The Devil is in the Details!

11/2/2016 | Articles & Alerts

Too often during commercial lease negotiations, tenants focus their attention only on issues critical at lease commencement, and lose sight of important issues governing their responsibility at the end of the lease term. As a result, tenants are often surprised when they learn of their surrender obligations at the end of a lease, and the costly obligations related to them. To avoid unexpected scenarios, tenants should pay particular attention to the “removal and restoration” provisions in their commercial leases. Attention to the following two issues will help ensure the tenant is properly protected at the end of the lease term.

1. Initial Alterations. Many leases state that the landlord will perform certain initial improvements to the leased premises on the tenant’s behalf at the commencement of the term. If the landlord requires that such improvements be removed by the tenant at the end of the term, however, then the tenant could end up incurring substantial expense when they are forced to do so at the end of the lease’s term. Tenants should search for such provisions when entering into leases, and try to either limit the scope of same (by agreeing only to remove the tenant’s so-called “specialty alterations”, such as decorative flooring or an advanced sound room), or have the language removed in its entirety.
2. Future Alterations. Leases also often include provisions requiring the tenant to remove at its own expense alterations made later in the term by a tenant. To avoid any surprise at the end of the lease term, tenants should require that the landlord make it clear at the time the landlord’s consent is given for any such future alteration whether the tenant will be required to remove the alteration at the end of the lease term. The tenant thus will be able to determine prior to making any alterations whether they are willing to assume not only the cost of installing the alterations, but also the cost, if any, of removing them at the end of the lease term.

Attention to the above issues at lease inception better positions commercial tenants to avoid unanticipated expenses at the end of their lease term. As attorneys who specialize in real estate matters, we address and negotiate these and other critical details to ensure your business is properly protected.