The following real property lease checklist addresses some of the most common issues that occur when a real property lease is being negotiated. After reviewing it, you should be in good position to understand what to look for in any real property lease. Of course, before signing a real property lease, make sure that you have your attorney review it.
o Nature and duration of the lease. Determine the term of the lease, and when the lessee is entitled to possession. Is the lease to be a net lease? What are the duties of the lessor?
o Rent. In the contract, make sure that the amount of rent and when and how it is payable is stated. If the lessee holds over, what is the rent for this period?
o Renewal. Is there an option to renew, and what is the term of each option? What is the rent for each renewal period? How must the option to renew be exercised?
o Space. What the landlord considers rentable square feet and what the tenant gets in usable square feet space can vastly differ. Designers and space planners can often save costs by laying out the facility to fit the space efficiently. The location of a building's columns, windows and mullions can affect a tenant's total space requirements. Determine whether the lease provides an option for additional space. Is the lessee given a right of first refusal when additional space becomes available? Can other tenants be moved when additional space becomes available so that the lessee's areas are contiguous?
o Construction. Does the lessor warrant that the building conforms to all local laws and codes, and will the lessor reimburse the lessee for correcting any code violations? Does lessee have right to inspect before execution of lease and before taking possession? Are there adequate parking facilities and other transportation facilities?
o Liability and insurance. Who is responsible for liability insurance, and what are the limits? Who carries theft, fire and other casualty insurance? To what extent does the lessor or lessee excuse the other party for liability for injury to persons or property? Lessees should scrutinize any hold-harmless provisions within the lease with great care. While a lessee may be willing to reimburse the landlord for losses caused by the lessee, most lessees would not want to hold a landlord harmless for damage caused by actions of the landlord. The provisions should indemnify the landlord only for harm caused by the lessee within the leased space.
o Termination. What obligations are imposed on the lessee as to the condition of the property at the end of the lease term? Are ordinary wear and tear excepted from lessee's obligation to return property in good condition?
o Enforcement. Are damages specified for breaches of various lease conditions? What about attorney's fees for actions to enforce lease provisions?
o Improvements. The tenant may wish to add ``improvements'' to the premises which might be of value to the tenant, but not future tenants. Determine the extent to which the landlord will allow improvements.
o Government reports. Under various federal, state and local laws, landlords and tenants may be required to report to a governmental agency the storage, use or release of hazardous substances. Under the lease, each party should agree to comply with all such laws and to provide to the other party a copy of any filing or report within a specified period following filing. The landlord should also agree to provide to the tenant, within a specified period after the landlord receives it, a copy of any filing or report made by any other tenant of the building.
o Legal compliance. The landlord may want to include a provision whereby the tenant is obligated to comply with all present and future federal, state and local laws, including future environmental laws, affecting the leased premises, tenant's business, or any activity or condition involving the premises; to change, reduce or cease any noncomplying activity; and to install pollution control systems, equipment, safety devices and the like in order to comply.
