Leasing Commercial Real Estate
Small businesses operating outside a home typically lease the commercial real estate they occupy. Some small businesses are themselves in the business of leasing real estate. The costs and risks for both the lessee and lessor can be high, and effectively negotiating and managing the many variables of leasing often affects profitability. Critically important variables include the role and rights of the third essential player in the commercial real estate lease: the lender that loaned the money for the purchase or development of the space the tenant leases and that holds an interest in the space and also the rents and profits to secure the loan and related advances. Understanding the law of commercial real estate leasing, from the perspectives of tenant, landlord, and lender, is an important qualification for the small business lawyer and a large part of their value to small business clients.
This course also provides a contained environment to study both the mindset and skill set of a successful transactional lawyer. Students have the opportunity to examine the motivations of the parties to the commercial lease transaction, evaluate the language that comprises the critical provisions that make up the lease, analyze the substantive law that lies in back of these contractual provisions, and apply this knowledge to true-to-life fact sets and problems. In addition, the ethical issues that commonly arise in transactional practice will be covered. Most course segments conclude with an opportunity to apply the material to a form “Killer Lease.”
The course is organized around common, fundamental parts of the typical commercial real estate lease, including:
- Premises descriptions
- Definitions of critical, controlling terms
- Rent provisions
- Permissible and prohibited uses
- Warranty-like provisions
- Transfers-assignments and subleases
- Maintenance, repairs, alterations
- Building services
- Insurance and utilities
- Default and remedies
- Subordination and estoppel
This chronological focus on the core legal issues of each part of the lease also provides opportunities to not only explore transactional practice generally but also to learn two central lessons to good transactional practice. First, the skills that make a good lawyer (drafting, negotiation, and review of documents) cannot be separated from a sound understanding of the substantive law. Accomplished transactional lawyers keep the present state of the law and trends in the law in mind when deciding which rights to trade away during negotiation. Second, good transactional lawyers thoroughly understand the meaning and impact of each provision in the documents that embody the deal, which explains why the course and the course materials are document driven. In this and every other respect, this course runs on practice as much as theory.
Other subjects of special interest and importance to small business are also covered, including: bankruptcy of the landlord or tenant; shopping center leases; percentage leases; and leasehold financing.