Contract considerations

A lease agreement is a binding document between the landlord and tenant, which stipulates all terms, conditions and regulations of the relationship. These documents are typically intended to protect the landlord, more so than the tenant. Many landlords will agree to slight modifications in their lease agreements, but are usually hesitant to changes to their standard form. As a result, it is very important for tenants to be familiar with their lease form, paying particular attention to the following key clauses.

  • Square footage. It is an industry standard to add a load factor (sometimes referred to as a common-area factor) to the square footage within a suite. This is intended to account for areas of the building commonly used by all tenants — elevators, parking area, hallways, etc.

A set percent (ranging from 15 percent to 24 percent in Miami-Dade and Broward counties) will be added to your square footage. For example, your usable square footage might be 1,000 square feet (the actual space within your suite), but your payments are based on your usable square footage plus the common-area factor for the building. This added amount is known as your rentable square footage. Pay attention to load factors, as they can result in different monthly payments for the same size space.

  • Operating expenses. As a tenant in an office building, you should be aware of the expense items that are included in the operating expense that will be passed through to you. Common expenses that are included as building operating expenses include landscaping; repairs and maintenance, including that of elevators and parking structures; janitorial services; and utilities, among others.

Expenses that should not be included are items such as leasing commissions, tenant improvements and capital improvements.

  • Renewal options. Asking for a renewal option affords maximum flexibility to the tenant. However, in order for renewal options to be effective you must know what deadlines and criteria you must meet.

Renewal options often specify that the tenant give written notice anywhere from 90 to 180 days prior to lease expiration. Should the tenant miss this deadline, the option to renew is null and void. Many times, these options are available at rents below market rents and as such, missing the deadline can cost you money. Remember to tag your calendars so that you do not miss out on these very important deadlines.

  • Landlord services. Review this section of the lease so that you are sure to receive all the services you pay for. For instance, most full-service leases include light bulb replacement, janitorial service and electricity for standard office consumption during set building standard hours. These hours should be specified on the lease agreement. Being aware of this section in your lease will allow you to request items/services and could end up saving you money as a tenant.
  • Sublease/assignment clause. Many tenants often overlook this clause, when it should receive a significant amount attention. Having this clause in your lease will afford your firm flexibility for future expansion or contraction of space.

Most office leases will demand that the tenant ask for written consent in order to sublease their suite. Also, be aware of what steps you must take to notify the landlord, what fees the landlord expects for the paperwork involved with consenting to your subtenant and any restrictions on rental rate.

  • Liability insurance. Commercial leases require that tenants purchase liability insurance during their tenancy at the building and sometimes other types of policies are required as well. Being aware of your limits, understanding what is covered and making sure you do not have a lapse in coverage will protect you as a tenant and help you avoid being in default of the lease.

Although all lease agreements should be reviewed and understood thoroughly, the above six key clauses should receive a large share of your consideration. These basic clauses can save you money and ensure that your tenancy goes smoothly.

Grace Blanco is commercial associate with the leasing group at Colliers Abood Wood-Fay. For more information, contact Colliers Abood Wood-Fay at (305) 446-0011 or www.colliersawf.com.

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