5 Key Commercial Lease Terms: #5 General Considerations

The 5 Key Commercial Lease Terms for Restaurants:

Get “On the Same Page” As Your Landlord, Figuratively and Literally

General Considerations

Finding and leasing commercial space has a different set of rules than for residential rental properties.  One golden rule, however, remains true in both cases: thou know and understand the key lease terms and ensure the lease agreement is specific and clear.

This is the six and final part of a six-part series, examining five key terms in your commercial lease agreement.  Today’s post, honestly, is a bit of a cop-out, as we’ll discuss some general considerations not previously discussed, rather than one particular term.

Special Needs. It’s amazing how many tenants have a particular need or desire in their leased premises, such as particular parking needs or unfettered access to a courtyard, and then fail to include those items in the lease agreement.  If there is a particular, unique reason why you chose your soon-to-be property, include it in the lease agreement to ensure it isn’t taken away.

Other, Minor Considerations. While maybe not a deal-breaker, there are always other items to consider, such as signage or other visibility to prospective customers, preexisting ADA-compliant bathrooms, advertising or marketing restrictions, and restrictions on a particular use.  Do your best to think of all the considerations that made you settle on the particular premises and ensure those considerations are included in the lease agreement.  Otherwise, in the future, you may lose access to the considerations that drew you to the space initially.

Lease Drafting.  Commercial lease agreements tend to favor the landlord.  The reason is simple: commercial brokers and landlords tend to get their lease templates from attorneys, who represent commercial owners and draft contracts that favor their clients, and commercial property professional associations, who, in turn, retain attorneys to do the same thing.  (If the template comes from one of these associations or a one of their books, oftentimes it will have a title in the header or footer of the document indicating the same.) While the agreements aren’t illegal or ethical, they will, when possible, tend to favor the landlord.  It’s not uncommon, for example, for lease agreement to permit a landlord to cancel the lease for a particular noncompliance by the tenant, but not permit the tenant to cancel the lease for a similar noncompliance by the landlord. (When reviewing contracts, often times what’s good for the goose isn’t also good for the gander.) So, a savvy tenant will read the lease agreement and identify those areas where the landlord is being favored over the tenant and renegotiate the terms to be equal and fair.  Don’t be afraid to submit your own drafting or propose additional clauses on a separate sheet or paper, even if the landlord’s proposed lease is clearly a template.  And, you may consider hiring an attorney to review and analyze the lease agreement.  This may not be as expensive as you think.  I, for example, do lease agreement reviews for a flat fee.

If you only take one thing away from this blog series its this: make sure your agreement/ understanding with your landlord is clearly and accurately reflected in your lease agreement, or you may find yourself arguing over the definition of “a coffee shop.”

I hope this series has helped you in your commercial lease needs.  Thanks for all you do in creating culture for the rest of us to enjoy.

Cheers!

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5 Key Commercial Lease Terms: #4 Be Sure to Consider Insurance

The 5 Key Commercial Lease Terms for Restaurants:

Get “On the Same Page” As Your Landlord, Figuratively and Literally

Be Sure to Consider Insurance

Finding and leasing commercial space has a different set of rules than for residential rental properties.  One golden rule, however, remains true in both cases: thou know and understand the key lease terms and ensure the lease agreement is specific and clear.  In this series, we will analyze five key terms of a commercial lease relationship.  This is the fifth part of a six-part series, examining five key terms in your commercial lease agreement.  Today, we’ll discuss insurance coverage.

Before a tenant signs a lease agreement, the tenant should be aware of the landlord’s demands for insurance coverage and seek to qualify for such insurance.  Many landlords will require insurance to protect the landlord from the tenants’ negligent and willful acts, but the landlord may have other insurance needs, which, to an unsuspecting tenant, may significantly increase the tenants’ operational overhead.

Here are some questions to ask the landlord before you sign your lease agreement?

  • What are your insurance requirements?
  • What is the penalty for failing to meet these requirements?
  • If a special insurance coverage is required, why is it needed?
  • Is Common Area Maintenance adjusted to account for my obligation to carry this insurance?
  • What insurance do you (the landlord) carry on the building/ premises?
  • (And, perhaps most importantly) where in the lease agreement are these requirements and penalties recorded?

Be sure to consider insurance coverage and ensure that your lease agreement accurately reflects your understanding and agreement with your landlord, so your lease agreement insures your landlord’s assurances.

(See what I did there?)

Finally, we next discuss some general considerations.

Cheers!

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Neighborhood, Gourmet Donut Shop Seeks Beer and Wine License

I’m currently working on a fun project.

My client, Glazed Donuts, is gourmet, artisan donut shop in Key West, Florida, seeking a Florida Beer & Wine Consumption on Premises License in order to sell mimosas, bellinis, and other wine-based speciality drinks and seasonal craft beer that compliment the flavor profiles of their donuts.  Some may surprised to hear of a donut shop seeking to sell beer and wine, but it can’t be too different than Starbucks doing the same.  And, really, isn’t it just another illustration of the creativity of restauranteurs and their impact on our culture?

Normally, the process of a getting a State of Florida Beer and Wine Consumption on Premises License would be rather simple: you’d merely apply for a license from the State.  But, in this case, there’s a snag.

Glazed Donuts is located within 300 feet of St. Paul’s Episcopal Church, and the City of Key West’s Municipal Code prohibits businesses from selling alcohol within that vicinity.  The City permits, however, property owners and their tenants to apply for a Alcohol Sales Special Exception, which we are seeking.  The Special Exception is seemingly simple, but needs the guiding hand of a good attorney.  It goes like this:

  • Complete an application that describes the intended use of alcohol sales, its impact, and mitigative measures;
  • Seek the consent of the Church;
  • Comply with the City’s “Good Neighbor” Policy (meaning discuss your intentions with your neighbors and seek to resolve any reasonable concerns that they may have);
  • Appear before the City’s Development Review Committee (DRC); and, finally,
  • Appear before the Planning Board, which is the approval authority.  The Planning Board can deny the application, grant the application with some restrictions, or grant the application without restrictions.

Currently, the application is slated to appear before the DRC this Friday and, hopefully, the Planning Board in January, subject to its agenda demands.

The real trick with these administrative procedures is to ensure the client’s long term interests are protected.  For example, right now Glazed Donuts is open 7 am – 3 pm.  But, there may be demand to be open longer in the future.  And, as it expands its wholesale operations, there may be a time where the bakery is operating 24 hours a day.  And, if the shop is making donuts, it only makes business sense to open its doors to any retail customers, including those who may want to have a speciality cocktail with their donut (even if late at night).  So, we’re being careful to pursue a Special Exception that permits Glazed Donuts to expand their operations as they see fit when the time is right, free of unreasonable restrictions.

All in all, this project illustrates the creativity and innovation of the culinary entrepreneur.  I, for one, have never heard of a donut shop selling beer and wine.  But, I’ve also never heard of gourmet donut shop . . . ever!  Though, my wife and I are glad we now have.  (Our waistlines are not as grateful.) Culinary entrepreneurs bring experiences that we otherwise might not have, and I’m proud to serve them as their counsel.

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