
  

FIXED RENT - Rent amount that is set by the landlord and agreed with tenant. There is no specific increase in percentage. Example: The rent may increase $500.00 every two years.

• Security Deposit (Money held by landlord as Security in case of tenant not being able to pay rent. Security Deposit is calculated by multiplying the current monthly rent by the number of months the landlord designates. Example: 3 months Security will be current rent x 3)
  

• Be Aware that there might be extra provisions where the landlord will try to get the most protection. See if there are any options to renew. If there is, usually tenant must notify the landlord via certified mail with return receipt to exercise the option.
  

OPTION - Option period is where the tenant can request to the landlord to extend his/her lease. In order to exercise the option the landlord must be notified by certified mail with return receipt 30 days or 60 days before the lease term terminates. On commercial leases the requirement might be 6 months before the lease term ends.

Commercial Leases are long because they include taxes, insurance, water/sewer charges, maintenance, guaranty, heating system, cooling system, etc.

• Taxes (Usually on the Lease there is something called tenant’s proportionate share. This is calculated by the amount of space tenant is using compared to the entire building. Some commercial leases will make the tenant pay 100% because it’s the only commercial unit in the landlord’s property. Taxes are only paid in commercial leases. In residential leases, any and all additional rent is usually included in the rent amount. But be aware, landlord might put in a language to charge it to the residential tenant as well.)
• Insurance (Landlord requires commercial tenants to have insurance: Liability and Property Insurance. If the premise is a commercial unit there is always a chance that someone might sue the store for slipping on the sidewalk or inside the store. There also might be a fire or a car that is out of control. The lawsuit will be the tenant’s responsibility. Sometimes landlord also has his/her own insurance and tenant is to pay landlord, tenant’s proportionate share.
• Sewer and Water Charges - The landlord may have tenant to pay the tenant’s proportionate share or there might be a separate water meter installed. If the premise does not have a separate water meter, and tenant wants to install it, the tenant will probably have to pay for the installation.

LEASE

Making of a Lease

1. Speak with Client to obtain following information

• Landlord’s Information – Name and Address
• Tenant’s Information – Name and Address
• Premise Address
• Size of premise in square footage
• Purpose of Business
• Rent schedule
• If there are any options?
• How much is the security deposit?
• Tenant to pay any real estate taxes? If so how much?
• All utilities to be paid by tenant?
• Tenant to pay Water and Sewer charges? If so how much?
• How much insurance should tenant obtain?
• If an assignment or subletting occurs, will tenant require to pay landlord’s legal fees? If so how much?
• Will there be a guaranty?
• Is there anything else that client wants to add on the lease?
• Does tenant have an attorney?

1. Have attorney to prepare a lease. He might ask you for more information.
2. Send lease to tenant or tenant’s attorney for them to review.
3. After review is complete have tenant sign the lease and return with a deposit check.
4. Have client come in and sign.

Reviewing a Lease

1) Obtain a copy of Lease from Client / Opposing party’s attorney

- Review lease
- Make Lease Summary
- Fax to client or go over with client when he comes in
- Make sure client understands exactly what is on the lease.

Lease Rider – Please be advised that the rider has more power than the actual lease. The Rider will change provisions so make sure you read it carefully.

Lease Assignment – Assignments are usually done when the business is being sold or tenant’s name is being changed. Seller and Buyer will need to obtain landlord’s consent. If client decides to change the name from an individual to a corporation as tenant, you will need an assignment or Modification. Some if the assignment provisions might require the tenant to pay the landlord some money.

Lease Modification and Extension Agreement – Need to review this carefully as well. Make sure tenant understands that he will pay additional rent or expense if there are any.


To be continued