Common Commercial Lease Clauses- Round 3

While your real estate broker will be your go-to person when it comes to negotiating your lease, it is not uncommon for real estate project managers to review our client’s leases. We can provide some insight and input from a project management perspective. We’ve done two guides on common lease clauses (Round 1 Here and Round 2 Here), but here are a few more clauses that you will commonly see in a commercial lease:

 

Broker Compensation: 90% of the time, the lessor (landlord) will be responsible for broker compensation. However, there are some landlords that stipulate a clause that the lessee (tenant) should be responsible for the broker’s compensation. Whatever the case may be, the decision must be memorialized and documented into a broker compensation clause within the lease.

 

Purchase Option Conditions: In situations with problem properties or buyers who have short-term debt, a purchase option lease can be advantageous to both parties. In the purchase option condition, the interested party is a lessee of the property until all debt is paid off and the guaranteed price can be paid. The lessee rents the property temporarily until they obtain a mortgage, pay the seller and the deed passes through to them. This can be advantageous to the seller because the seller can get rid of management costs since the lessee/buyer becomes responsible upon lease execution.

 

Right of First Refusal: The right of first refusal clause provides that upon the landlord receiving an offer from a third party to lease/purchase a property, the landlord must submit the offer to the existing tenant. The tenant then has the right to lease or purchase the subject property on the same terms and conditions as the third-party offer.

 

Katie Craven
Katie Craven is Marketing, Communication and Brand Manager at Watchdog Real Estate Project Managers, a real-estate consulting firm that provides owner’s representation and project management services. More about Watchdog Real Estate Project Managers as well as additional blog posts can be found here.
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