Delaware Business Lawyer Blog

When you receive the form lease from your landlord, you can expect to see a paragraph that requires you to pay your pro rated share of increases in taxes and insurance, charges for gas, electricity, etc., and your pro rata share of trash removal. You should have the right to review the landlord’s books and records to assure yourself that you’re not being overcharged by the landlord.

Although the lease might say that your landlord’s annual determination of expenses is binding, it should go on to give you, as the tenant, the right to review the landlord’s books and records supporting such determination.

I’ve seen leases that say you have the right to use an independent accountant to perform the review, but the accountant can't be compensated on a contingency basis. In addition, you may be given only 90 days within which to object. The problem with accepting a 90 day limitation is that it’s virtually impossible for most tenants to determine whether there's anything wrong within 90 days. You have to hire a lease audit firm to review the lease and the bills, you have to gather internal information, coordinate schedules for the audit, conduct an on-site review of the books and records, complete the analysis, prepare a report, and present the findings to the landlord. The result of this is that the necessary work just can't be done within 90 days, and so you can't meet the deadline. There should be an Addendum to the form lease giving you more than 90 days to get this done.

As far as who can help you with the audit, you should be able to use a contingency firm if you feel it would be in your interest. The landlord has no legitimate interest in telling you who you can hire. Certainly, the landlord wouldn't tell you what attorney to use and what your fee arrangement should be. The reason a contingency fee audit firm could be good for you is that you may not have the money needed to pay for an audit on an hourly basis. This means that even though you have the right to an audit, you generally will not exercise your right unless you can use a contingency fee firm.

By the way, a contingency firm is one that gets paid based on how much money they save you. If the audit finds you have not been overcharged by the landlord, there is no fee.

It's been my experience that many business owners don't take the time to carefully read the commercial lease that comes from the landlord. That's understandable if you've ever seen the length of that document, or how small the print is, or if you actually tried to get through all the legalese.

The form lease you get from your landlord probably contains some language which you would not agree to if you understood it, and I can tell you that it's common for landlords to agree to some changes if they're reasonable. Let me give you a few examples.

The lease may require you to comply with all governmental laws and regulations applicable to the use of the premises and to comply with all governmental orders for the correction, prevention and abatement of any violations in the building. That sounds okay when you read it. However, even though you don't plan on conducting illegal activities, a “compliance with all legal requirements” clause can impose broader obligations and expense than you might realize. For example, it could require you to abate environmental problems even if they existed before the commencement of the lease. You could also be obligated to comply, at your expense, with the requirements of the Americans With Disabilities Act, zoning requirements and other matters. There should be an Addendum to the lease which makes an exception for these types of things.

Almost all leases have a clause stating that the lease represents the entire agreement between the landlord and the tenant. The important thing to keep in mind is that you can’t rely on any oral comments, promises, or understandings unless they are specifically in the Lease Agreement or an Addendum. Therefore, if you were told anything important that’s not in writing, make sure it’s put in an Addendum to the lease.

You’ll probably see a paragraph that mandates that the premises are to be used solely for the purposes set forth. Although it’s common for a lease to provide how you as the tenant can use the premises, it makes sense for you to try to use a broad enough use that will allow flexibility for your evolving business or for purposes of subletting or assignment.

Your lease may give you the non-exclusive use of the common areas, including parking facilities. That section may go on to say that you cannot park more vehicles in the parking facilities than your proportionate share of the total parking spaces available for common use. It states than you are not guaranteed any specific number of parking spaces. Although these provisions are reasonable, this could become a problem if other tenants are not subject to the same restrictions as you are. For example, if the landlord were to rent space to a large company that has a lot of employees, they could take up more parking spaces than would be allowed under their proportionate share. You can deal with this in an Addendum by stating that the landlord agrees that all other tenants will be subject to the same restrictions regarding parking spaces as you are. Otherwise, it may be difficult for you, your employees and your customers to find a parking space.

Your lease might give the landlord the right to require you to move from the premises to other space of comparable size. If you can't get the landlord to delete this, you should at least negotiate for several things. If the lease doesn't say where you can be relocated to, this should be spelled out. You would not want to be relocated to another part of the state. There should be a time limit within which you should be up and running in the new location. The landlord should also pay for new business cards, letterhead, etc. The Addendum should provide that the landlord’s right to relocate you can only be exercised one time during the entire term of the lease and any extensions.

These examples obviously don't apply to every business location, or to every situation. Hopefully, they will allow you to see that language in a form lease may seem okay, but if you consult with an experienced lawyer, you may discover that some changes are in order.

In my next article, entitled "Auditing Your Landlord's Books," I'll give you another example that discusses the costs your landlord bills you for and your right to have the figures reviewed by someone looking out for your best interest.