by: Peter D. Morris CRX, SCLS, SCSM, SCMD
Greenstead Consulting Group
Specialists in Commercial Real Estate Training and Consulting
The documentation of your mutual understanding of the transaction comes after you have negotiated the transaction. While I am not a lawyer, and am not about to offer legal advice, there is a concept in law that applies to contracts. In Latin it is: “Consensus ad idem”, which translated means “Consent to the Same”. This is important from a business perspective. The essence of an agreement is a meeting of the minds of the parties. That seems obvious. Both parties to a contract must agree about the subject-matter of the agreement in the same sense and at the same time. What is less obvious is the contract may become void if it turns out that the parties were of a different understanding. At the very least, if you and the landlord have a different understanding of the deal, it causes confusion, poor relations, mistrust and the potential for costly legal action. It can even cost you your business.
Three key points about the documentation step:
1. Get everything in writing and make sure it is clearly understood.
Howard Kline is a commercial real estate lawyer in California. His doctrine is that the wording can be improved upon if it is not absolutely simple and clear. Both the landlord and tenant must have a meeting of the minds.
Lease disputes come from differing interpretations of the same wording. Make sure you and the other party read the clause the same way; and clarify the wording if you feel a sentence, paragraph or even an entire clause can have more than one meaning.
2. Have your lawyer involved at the start and they should review the final draft.
Your lawyer should be involved in the documentation process at the beginning. However, as I noted before, it is YOUR lease and YOUR negotiation thus the first point above. Many times the Landlord’s legal counsel drafts the lease, and revisions to it. Your lawyer will watch for legal ‘wiggle words’, as I call them. There is a significant difference between the words “may” and “shall”, for example.
3. Never sign a binding agreement until you are 100% satisfied with it.
Negotiation fatigue can set in during Steps 8 and 9. It may become tempting to just sign the lease so you can move onto other aspects of your new location. Don’t! This is a contract that will govern your relationship with the Landlord for many years. You must be completely satisfied with the lease document before you sign it. This is not to say that you should re-negotiate the basic lease terms, such as the rent, etc. Those should have been agreed to before this point. Just don’t fall to expediency — whether real or imagined or imposed by the other person.
Remember to keep a copy of the lease for your ongoing reference during the lease term. Too many people sign the lease and put it in a filing cabinet and forget about it. The lease spells out the working relationship and the obligations of both the Landlord and you, the tenant. It can be hard to read, and your eyes may glass over after a few lines. But this is an important document with important dates and responsibilities. As I said before, leasing space is just one part of your overall business, it isn’t your primary occupation in life, but it is very important to actively manage your lease during the time you are in the space.
The Greenstead Consulting Group helps our clients manage their lease so you don’t have to. We provide two critical services:
In the first we make a management copy of the lease. This doesn’t replace the proper legal version of your lease; but distills each clause into easy to understand language that you can use on a daily basis. We strip out the legalese in your lease so you can focus on the business concepts.
The second service is ongoing lease management. We enter critical data into our lease administration system so you don’t forget important dates and obligations, such as the window of opportunity to exercise a renewal, and give you forewarning of these so you can protect your interests. This makes your life easier.