bake - January 2012 - 32

GENERAL LEASING ISSUES Rent : If the rent includes escalations for taxes, operating expenses or common area maintenance, try to figure out the overall effect of those increases over time. Build-out : How will the landlord contribute to the tenant’s initial construction in the space? Insurance : Are insurance requirements reasonable and appropriate? Early in the process, tenant should have its insurance broker or consultant review insurance provisions. Tenant alterations : Have the landlord approve tenant’s initial plans as part of the lease signing. Require landlord to approve reasonable tenant alterations in future. Sale of business : Make sure you can sell the business (including a transfer of the lease or all the stock or other equity of the tenant) without a requirement for landlord consent. Usually, landlords will insist on at least having a right to “reasonably consent” to any such transaction. Nondisturbance : If there’s a mortgage, then ideally the lender will agree to leave the tenant in place if the lender ever forecloses on the landlord. Small tenants often can’t get such protection

Lawyer up The best way to secure the right property with the right leasing agreement is to hire an attorney with experience in commercial real estate or contracts. While it might seem like a large initial cost, having a competent real estate attorney guide you through the process will prove invaluable over the long term. With two locations in the Kansas City metro area, Vicki Goellner, co-owner of Natasha’s Mulberry and Mott, attributes the quality of her lease in Leawood, KS, to having a contract attorney in her corner. “We had several drafts of the lease from what it started with because our attorney just went through it with a red line,” Goellner says. The non-compete clause in the lease, a direct result of her attorney’s contract acumen, gave her the ability to tell her landlord “no” when a cupcake shop wanted to move into the same shopping center. “We have such a good lease because of our attorney,” she says. “He’s worth every penny.” Landlords want an obligation to have the rent paid and will often ask for a personal signature on a lease to ensure this will happen. Depending on the situation, this request can be non-negotiable. This means the bakery owner agrees to pay rent for the entire term of the lease regardless of what happens to the business. Joshua Stein, New York real estate attorney, says many landlords of small businesses will ask the business owner to sign a guarantee of the lease. He suggests the owner should instead try to sign just a “good guy guarantee,” a common practice in New York and elsewhere. A good guy guarantee allows the business owner to

Removal/Restoration of Improvements : Try to eliminate any requirement to “repair” or “restore” the premises at the end of the term. Try to avoid any obligation to return the premises at the end of the term in any particular condition. These are invitations to lawsuits.
Provided by Joshua Stein PLLC, www.joshuastein.com

personally sign, but not the entire lease. The owner agrees to vacate the space, should the business fold, and personally commits to paying the rent until the space is vacated and ready for another tenant to move in. Once the business has completely moved out of the space, the owner can stop paying the rent. As an alternative, a tenant will sometimes have the right to terminate the lease early by paying some fee. Know your plan The best area and best price don’t necessarily make the best option for your shop. If you’re not able to use the space for what you want to do now — or in the

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bake - January 2012

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