Leasing Space in a Changing Economy

Economic fluctuations may present tenants of commercial or office space with bargaining power which they might not otherwise have. While it may not be possible to obtain rent concessions in a strong real estate market, it still makes sense to spend some time and energy negotiating the terms of one’s lease. Hiring an attorney to assist in this endeavor may make a great deal of financial sense.

First, the involvement of an attorney in the negotiating process provides credibility and leverage with the landlord. In short, landlords tend to take tenants more seriously when the tenants have legal representation. Acting as the intermediary, the attorney may be able to obtain better lease terms without jeopardizing the landlord-tenant relationship. The attorney can act as a buffer, so that the tenant is not directly viewed as the adversarial party.

One of the most important legal issues which may arise in connection with commercial leases is whether the tenant should have the right to assign or sublet all or a portion of the leased premises, and under what terms and circumstances. The ability to assign or sublet, especially in the event of an economic downturn, may be crucial to the financial health of one’s business. Certainly, the landlord also has an interest in seeing the tenant remain financially viable over the long-term; therefore, during changing economic times the landlord may be more willing to permit assignment and/or subletting.

If the poor performance of the economy also softens the real estate market, tenants may become more successful in negotiating lower rents. Often overlooked, however, are rent and tax escalation clauses. These must be reviewed carefully, as the precise wording of such clauses can have great financial consequences. Tenants in Nassau County must be especially careful with respect to tax escalation clauses in light of recent property reassessment initiatives.

Of practical concern always is the landlord’s willingness to make represen-tations regarding the condition of the roof, fire sprinkler system plumbing, heating, ventilation and air conditioning systems. If the tenant is responsible for such items, the cost of repair or replacement can be prohibitive.

In summary, retaining a knowledgeable and experienced attorney to negotiate the terms of one’s lease may prove quite valuable and cost-efficient.




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