In the spirit of heading back to school, we want to test our readers’ knowledge of the essential terms of commercial leases.
After all, most businesses will be a lessor or lessee at some point during their life cycle. Moreover, out of all the agreements a business will execute, commercial leases are often the most complex and least understood.
Q: Is it ok to use/sign a standard form?
A: Forms can be a good starting point, but they rarely address the unique circumstances of the parties. In addition, if you are not the one who provided the form, it is generally safe to assume that the terms will not be in your favor. Therefore, standard leases should serve as a starting point for lease negotiations and always be reviewed with experienced counsel prior to signing.
Q: What is a “triple net” lease?
A: Under this type of lease structure, the tenant is responsible for paying the net of the landlord’s operating expenses, including real estate taxes, property insurance, and maintenance (the three nets), in addition to base rent and other fees. Because the tenant essentially assumes the risk of ownership, it is important to understand how the operating expenses are calculated.
Q: What is the difference between a right of first offer and a right of first refusal?
A: Under a right of first refusal, when the landlord receives an acceptable offer to lease or purchase the property from a third party, the landlord must submit the offer to the tenant, who then has the right to lease or purchase the subject property on the same terms and conditions. By comparison, a right of first offer obligates the landlord to notify the tenant that the property is being made available for lease or purchase prior to marketing the property. The tenant then has the right to lease or purchase the property pursuant to that offer. In the case of either provision, care must be taken by the drafter to set forth the conditions that trigger the tenant’s rights, and the steps that tenant must take to exercise those rights.
Q: What are CAM expenses?
A: “CAM” refers to common area maintenance. Tenants are frequently required to contribute to the upkeep costs for hallways, stairways, elevators, parking lots, and other shared spaces. It is important to (i) understand how these fees are calculated and how each tenant’s share is apportioned; (ii) understand what is included and excluded from such fees; and (iii) secure a right to audit such fees in the event that they seem inappropriate.
Q: What is an SDNA?
A: An “SDNA” is a “subordination, nondisturbance and attornment agreement. Most standard lease agreements state that the lease is subordinate to any pre-existing mortgage on the property. To avoid being potentially evicted in the event of a foreclosure, tenants can condition the lease upon landlord securing an SDNA from the lender in which the lender agrees, among other issues, that it will not disturb the tenant’s possession of the premises, while the tenant agrees to continue paying rent and otherwise abiding by the terms of the lease.
If you have questions about commercial leases provisions or would like to discuss your company’s real estate interests, please contact me, Victor Kinon, or the Scarinci Hollenbeck Litigation attorney with whom you work.
BESS Project Agreements: Allocating Risk Among Developers, EPC Contractors, and Equipment Suppliers
Developers, engineering, procurement, and construction (EPC) contractors, and equipment suppliers each play a critical role in completing a BESS project. However, when equipment costs rise, deliveries are delayed, or regulations change, determining who bears the financial consequences can become contentious. Well-drafted project agreements are essential to sound risk allocation. Key Takeaways This article is Part […]
IP Infringement: What Steps Can You Take If You're Affected?
IP infringement occurs when someone uses your intellectual property without your permission or beyond the scope of the permission you granted. Common examples of IP infringement include copying a product’s patented features or using a trademarked logo in a way that is likely to confuse consumers about the source or affiliation of goods or services. […]
Public Allegations, Unfinished Investigation: What New Jersey Businesses Should Do Next
When facing public allegations of wrongdoing, companies should not let the speed of the public conversation dictate the speed of an investigation. An investigation designed to confirm a preferred narrative rather than establish the facts can create serious problems later, particularly if litigation, regulatory scrutiny, or employment claims follow. Key Takeaways When public allegations surface […]
BESS Interconnection: Managing Grid, Cost, and Schedule Risk
For battery energy storage system (BESS) developers, securing equipment and site control is only part of the development equation. A project must also connect to the electric grid, and increasingly, BESS interconnection is one of the biggest sources of schedule, cost, and contractual risk. Key Takeaways This article is Part 3 of our Battery Storage […]
Navigating Director and Officer Liability in Times of Financial Distress
Director and officer liability increases sharply when a company is in financial distress. Decisions that would draw little attention in a healthy business can later be challenged by creditors, shareholders, bankruptcy trustees, and regulators as breaches of fiduciary duty, fraudulent transfers, or oversight failures. Understanding where that exposure comes from, and how to manage it, […]
Before You Buy: Managing Real Estate and Permitting Risk for BESS Projects in New York and New Jersey
For developers pursuing battery energy storage system (BESS) projects, finding the right property is only the beginning. BESS site selection is as much a legal and transactional exercise as a real estate decision, with risk analysis central to the project’s ultimate success. Key Takeaways The core questions for BESS site selection in New York and […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
