Maryland Commercial Lease Negotiation: Top 10 Issues

•  Unusual entity or capacity (manager or agent signing)? Represent that is authorized.

• Address of building, square footage and exhibit attached showing space?
• Right to re-measure?  By Landlord or by Tenant? Does pro-rata share adjust?
• Any parking ratio guarantee or certain number of reserved spaces?

• May Tenant erect any signs?  Where?  Specs?
• What does Landlord provide at no cost?

• May Tenant use the premises for its intended purpose?
• Keep general, if too restrictive, may limit assignability.
• Need special rights?  Right to access roof or other areas for maintenance of owned accessories?

• When does term begin?  Terminate?  Have “confirmation of commencement date” procedure
• If lease begins at a time to be determined, what is the latest date for commencement and does termination date shift so Tenant gets latest date rent increases and full term?
• Does Tenant need drop dead date?  (exclude from force majeure clauses)
• Is the contingency on which commencement depends clear enough and will it hurt either party due to their unusual circumstances if it is not met (Landlord may want rent to start, Tenant may not want to start it too early or Tenant may need to be out of old space)  Need new Landlord to pick up holdover rent at old space?
• Option(s) to renew?  At FMV or fixed rate?  Can Tenant opt out after learning FMV?
• Any early termination rights?
• Need rights of early access?

• Is the annual minimum rent and monthly payment stated?
• Mailed or wired?   Add EFT language as option.
• Grace period on late charge?
• Advance rent or security deposit: due on execution, within x days, or  upon completion of improvements?
• Are there escalations?  At what intervals and what is the formula?
• Is there “free rent” period?

• Is it a list of what is included or “everything” with list of exceptions?  Exclude new items unless also in base year?
• How much gets passed through: all;  excess over Base Year;  excess beyond stop; cap on “controllable” expenses; overall cap?
• Separate “baskets” for expenses, taxes, insurance?
• Are expenses “grossed up”?  Be sure base year is, too.
• Amortize capital expenditures?   What life?
• Right of audit?  Go back three years for any line item found to be in error.
• Clear who pays for audit in the event error is found?
• Get refund if overpaid?
• Who pays real estate taxes?  Reassessment likely during term?
• Prorated for partial year?
• Exclude increases due to building’s sale?
• Limit assessments to portion attributable to term of Lease?
• Exclude retail, parking/ special assessments; profit, franchise taxes?
• Tax receipts provided?
• Right to contest amount of taxes?
• Pro-rata share appropriate? Consider if other buildings (retail or parking) pay different rate

• Limit Tenant’s responsibility to non-structural and within Premises only?
• Clear who is responsible for roof, bearing walls, floors, foundations, utility connections to the building, heating and cooling, plumbing, glass, sidewalks?
• Eliminate language that requires Tenant to pay for repairs caused by Tenant’s negligence.  This is covered by Landlord’s property insurance.
• Be clear on Tenant’s responsibility for repairs vs. replacements.  Amortize capital expenditures so Tenant only pays portion within the term?
• Who is responsible for compliance with new requirements (ADA, e.g.)?
• Are all of Landlord’s costs to be passed through as operating expenses?  Is this the business deal?                                                  

• Does Landlord represent present compliance?
• Tenant should only pay for compliance-related costs if due to its use (not just  tenancy in general) or include a cap.
• If possible, limit nuisance and waste clause to “voluntary” waste.
• In environmental clauses, limit to “illegal” uses of hazardous wastes or exclude “typical amounts of office supplies”.

• Who carries and who pays for which types of insurance?
• Does Landlord agree to insure building with replacement coverage?
• What amount of insurance is to be carried?  Is self insurance prohibited?
• Name Landlord as additional insured only on liability policies?
• Waiver of subrogation for property losses?

• Make indemnification limited to third party losses and make it mutual, if possible.
• Do not accept restriction to “gross” or “sole” negligence of Landlord and do not limit to acts at the “Premises”.
• In “release” clause, exclude negligence of Landlord.

• Under what circumstances must Landlord or Tenant rebuild?
• What is threshold?  (percentage, unusable, discretion)
• Time limit for rebuilding?
• Under what circumstances may Landlord or Tenant avoid rebuilding?
• To whom is loss payable?
• What is Landlord required to rebuild?
• What is Tenant required to rebuild?
• Who is to provide deficiency, if any?
• When can Landlord or Tenant terminate lease?
• From what date–destruction or decision?
• Is any abatement of rent provided for?
• Does clause cover all contingencies?

• Is there abatement of rent?  From what date?
• Can Tenant terminate?
• Can Landlord terminate?
• Does Tenant share in award?
• How compensate Tenant for any construction or improvements paid for by Tenant?

• If inconsistent (and usually is) add language that Lease controls.
• Attach plans, if possible.
• Who is doing work?
• Is it very clear what is part of “base” building and what is part of Tenant’s work?
• Does Landlord commit to do in “good and workmanlike manner” and/or is there a warranty?
• What is “substantial completion”?
• Limit Tenant “delays” to “actual” or “caused solely by Tenant” and do not accept “default” or “failure to pay” as a delay.
• Is construction to be completed by a certain date?
• What does Landlord have to approve? changes to plans, contractor, non-building standard items?
• Can Tenant do any alterations? Require approvals, lien waivers, payment of fee?
• Is building permit a problem in this municipality?
• Who decides and when/which alterations stay and which must be removed?

• Is deposit required? When paid?
• Cash?   Letter of credit?

• Does Tenant have notice and grace period to cure default?
• Is there interest and is it fairly calculated?
• May Landlord re-enter and terminate any subleases?
• Accelerated rent have discount rate?
• Confession for money?    For possession?
•  Exclude late payments from amounts that bear interest.

• Does Landlord have lien on any of Tenant’s property for delinquent rent?
• If no such clause, should Landlord waive any statutory rights?

• Time period for Landlord to respond?
• Is original Tenant to remain liable under the form of assignment in all circumstances?  What about if renewed?
• Any type of subleases and/or assignments be made without consent?  Reasonable consent?
• Recapture rights?
• Sharing of profits (after deducting fees, TI and inducements)?

• If lease is subordinate (mortgage already exists or language says deemed to be subordinate to later mortgages) ask for nondisturbance agreement. 
• Limit estoppels to rent facts and only once every 12 months unless selling building
• Reserve right to get operating expense overpayments from new owner in estoppels

• If there is a force majeure clause and any drop dead dates, make the latter an exception.If larger space or sole
• Tenant, right to cure Landlord’s defaults and offset costs from rent?
• Notice clauses to right people and by an easy means, like fed ex?
• Limit holdover rent to after 30 days and exclude all consequential damages?