Tuesday, October 25, 2011

Lease Documentation

Here is the next segment in our Leasing Series…Documentation.

Once you’ve surveyed and toured the market for commercial premises, and selected a property for your purposes -- how does the transaction get ‘papered’. There are 2 prinicipal documents involved in most cases - the ‘AGREEMENT TO LEASE’ and the ‘LEASE’ itself.

The Agreement to Lease is more or less the preliminary document needed in order to negotiate and secure the premises, and becomes the basis for both the agreement and as the precursor to the final Lease document. All terms of the deal are outlined - including the lease term, rate, additional rental costs, commencement date, landlord’s work, tenant’s work, rent free periods etc. In addition, tenant information is normally provided at this time, so that the Landlord may complete their due diligence with respect to the Tenant and their proposed use.

The final Lease then typically follows - which in addition to including all the terms of the agreement, also includes a comprehensive point by point summary of all the obligations of both parties, among other details. There is no such thing as a typical lease length, as they come in all shapes & sizes – they can be anywhere from 8-80 pages. Involve your lawyer at this stage of the process, to ensure you understand the document front to back, as this is the overriding document as it relates to your use of the space. In most cases, you will and should have signed the final Lease Document prior to taking possession of the premises.

Seek out experienced commercial realtors with strong leasing backgrounds, to assist you on the transactional side of entering into a lease deal. Their experience is invaluable, in helping you to understand the documentation side of it.

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