If you are about to draft or sign an Offer on a fill in the blank template form, please don’t.
Read this first, and then decide if the template is offering you everything you need.
Fill-in-the-blank templates have their place, but in my opinion they have no place in the Commercial Lease transaction!
You are doing yourself or your clients a disservice by using these types of documents.
This week alone, I have had 4 frantic phones calls from various Landlords and Tenants operating on the OREA Form.
They all had various issues that could have easily been solved if they had a proper Lease Agreement in place, rather than a simple Offer.
First call was from a Landlord wanting to evict their Tenant for non-payment of Rent.
- Problem here – an Offer does not go into enough detail about what constitutes a Default under the Lease and what are the remedies the Landlord has.
- Sophisticated Lease agreements will have several pages talking about what the Landlord can do when a Tenant is late on Rent – the OREA Form has nothing!
Second call was from a Tenant wanting to understand the bill they received from the Landlord for Additional Rent.
- What was the issues? The language around the what costs are and how they are calculated is very vague.
- Typically these costs are estimated at the beginning of the year and reconciled at the end, but the OREA Form only talks in general terms about what the tenant will pay not how these costs will be billed and reconciled and that is such an important part.
The next call was from a Tenant who was looking to execute an extension agreement with their Landlord.
- The “Lease” the Landlord was proposing to extend was the OREA Form Agreement to Lease Commercial space. This was an issue for many reasons, not the least of which there is no address for either party to send Notices, other than the Brokerages who were involved in the initial deal 10 years ago.
The fourth call was from a Tenant who had sold their retail business without the Landlord’s consent and the Landlord was terminating the Lease.
- If a Lease is held by a Corporation typically the Lease document (even the OREA template) restricts the Corporation’s ability to transfer shares, in effect selling the business, and giving the Lease to another party without the Landlord’s prior consent.
- If the future plans of the business involve buying out certain shareholders, then this should be contemplated and allowed for in the Lease Agreement so the transfer does not trigger a Termination right.
Having a team familiar with Commercial leases will be the key to helping you identify areas to touch on in the various lease documents. If your business is operating under the Offer or Agreement to Lease it might be time to initiate the execution of a formal Lease document – we can help with that.Knowledge is Power