by Nathalie Tinti, Associate
Many first time businesses owners give little thought when entering into an Offer to Lease. The thought usually goes something like this: I need to rent a space for my business. I also need to keep my legal fees down as I am just starting up. I will just execute the Offer to Lease and then retain a lawyer to negotiate the Lease for me. STOP RIGHT NOW!
I cannot stress enough, in my opinion, the Offer to Lease is more important than the Lease Agreement itself. This is usually the only stage where the Landlord is willing to make concessions in order to solidify the deal. This is the stage where the Tenant should be asking for ALL of the items on its wish list. What should these wish list items be? I could go on for pages, but some very important ones are: a rent free period; right of first refusal; right to extend; leasehold improvement allowance; waiver of subrogation; non-disturbance agreement; Landlord work to be done; Tenant work to be done; right to go dark etc, etc, etc. The reality is, if the Tenant doesn’t ask, the Tenant ain’t goin’ get!
One provision often included in a standard offer to lease is a section stating that the Tenant agrees to sign the Landlord’s standard form lease agreement without making any changes to it at all. I am always amazed at how many Tenants agree to this without much thought. Once signed, this takes away any right you, as the Tenant, have to negotiate any provisions of the Lease Agreement! At the very least, it is essential for the Tenant to modify this provision to include such language as “the Tenant has the right to modify the Lease Agreement as the Tenant and/or it’s solicitor deems appropriate”.
Why is this so important for the Tenant to have the right to seek changes to the Lease? A couple of reasons. First, the Tenant has its largest negotiating power before the Offer to Lease and the Lease Agreement are executed. The Landlord wants the Tenant in the building as much as the Tenant wants to be there. Second, commercial lease agreements are weighted favourably towards the Landlord. There is a reason why it is referred to as “the Landlord’s Standard Form Lease”. Last, and certainly not least, once the Tenant has agreed to execute the Landlord’s standard form lease and it is attached to the offer which is fully executed, the Tenant’s chance to modify the Lease are practically zero.
Lesson: call your solicitor first…while you are negotiating the Offer to Lease. It will save you thousands during the life of your lease agreement.