Nicholas M. Moccia, P.C.
Attorney at law

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Staten Island Foreclosure & Alternatives Law Blog

Never Prepare a Commercial Lease without an Attorney’s Guidance

When Frank's commercial tenant, an auto parts dealer, told him they would not have the rent on time, Frank tried to play it cool. It was his first commercial rental property, and he wanted to make sure he came off as professional. He told himself that this was just part of being a landlord, and he would have to roll with the punches. Besides, he had enough money to make his payment to the bank.

The real problem came a month later when the tenant explained that business had yet to pick up. The tenant did not have last month's rent, and unfortunately, would not be able to pay this month's rent either. This left Frank in a real tough spot. He needed the rent money to meet his debt with the bank. He was going to have to make an arrangement with the lender. 

After the phone call with the bank, Frank was feeling pretty frustrated. The lender expected him to pay his loan payment on time. Tenant issues were Frank's problem, not theirs. 

A day later, Frank decided he was not going to put up with a deadbeat tenant. He called the tenant and told him that he wanted him out. The tenant told Frank he was being unfair, that he should understand how business worked. He told Frank that he needed more time and that he was not going to leave. He was going to stick it out and make things right. 

As much as Frank wanted to believe the guy, he had his own problems. The bank was not going to continue to let things slide. Choosing what seemed like the only reasonable option, Frank set out to officially remove the tenant. 

Money was tight, so Frank opted for the DIY method. He went online, found some forms, took them down to the courthouse, and submitted them. Then he waited. One week. Two weeks. After two and a half weeks, he had not heard anything. Frank went down to the courthouse again, waited in line for an hour – again – and finally got the chance to talk to a clerk. The clerk informed Frank, in a barely civil tone, that he had submitted the wrong forms. He was going to have to restart the action and wait for approval. Meanwhile, Frank had yet to see a dime in rent money. 

After weeks of frustration, confusion, and stress, Frank made a call to a real estate attorney. With the attorney's help, he managed to get his commercial rental space back. The lesson was a costly one, but, from then on, Frank always consulted his attorney on rental matters. Having a lease that protected Frank as a landlord and having legal guidance when dealing with tenant matters proved to be far more valuable than Frank would have ever imagined when he started out.

The Importance of Commercial Leases

Frank could have saved himself a lot of stress if he had discussed his first commercial rental with a qualified real estate attorney. Had Frank talked to an attorney, he would have had a commercial lease that was designed to protect his interests and would have known what his options were when dealing with his problem tenant. 
  
Commercial leases are essential to define the business relationship between the renter and the landlord. While most leases have fairly similar structures, a quality lease is written with the specific needs of a property owner in mind. This is why it is so important to visit a lawyer when writing a lease. Your business and your properties are unique to you, and the lease should reflect that.

Key Elements of a Commercial Lease

Designed to cover all common concerns in a landlord-tenant relationship, these elements of a lease address a wide range of potential problems:
 
· Parties Clause. A parties clause defines who the lease refers to. Your business is one party, while the tenant's business is the other party. Exact language is important in legal matters, so you want to make sure that the names listed here match the names of each company exactly.
· Premises Clause. This is the official address that is being rented. Any space that is part of the rental needs to be listed here as well, including additional storage locations, parking, kitchen facilities, etc.
 
· Use Clause. You want to be clear on what the tenant can and cannot use the space for. It may not be a problem if the renter conducts various types of activities in your rental, or you may want to make certain that only specific business activities occur in the building.
 
· Exclusive Clause. The tenant may want to have certain exclusivity. For instance, a coffee shop tenant may want to be the only coffee shop in your building.
 
· Rent Clause. This clause defines monthly rent amount and other expenses. This is the amount the tenant is agreeing to pay to you during the term described by the lease. You can also list dates when rent will increase in this clause.
 
· Term Clause. This defines the starting and ending dates of the rental agreement. Other dates can be defined here, such as when the business will open or when the rent payment is due.
 
· Alterations or Improvements Clause. Either you or the tenant may want to make improvements to the space. This clause defines who will pay for improvements, when they will be started, and when they will be finished. You can also state which contractor will do the improvements.
 
· Security Deposits. As a commercial property owner, you can ask for whatever amount you want for a security deposit. Or course, if you want to attract tenants, the amount needs to be competitive for the area. Whatever amount you choose will be listed in the lease.
 
· Insurance. You can define the amount and type of insurance each tenant is required to carry. Think carefully about what levels of insurance are reasonable – low enough to attract tenants, but high enough to protect your investment.
 
· Maintenance. Tenants reasonably expect you to keep the property in working order. Define your responsibilities for building maintenance.
 
· Assignment/Sublet Clause. This provision is important especially if you want the flexibility of selling your business or sharing space with other individuals or companies. There may come a point when you want out of a space. It this clause that sets the parameters for doing so.
A Comprehensive Lease Protects Your Investment
 
Your commercial rental property can prove to be a solid long-term investment, but only if it is protected. A strong lease is a necessity to protect both you and your property from the unexpected. The best way to develop such a lease is with the help of a skilled attorney.
 
What To Do Next:
 
Just as every piece of property is unique, each instance of litigation for a piece of property is unique - and not every lawyer has experience handling such litigation. Using the legal process to achieve your strategic objectives involves much more than paper pushing. It requires an understanding of how New York City and New York State law is applied to your specific case.

Nicholas Moccia provides prospective clients a Property Strategy Session in order to ensure he understands your objectives as well as your obstacles. Nicholas Moccia then formulates a plan of action that is tailored to your objectives including a cost/benefit analysis. To this end, Nicholas Moccia provides predictable and transparent fees structures, and to the extent possible he will project for you, step by step, the likely course your case will take. 

If he's not the right attorney for the matter, or if an alternative to legal action is more appropriate, you have his commitment that he'll point you in the right direction. Just call his office at (718) 701-5772 to schedule.
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