CLE Presentation by Jeffery A Margolis, Esq. The Margo=
lis
Law Firm =
Sept
28, 2005
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REBNY
PARA. #
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HEADIN=
G
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COMMENTS
(“must
haves” in BOLD)
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|
(iii) and 15 &=
nbsp; <=
/o:p>
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Landlord
and Tenant
<=
/o:p>
&=
nbsp;
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- confirm correct entities=
- T: newco to be formed? corp.? LLC? general/limited
partnership?
- take in=
one
name/right to assign to newco <=
o:p>
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WITNESS-SETH=
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Premis=
es
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- rentabl=
e, leasable, useable, carpet=
able
- REBNY
standards as to measurement; also BOMA, etc
- re: description of the demised premises (̶=
0;DP”)—attach
a diagram
- specify
square footage
- once
diagram received, check to make sure that the DP have been properly
outlined
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WITNESS-SETH
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Term
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- fixed or
sliding
- REBNY f=
orm
is fixed—easy
- sliding=
—date
T takes occupancy or L completes L’s Work
- if slid=
ing: effect of delays-outside date (“drop dead” date)=
for
completion of work/delivery of possession
- commencement contingent on
various approvals and permits (e.g., C of 0, plans/specs for T's Work, SLA)
- rent
penalty—2x days rent for each day of delay
- provide=
for
commencement date agreement
- right to enter prior to rent
commencement date for fixturing/communic=
ations
work/decorations
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WITNESS-SETH
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Rent
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- fixed
- first
months rent due on signing
- try to
change to pay at completion of L’s Work
- as to a=
ny “free”
rent: no give-backs by reason of (claimed) T default
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|
(none)<=
/o:p>
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Escala=
tion
Rent
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- additio=
nal
rent
- CONFIRM PROPER BASE YEAR (RELATIVE TO LEASE ST=
ART
DATE)
- Confirm T’s proportionate share -- L
representation as to amount and basis of total bldg square footage u=
sed
in denominator.
CPI
- confirm proper base data=
- use appropriate index
<=
/o:p>
Porter’s Wage
- proper base year
- multipl=
ier
- penny for penny, etc.
- to reflect base hourly rate only
- exclude
“fringe” benefits and value of time-off
- CPI and PW: advantage: easy to calculate
Operating Expenses
- review as to suitability of i=
tems
included
- limit to L’s “actual”
expenditures
- carve out capital items, amounts reimbursed by other tenants or inclu=
ded
in their rent, items not fully related to operation of the building,
e.g., home office management, executives salaries, brokerage
commissions, L’s insurance, legal fees for lease enforcement
against other tenants-prep of space for tenants’ occupancy, if=
a
“cost saving” device is included, should be only to the
extent =3D a savings—right to inspect L’s books/audit
- “gross-up” expen=
ses
in base year
- one year deadline for billin=
g
Tax Escalation
- use fair base year (get full year or close to it)
- what is=
T's
proportionate share?
- L to
provide copies of tax bills
- give
careful review to definition of "taxes"<=
/li>
- exclude
special assessments, penalties, interest
- what is
present tax status of building?
- special pr=
oblems
re=
new construction and increase relating to new
construction (actual vs. transitional assessments)=
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2=
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Use
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·
"Any lawful use"—looking for flexibility—esp if later sublease/assignment<=
/p>
·
cover all aspects of proposed
business
- L to rep proposed use is covered b=
y C
of O and will not result in increased insurance pre=
miums
- elimina=
te
prohibitions such as a use which would “adversely effect the
character and reputation of the Building”—too vague=
- general or executive offices=
- look out
for list of “no’s”
- add rig=
ht
to use DP for “incidental” uses—also present use m=
ust
be interpreted in some flexible way—add use X “as same m=
ay
change from time to time” (example, toys & book store now
wants to carry video tapes, DVD’s)
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3
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Altera=
tions
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·
<=
span
style=3D'font-family:Arial;mso-bidi-font-family:"Times New Roman"'>T to h=
ave
right to make non-structural alterations, decorations, or alterations cos=
ting
less than ($25,000) without L's prior consent
· all
installations made by T
remain T's property
· right =
to
remove (T to repair the damage)<=
/o:p>
· no obligation=
to
remove at end of term
· If L reserves right to change lobbies, configuration of corridors,
etc., add provision re no impairment of egress, ingress, visibility, etc.=
L’s Work (esp. initial work=
)
- need specific plans and
specifications—outside date for completion
- “drop-dead” date=
(terminate
lease)
- l=
iaise
with T's architect/des=
igner
T’s Work =
- on
initial work, get approval upfront—no charge for L review on
initial T work.
- C=
onstruction
allowance
Specific pla=
ns
and specifications
· &nbs=
p;
must T use contractors approved b=
y L?
-Union help?
- right of T to contest liens
- liaise with L's
architect/designer
- limit time for L review=
- If no objection w/i time frame, L deemed to have approved
- decorative –no consent
required
- T to be allowed to use work
allowance $ for any purpose related to lease
all alterations—no obligati=
on
to remove at end of term
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4=
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Maintenance and Repairs
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- general division T, inside; L, outside and all building
systems
- also add that L responsible =
for
elevators
- L to make all structural repairs, repairs to H=
VAC,
utility lines, and such nonstructural repairs as occasioned by L's
negligence, etc.
- building to be maintained in
attractive, clean, first-class manner
- T not required to make repai=
rs (i) covered by warranties of L's contractors, or =
(ii)
covered by insurance carried by either party—try for agreement
that L to make all repairs covered by L’s insurance, regardles=
s of
whose responsibility under the lease--
- L’=
;s
repair work to be performed so as to minimize interference w/ T̵=
7;s
business
- work to=
be
done in good and workmanlike manner
- T to ge=
t reas advance notice (exc. emergency)
- if L fa=
ils
to make a repair, T right of self-help, at least a broad indemnity o=
f T
- L to rep that at CD, all major systems in good
order and repair
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6=
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Requirement of Law
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- generally, to be L's
responsibility, at L's expense, unless caused by T's "manner of use&quo=
t;
(compare with mere "use")
- r=
ep
that at commencement of term DP will be in compliance with all
laws—esp as to asbestos, fire comm=
and
system, ADA<=
/st1:place>
compliant, etc
- L=
responsible
for all environmental matters
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6, 9
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Insura=
nce
|
- REBNY f=
orm
is not specific
- waiver =
of
subrogation
- review =
ins
requirements with T’s agent
- require=
L
to carry typical insurance
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7=
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Subordination
|
- w=
hat is
present ownership status of fee (land/building)
- o=
btain
specifics as the present mortgages and ground leases, if any
- (for larger leases): Non-Disturbance Agreements=
(re
present and future mortgages, etc.)
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4, 8,20,
27,31
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Indemn=
ity-
Exculp=
ation
|
- Form (A=
rt.
8) already has “unless caused by L’s negligence” a=
s a
carve out—add “willful misconduct or omission”R=
21;
to “negligence”
- make reciprocal
- carve out L’s negligence from Art. 27
(inability to perform), too
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9=
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Damage=
Or
Destru=
ction
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- under certain circumstances
(e.g. total destruction of premises) T to have right to cancel (=
esp.
if event is in last year or two of term)
- f=
ull
abatement and partial abatement (to run until both L and T restorati=
on
work completed)
- r=
equirements
re L's repair and restoration (outside dates, etc.)—shorten dates for completion—red=
uce
time for L decision making on rebuilding—“untenantability” to mean T unable to car=
ry on
its work in full DP in normal manner
- note that damage to some parts of DP can be more
important than others
- L to give adequate notice when DP will be ready=
for
re-occupancy
- be careful as to phrases such as restoration wo=
rk
begins after L’s receipt of the insurance proceeds (could be m=
ajor
delay if as L and carrier slug it out)
- if substantial damage or destruction, explore T's right to reoccupy space=
in
"new building"
- “substantial damage”—work on
definition—
- L to restore interior of DP to state as of star=
t of
term (i.e, re-do L’s Work)
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11
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Assign=
ment
and Sublet
|
- k=
ey
word: FLEXIBILITY”
- right to assign or sublease =
to
affiliate, subsidiary, parent or in connection with sale of all asse=
ts
(successors) without L's consent; release of original tenant and
guarantor from liability (provided net worth =3D or + than original
parties
- all oth=
er
assignment or sublease, consent not to be unreasonably withheld,
conditioned or delayed
- right to have clients, customers occupy desk s=
pace
without consent
- no recapture; if recapture no partial recaptur=
e
- discuss profit on assignment or sublease (not
apply to “family” transfers—also no recapture)
- try for expedited approval process<=
/span>
- preliminary term sheet to suffice (not require=
d to
go all the way to signed sublease)
- be specific—as to profits—make it =
just
that: “all costs”—include legal fees, ads, alterat=
ions
done to prep DP for new occupant
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12
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Electr=
icity
|
- r=
ent
inclusion is typical
- c=
heck
that rate is comparable to other buildings (now in NYC, $3 per rsf is typical)
- i=
f submetered, T not to pay more than direct rate
(tariff) paid by L
- L=
to
rep that electric adequate for office purposes.
- S=
pecify
electrical capacity __amps,
broadband capacity, etc.
- L=
not
to discontinue service unless does so as to majority of tenants by <=
span
class=3DSpellE>rsf
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13
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Access=
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- L to use all reas
effort not to interfere with w/conduct of T’s business
- g=
ive
notice of entry (except emergency)
- L=
to
clean-up/restore after its work is done
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15
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C of O=
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- L=
to
rep that proposed use is permitted under C of O
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16
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Bankru=
ptcy
|
- B=
ankruptcy
law trumps lease provisions
- &=
#8220;ipso
facto” clauses (lease terminate on T’s becoming insolven=
t)
are not enforceable
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17
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Defaul=
t
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- notice and opportunity to cu=
re
before being held in default, esp as to =
rent
- T
should have right to dispute defaults (include stay of termination
pending resolution)
- i=
nclude
"unavoidable delays" clause
- note “conditional
limitation” language—trump that with notice and opportun=
ity
to cure
- MUST HAVE GRACE PERIOD AFTER
NOTICE FOR ALL ALLEGED
DEFAULTS—even if only 5 days
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18
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Remedi=
es
|
- T=
to
get notice
- L=
to be
obligated to use reasonable
efforts to mitigate damages (See Kenneth
Cole case: commercial L not obligated to re-let, mitigate
damages)
- d=
elete
references to “threatened” breach
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19
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Fees a=
nd
Expenses
|
- must be reasonable
- n=
otice
prior to L exercising self-help
- m=
ake
mutual
- p=
revailing
party to get legal fees
- t=
ry for
right of offset
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20
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Rights=
of L
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- c=
hanges
to common areas not to impair T’s access to the DP or restrooms
etc—nor visibility of T’s door
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21
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No Repre-sentations by L
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- e=
xclude
defects not observable, such as in walls
- m=
ake “as is” clause
subject to other obligations of L for repairs etc, found elsewhere in
lease
|
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22
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End of=
Term
|
- no obligation to remove
property/restore DP
- restoration to exclude ordin=
ary
wear and tear
- T=
to
remove only what it wishes to
- a=
lternative
is to require that L specify if removal will be required as part of
consent to alteration process
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23
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Quiet
enjoyment
|
- f=
orm
says “so long as T not in default”—etc , add: provided T has rec’d =
notice
and opportunity to cure
|
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24
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Failur=
e to
Give Possession
|
- outside “drop deadR=
21;
date
- L=
to
diligently pursue eviction of any holdover tenant—contra to Sec
223-a of NY law—says L will deliver possession at beginning of
term
- c=
ompensate
T for any holdover penalty it must pay at its present space
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25
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No Wai=
ver
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26
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Waiver=
of
trial by Jury
|
- n=
ote:
small T probably better off with no jury—expedites
matters—keeps costs down
- a=
lso
look into ADR
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27
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Inabil=
ity to
Perform
|
- m=
ake
reciprocal—rent abatement after x days
- f=
orce majeur excludes L’s financial condition<=
o:p>
- T=
to
get business interruption insurance—
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28
|
Bills =
and
Notices
|
- FORM =
is
antiquated
- u=
se
FEDEX , some method where delivery is confirmed with a receipt<=
/o:p>
- cc
attorney for T—avoid inadvertent problems
- a=
ttorney
authorized to give notices
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29
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Servic=
es
|
· &nbs=
p;
<=
span
style=3D'font-family:Arial;mso-bidi-font-family:"Times New Roman";letter-=
spacing:
-.2pt'>make sure all basics are included: HVAC, cleaning, elevator, etc
· &nbs=
p;
<=
span
style=3D'font-family:Arial;mso-bidi-font-family:"Times New Roman";letter-=
spacing:
-.2pt'>24/7/365 access
· &nbs=
p;
overtime AC? Freight elevator? To=
be
billed at L’s cost, not a profit maker
· &nbs=
p;
supplementary AC unit?
· &nbs=
p;
Overtime AC charge to be allocate=
d if
several offices benefit
· &nbs=
p;
<=
span
style=3D'font-family:Arial;mso-bidi-font-family:"Times New Roman";letter-=
spacing:
-.2pt'>DELETE PROVIDED NOT IN DEFAULT language
· &nbs=
p;
no charge for freight car on move
in/out
· &nbs=
p;
min. interruption of T’s
business when making repairs
· &nbs=
p;
also if service not available for
prolonged periods then abatement
· &nbs=
p;
HVAC specs—HVAC season=
· &nbs=
p;
cleaning schedule
· &nbs=
p;
building security
· &nbs=
p;
use standards such as “typi=
cal
of a first class office building in midtown Manhattan”
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33
|
Rules/=
Regs
|
· &nbs=
p;
to be uniformly enforced
· &nbs=
p;
if conflict, lease terms prevail<=
o:p>
|
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34
|
Securi=
ty
Deposit
|
· &nbs=
p;
trust funds, per NY GOL (Gen’l Obligations Law)
· &nbs=
p;
T’s property
· &nbs=
p;
ask for inte=
res
· &nbs=
p;
after x years, sec dep start burning off
· &nbs=
p;
use Letter Of Credit if T can sec=
ure
one
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35
|
Estopp=
el Certificate
|
- “best of knowledge” of T
- if conflict with lease terms, lease prevails
|
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--
|
Direct=
ory
listings
|
·
include subtenants and permitted
co-occupants (clients, customers etc.)
· &nbs=
p;
if electronic, unlimited entries<=
o:p>
|
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--
|
Reloca=
tion
|
- NO
- if
lease must include this clause, then provide that T must approve the=
new
location
- be
specific as to equivalent space (size, view, position on floor,
visibility from elevator lobby), also L must pay ALL
costs, so T is not out of pocket
- L=
to
recreate existing space in all respects
- a=
sk for
right to terminate (rather than relocate)
- n=
o more
than 1 move in lease term
|
|
--
|
Guaran=
ty
|
- v=
arious
forms—try to limit—good- guy guaranty<=
/li>
- t=
ry to
limit partnership liability
|
|
--
|
Option=
to
Expand=
|
- r=
ight
of first offer on contiguous space
|
|
--
|
Option=
to
renew
|
“Fair Market” Rent
- e=
xclude
brokerage commissions, buildout, other
non-recurring items
- n=
on-material
default no bar to exercise<=
o:p>
- i=
f T
assigns lease, renewal option goes to assignee
|
|
--
|
Option=
to terminate
|
|
|
--
|
Signag=
e
|
|
|
--
|
Holdov=
er
|
- no
penalty rent if in good faith negotiations
|
|
--
|
Broker=
|
- m=
ake
rep and indemnity mutual
|
|
--
|
Arbitr=
ation
ADR
|
- k=
eeps
T’s costs down if there is a dispute
- m=
ore
efficient
- u=
se
expedited arbitration
- e=
sp.
useful in time sensitive disputes (e.g., reasonableness of L withhol=
ding
consent to a sublease)
|
|
--
|
Tenant=
Incent=
ives
|
- L=
to
cooperate (w/o charge) in obtaining govt
incentives for T
|
|
--
|
Demoli=
tion
|
- N=
O
- If
must, then negotiate long notice, demo permit obtained, good faith,
simultaneous termination of all leases
|