Getting a grip on potential real estate issues is one of the less fun roles of an in-house counsel. But it can't be stressed enough how important to it is to check the lease from time to time. Leasing woes typically begin with a tenant's "out of sight, out of mind" approach. So, get off your ergonomic chair, remove the lease from your drawer, dust it off, look it over, and maybe breathe new life into it.
To help you get started on what to look out for, here are three common leasing issues:
Compliance requirements. Keep an eye out for expensive compliance requirements. Such clauses may include requirements that the tenant make structural changes to the building or install building safety measures such as sprinklers. These expenses can add up very quickly and would benefit future tenants as well as the current tenant, making it a ripe angle for negotiation.
Assignment clauses. Contrary to popular belief, assignment clauses can come into effect in ways other than the premises being sublet or assigned to third parties. For example, they can trigger when a tenant does corporate transactions under the "operation of law" provision. This means you may need your landlord's permission before buying a company or selling yours. If the tenant assigns or subleases a part of the premises, the landlord may the right to take the premises back and/or have a right to some or all of the tenant's profits.
Use restrictions. Standard prohibited uses usually aren't an issue for most tenants, but a couple could throw a wrench into how your company manages its operations. For example, a number of leases include provisions that prohibit alcohol consumption on the premises. That could pose a problem for your fun (or not so fun) start-up's holiday party or for your secret stash of fancy rye whiskey in your bottom drawer.
Of course, this is just scratching at the surface of leasing issues every in-house counsel should keep in mind. Have some tips of your own that you'd like to share? Tweet them to us @FindLawLP.