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Negotiating and Drafting Commercial Leases

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John Busey Wood, Alan M. Di Sciullo


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“The first treatise that a leasing pro will refer to for explanation of new and difficult issues as well as a refresher on issues that have not recently been encountered.”
James S. Saunders, Esq., Senior Managing Director, Newmark Knight Frank

“[An] extraordinary treatise.... The real value of this book is in its practical evaluation of lease provisions, the motivations of the parties, and the reasonable (and unreasonable) positions that parties to a lease often take.”
Prof. Daniel Bogart, Chapman University School of Law,
and Prof. Celeste Hammond, John Marshall School of Law,
in Commercial Leasing: A Transactional Primer

Negotiating and Drafting Office Leases, now called Negotiating and Drafting Commercial Leases, offers a practical road map through the entire leasing negotiation process. It reviews the clauses of a typical complex modern lease in detail, with explanation and commentary, examining the legal, economic and financial accounting ramifications.

Compared to recent years, there are very few commercial property owners, developers, design professionals, lenders, tenants and landlords that are NOT utilizing sustainable designs and materials.

The NEW Release 46 for Negotiating and Drafting Commercial Leases includes a complete revision of the green leasing materials to reflect this industry shift. Included is everything you need to know about the numerous motivations for building green; the current green leasing certification requirements; and many sample provisions for drafting green leases, including sustainability clauses, operating expenses, and alterations.

This Release also provides coverage of a number of trends impacting office leasing, including:

·        Virtual reality vs. augmented reality, and how these technologies are used in leasing, as well as their impact on real estate deals

·        Pop up leasing and how these short-term leases should be structured for the landlord and the tenant

·        Implications for office leases of the legalization of marijuana, including tenant compliance with state law and federal guidelines; potential for nuisance to other tenants; and additional landlord requirements in such leases

·        Expectation that there will continue to be greater implementation of cryptocurrencies through blockchain to drive efficiencies through digitization and create more accurate records of ownership that update in real time

Negotiating and Drafting Commercial Leases also covers:

  • Negotiating strategies and styles

  • Pitfalls created by other agreements entered into by the parties to a lease

  • Repairs and maintenance

  • Assignments and subleases

  • Environmental compliance and due diligence

  • Electricity and utilities costs and issues

  • The "Porter's Wage" escalation provision

  • Tenant monitoring of landlord's escalation calculations

  • Guarantors and security deposits

  • Proving the existence of a lease when the original document is lost

  • Quiet enjoyment

  • Expansion space

  • Bankruptcy

  • Work letters

  • Restrictive causes

  • Renewals and options

  • Financing development through participation leases

  • Synthetic leases

  • Brokerage

  • Lease audits...and more!

This invaluable primer comes with 150 forms, including:  landlord/tenant checklists of typical and atypical lease provisions; a sample tenant's proposal letter; work letter materials; a sample asbestos removal clause; good guy clauses; and other samples that will help beginners and experts, alike, involved in commercial real estate transactions. For your convenience, these forms are now available through our interactive, online platform in place of the CD-ROM. If you have any questions, please contact our customer service team at 1-807-8076 or ljpsales@lawjournalpress.com.


Book #00624; looseleaf, two volumes, 3,190 pages; access to our interactive, online platform published in 1995, updated as needed; no additional charge for updates during your subscription. Looseleaf print subscribers receive supplements. The online edition is updated automatically.ISBN: 978-1-58852-061-6


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  • Availability: Available
  • Brand: Law Journal Press
  • Product Type: Books
  • Edition: 0
  • Page Count: 2406
  • ISBN: 978-1-58852-061-6
  • Pub#/SKU#: 624
  • Volume(s): 2

Author Image
  • John Busey Wood

John Busey Wood, Esq. is a Partner in the New York City office of Akerman Senterfitt LLP. He is a member of the American Arbitration Association Commercial Neutral Panel and a Fellow of the American Bar Association Foundation. Mr. Wood has authored a number of books and publications including Navigating the Dangerous Shoals of a Commercial Lease and chairs the Practicing Law Institute Commercial Leasing Panel Programs nationally for over a decade.

Mr. Wood counsels international and US based retail tenants and corporate property owners and lessees on cost reduction and safe leasing. The Wall Street Journal called him The Father of the Modern Killer Lease Form and the New York Times noted that he negotiated the largest ground lease of its kind ever in New York City. Mr. Wood received his MBA in accounting from the University of Kansas and is AV rated by Martindale-Hubbell. He is also a certified Public Accountant.

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Author Image
  • Alan M. Di Sciullo

Alan M. Di Sciullo, Esq. is the Director of Global Real Estate at Shearman & Sterling LLP and Professor of Real Estate at New York University's Masters Program at the Schack Institute of Real Estate. He has been a Senior Vice President and First Vice President at a major global bank and investment bank where he handled leasing and corporate real estate transactions. He has served as Chair of the ABA's Office Leasing Committee and other leasing committees. He was elected as a fellow to the American College of Real Estate (ACREL) lawyers. He received his JD and undergraduate degrees from Georgetown University and MBA from New York University. Mr. Di Sciullo is AV rated by Martindale-Hubbell.


CHAPTER 1
Office Lease Fundamentals

§ 1.01 Evolution of the Modern Office Lease—Emergence of the “Killer Lease”
[1] The Past and Today
[2] Looking to the Future—Trends Impacting Office Leasing
§ 1.02 What Is a Lease?
[1] Lease vs. License
[2] Necessity of a Writing
[3] Elements Required for Enforceability
[4] Can Electronic Communications Satisfy the Writing Requirement Under the Statute of Frauds?
[5] Uniform Standards Toward a Fair Lease
§ 1.03 Life of the Lease
[1] Signing vs. Execution
[2] Contract Interval Before Possession
[3] Cancellation of the Lease
[4] Conditional Demising
§ 1.04 Office Lease Provisions
[1] In General
[2] Checklist of Lease Provisions
[3] Omission of Terms
§ 1.05 Drafting and Analysis Basics
[1] Interpreting Definition Pyramids
[2] Following Lease Time Lines
[3] Precision Drafting
[4] Value of Lease Forms for Landlord and Tenant
[5] Long Range Planning
§ 1.06 Summary

CHAPTER 2
Who Is the Landlord and Who Is the Tenant?

§ 2.01 Who Has Authority to Sign the Lease?
§ 2.02 Who Is the Landlord?
[1] In General
[2] Ground Leases
[3] Landlord as Assemblage Owner
[4] Partnership or Corporation as Landlord
§ 2.03 Who Is the Tenant?
§ 2.04 Limitations on Landlord’s Authority
§ 2.05 Title Insurance
[1] The Importance of Conducting a Title Search
[2] Title Insurance Coverage
§ 2.06 Covenant and Representation of Authority of Tenant
§ 2.07 Summary

CHAPTER 3
The Leased Premises

§ 3.01 Space Selection
§ 3.01A Description of Demised Premises
§ 3.02 Measurement Standards
[1] In General
[2] International Property Measurement Standards for Office Buildings
§ 3.03 Space Maintenance and Repair Obligations
§ 3.04 Compliance and Safety
[1] Compliance with Laws
[2] Building Safety
§ 3.05 Tenant Relocation
[1] Timing
[2] Nature of Substituted Premises
[3] Landlord’s Payment Obligations
[4] No Additional Costs for the Tenant
[5] Tenant’s Right to Terminate
§ 3.06 Office Leases in Retail Space
§ 3.07 Summary

CHAPTER 4
The Lease Terms

§ 4.01 Commencement of the Lease Terms
[1] Dating the Lease
[2] Possession for Occupancy Terms
[3] Demising Term
[4] Rental Term
§ 4.02 Abatements, Concessions and Other Inducements Offered Tenants
[1] Initial Considerations and the Letter-of-Intent Stage
[2] Lease Negotiation and Strategy
[3] Lender Recognition
[4] Abatements and Concessions
§ 4.03 Phased-In Possession or Occupancy
§ 4.04 End of the Term
§ 4.05 Condition of the Premises
§ 4.06 Summary

CHAPTER 4A
Security Deposits and Other Forms of Security

§ 4A.01 Introduction
[1] General
[2] Amount of Security
[3] Transfer of Security
[4] Assignment of Lease
[5] General Tenant Concerns
[6] Landlord Issues—Treatment of Security Deposits in a Tenant’s Bankruptcy
§ 4A.02 Kinds of Security
[1] Introduction
[2] Cash Security
[3] Letters of Credit
[4] Guaranties
[5] Bonds
[6] Additional Security—Perfecting a Security Interest in the Tenant’s Assets
§ 4A.03 Concluding Comment

CHAPTER 5
Preparing the Premises for Occupancy

§ 5.01 Prioritizing Landlord’s and Tenant’s Work
§ 5.02 Control of the Work Site
§ 5.03 Inspecting and Monitoring Work Quality
§ 5.04 Right to Exclude Landlord
§ 5.05 Summary

CHAPTER 6
Landlord Access

§ 6.01 Building Systems and Compliance
§ 6.02 Landlord Access to Premises
§ 6.03 Emergency vs. Security
§ 6.04 Interference and Business Interruption
§ 6.05 Summary

CHAPTER 7
Area

§ 7.01 Usable Area
§ 7.02 Rentable Area
[1] In General
[2] BOMA’s Measurement Standards
[3] International Property Measurement Standards for Office Buildings
§ 7.03 Carpetable Area
§ 7.04 Loss Factors
§ 7.05 Measuring Additional or Option Space
§ 7.06 Remeasurement
§ 7.07 Measurement Representations and Proportionate Shares
§ 7.08 Limiting Tenant’s Proportionate Share
§ 7.09 Sum of the Demised Premises
§ 7.10 Stand-Alone Areas
[1] Expanding the Definition of “Land”
[2] Tax Lots
[3] Retail and Garage Areas
§ 7.11 Summary

CHAPTER 8
Use

§ 8.01 Types of Uses
[1] In General
[2] “Any Lawful Use”
[3] Specific or Mandatory
[4] Special Designations
[5] Exclusionary Use and Exclusives
[6] The Right to “Go Dark”
[7] Special Requirements Leases
§ 8.02 Zoning or Building Use Laws
§ 8.03 No Representations—Permissive Use
§ 8.04 Failure of Essential Purpose
§ 8.05 Summary

CHAPTER 9
Appurtenances

§ 9.01 Common Areas
[1] In General
[2] Use of the Common Areas
[3] Loading Areas
[4] Elevators
[5] Sidewalks
[6] Storage and Vaults
[7] Parking
[8] Cooling Towers and Mechanical Rooms
[9] Roofs
[10] Common Area Maintenance Costs
§ 9.02 Directory and Signs
§ 9.03 Building Systems, Fixtures and Improvements
[1] In General
[2] Air Conditioning, Ventilation and Heating
[3] Electrical
[4] Security Systems and Fire Command
[5] Ownership of Improvements
[6] Abandoned Building System Areas
§ 9.04 Impact on Additional Rentals
§ 9.05 Summary

CHAPTER 10
Repairs and Maintenance

§ 10.01 Obligations of the Parties
[1] Landlord Obligations
[2] Tenant Obligations
§ 10.02 Quality of Service
§ 10.03 Self-Help Remedies
§ 10.04 Repairs Necessitated by Preexisting Conditions
[1] During Initial Tenant’s Work
[2] Future Repairs
[3] Hazardous Materials—Risks and Remediation
[4] Potential Landlord/Tenant Issues Involving Mold
§ 10.05 Insurance Coverage for Damage to Tenant Property and Improvements
[1] Ownership Interests and Insurance Obligations
[2] The Lease Language
[3] Insurance Policies and Coverage
[4] Conclusion
§ 10.06 Summary

CHAPTER 11
Condemnation and Destruction

§ 11.01 Condemnation
[1] Takings in General
[2] Valuation and Allocation of Award
[3] Mortgagee’s Interest in Condemnation Award
[4] Viability Clause
[5] Condemnation Clause
§ 11.02 Destruction by Fire, Flood or Other Casualty
[1] Insurance
[2] Landlord’s Obligation to Restore
[3] Liability
[4] Damage or Destruction Clause
§ 11.02A Destruction by Force Majeure
[1] In General
[2] Sample Force Majeure Clauses
[3] Terrorist Activities
[4] Natural Disasters
§ 11.03 Mortgagee’s Interest in Insurance Proceeds
§ 11.04 Rent Abatements During Condemnation or Destruction
§ 11.05 Length of Restoration Period
§ 11.06 Summary

CHAPTER 12
Alteration

§ 12.01 Initial Alterations
[1] In General
[2] Approvals and Consents
[3] Permits, Violations and Certificates of Occupancy
[4] Field Conditions
[5] Delays and Hidden Costs
[6] Building Conditions Preventing Alterations
[7] Initial Construction Clause
[8] Large Lease vs. Small Lease Issues
§ 12.02 Subsequent Alterations to the Premises
[1] Landlord Resistance to Subsequent Alterations
[2] Necessity for Subsequent Alterations
[3] Subletting a Portion of the Premises
§ 12.03 Monitoring Alterations and Compliance
[1] Process and Documentation
[2] Landlord Costs
§ 12.04 Alterations Clauses
[1] Oppressive Approach
[2] Reasonable and Practical Approach
[3] Model Approach
§ 12.03 Summary

CHAPTER 13
Compliance with Laws

§ 13.01 In General
§ 13.02 Compliance Obligations Within the Building
[1] Responsibilities
[2] Tenant Self-Help and Indemnities
§ 13.03 Compliance Obligations Within the Premises
[1] Circumscribing Responsibilities
[2] Compliance Clauses
[3] Impact on Permits and Improvements
§ 13.04 Preexisting Noncompliance
[1] Structural
[2] Inclusion in Additional Rentals
§ 13.05 Compliance Arising After Lease Commences
§ 13.06 Major Substantive Compliance Areas
[1] Environmental Issues in General
[2] Asbestos
[3] Sick Building Syndrome
[4] Americans With Disabilities Act
[5] Architecture Barriers Act Compliance
§ 13.07 Summary

CHAPTER 13A
Green Lease Provisions

§ 13A.01 Green Buildings in General
[1] Introduction
[2] What Is a Green Building?
[3] Motivation to Be Green
[4] Which Party Drives the Green Building Effort
[5] Sustainable Building Law and Its Impact on Negotiating and Drafting Contracts
[6] Why Property Owners Do and Do Not Obtain Certification
[7] Green Rating Systems—Generally
[8] Some of the Best-Known Rating Systems
§ 13A.02 Green Lease Provisions - General
§ 13A.03 Green Lease Provisions - Landlord Sustainability Covenants
[1] Permitted Use
[2] Operating Expenses
[3] Capital Expenditures
[4] Compliance with Laws
[5] Services
[6] Assignment and Sublet
[7] Alterations/Improvements
[8] Repairs and Maintenance
[9] Access
[10] Insurance
[11] Indemnification
[12] Surrender
[13] Default and Remedies
[14] Rules and Regulations
[15] Renewal
[16] Recycling/Waste Management/Janitorial
[17] General Affirmative Covenants - Tenant Obligation 
[18] General Negative Covenants - Tenant Obligations
[19] General Covenants - Landlord Obligations to Green Tenant
[20] Definitions
[21] Parking
[22] Data Reporting
[23] Relocation
[24] Certification and Landlord’s Sustainability Requirements
[25] Taxes and Credits
[26] Landlord’s Additional Sustainability Requirements
§ 13A.04 The Green Work Letter
§ 13A.05 Conclusion

CHAPTER 14
Conditions of Limitation and Defaults

§ 14.01 Operation of Condition of Limitation
[1] Requirements for a Condition of Limitation
[2] Equitable Relief
[2A] Alternative Dispute Resolution
[3] Notices
[4] Condition of Limitation Clause
§ 14.02 Defaults
[1] Incurable Defaults
[2] Performance or Monetary Defaults
[3] Tenant Self-Help When Landlord Defaults
[4]  Landlord Leasing Strategies to Address Tenant Defaults
§ 14.03 Determination of Damages After Default and Termination
[1] In General
[2] Under the Common Law
[2A] Clauses Limiting the Landlord’s Liability
[3] Under the “Killer Lease”
[4] Statutory Provision for Termination and Remedies
[5] Reletting and Mitigation of Damages
[6] The “Good Guy” Clause
[7] Liquidated Damages
§ 14.04 Summary

CHAPTER 15
Reentry by Landlord

§ 15.01 Emergency Access
§ 15.02 Routine Access
§ 15.03 Reentry as a Remedy
§ 15.04 Consensual Reentry
§ 15.05 Reentry to Security Areas
§ 15.06 Summary

CHAPTER 16
Services

§ 16.01 Levels of Services
[1] In General
[2] Issues for Negotiation
[3] Complex Services Clauses
§ 16.02 Essential Services
[1] Negotiating Specific Protections
[2] Frustration or Failure of Essential Purpose
[3] Self-Help and Abatements
§ 16.03 Differing Levels of Services Among Tenants
§ 16.04 Summary

CHAPTER 16A
Technology, Telecommunications and Rooftop Rights

§ 16A.01 In General
[1] Introduction and Scope
[2] Technology Issues in Real Estate Transactions
§ 16A.02 The Regulatory Framework and Landscape
[1] FCC Regulations
[2] State Laws and Regulations
[3] Local Regulatory Issues
§ 16A.03 Perspective of Commercial Property Owner in Negotiating Terms of a Telecommunications License Agreement
[1] In General
[2] Landlord Considerations When Negotiating Rooftop Rights
§ 16A.04 Key Terms of a Rooftop License or Telecommunications License Between the Property Owner and the Telecommunications Service Provider
[1] Nature of the Agreement
[2] Term and Fees
[3] Relocation Rights
[4] Access to the Building and Telecommunications Spaces
[5] Plans, Construction, Installation and Alterations
[6] Insurance and Subrogation
[7] Indemnification
[8] Electricity
[9] Assignment
[10] Interference
[11] Subordination
[12] Rights on Termination and Obligation to Remove Abandoned Cable
[13] Miscellaneous Provisions
§ 16A.05 Telecommunications Inside and Outside the Premises
[1] In General
[2] Form of Telecommunications License Agreement Between a Building Owner/Licensor and a Communications Service Provider/Licensee (for Rooftop Antenna) with Commentary
[3] Form of Telecommunications License Agreement Between a Tenant/Licensor and a Communications Service Provider/Licensee
§ 16A.06 Rooftop Solar Panel Rights and Obligations
§ 16A.07 Licensing/Leasing Considerations

CHAPTER 17
Electricity

§ 17.01 Character of Electrical Services Available
[1] Determination of Essential Information
[2] Definition of Terms
[3] Electrical Service Clauses
§ 17.02 Cost of Electrical Services
[1] Breakdown of Charges
[2] Metering and Submetering
[3] Electrical Services as Landlord Profit Centers
[4] Profit-Maximizing Electricity Clause
§ 17.03 Landlord’s Exculpation
§ 17.04 Summary

CHAPTER 18
Custom of Dealing, Waivers and Modifications

§ 18.01 Practices of the Parties
[1] Requirement of a Writing to Amend Lease
[2] Nonwaiver Provisions
[3] Entire Agreement and No Waiver
§ 18.02 Substance of Modifications and the Modification Agreement
[1] Basic Principles
[2] Form of Lease Modification Agreement
§ 18.03 Informal Accommodations and Waivers
§ 18.04 Summary

CHAPTER 19
Rent

§ 19.01 Office Lease Rent
§ 19.02 Base Rent
[1] Price Per Square Foot
[2] Analyzing Base Rent Components
§ 19.03 Escalations
[1] Net and “Not So Net” Leases
[2] Cost Comparisons Between Buildings
[3] Taxes
[4] Operating Expenses
[5] Tenant’s Right to Audit
[6] Monitoring Landlord’s Escalation Calculations
[7] Escalations Checklist
§ 19.04 Consumer Price Index
§ 19.05 Rent Concessions
[1] In General
[2] Below Market and Free Rent
[3] Work Allowances
[4] Early Buyouts or Renegotiation
[5] Government Participation
[6] Other Rent Concessions
[7] Pass Through Clauses
[8] Transfer Rights
[9] Equity Participation
§ 19.06 Rent Deferral Arrangements
[1] Introduction
[2] Landlord Considerations When Deciding Whether to Grant a Deferral
[3] Renegotiating Existing Unfavorable Lease Terms
[4] Conclusion
§ 19.07 Using the Accounts Stated Doctrine to Establish that Rent Is Owed
[1] In General
[2] Account Stated in the Commercial Leasing Context
[3] Account Stated Defenses
[4] Drafting Strategies
[5] Account Stated to Collect Rent
[6] Defensive Account Stated
§ 19.08 Sale-Leaseback Arrangements—An Alternative to the Traditional Lease
[1] In General
[2] Advantages and Disadvantages of Sale-Leaseback Arrangements
[3] Factors to Consider
§ 19.09 Summary

CHAPTER 20
Superior Interests

§ 20.01 Superior Title Interests
§ 20.02 Subordination Agreements
[1] Impact of Subordination
[2] Agreement to Subordinate
[3] Subordination, Non-Disturbance and Attornment Agreements
[4] The Non-Disturbance Agreement as an Important Corollary Subordination Agreement
§ 20.02A Collateral Agreement with a Lender
§ 20.02B Loan Underwriting
§ 20.02C Financial Challenges
[1] In General
[2] Tenant Protections
[3] Bankruptcy Code Protection for Tenant Improvement Allowances
[4] Security Deposits/Letters of Credit
[5] Tenant Due Diligence Considerations
§ 20.02D Leasehold Mortgages
§ 20.03 Non-Disturbance Agreement
[1] Importance and Purpose
[2] Lender’s Perspective
[3] Negotiability
[4] The Basic Non-Disturbance Agreement
[5] The Overkill Agreement
[6] Landlord and Lender Requirements
[7] Tenant Requirements
[8] Tenant’s Leasehold Lender
§ 20.04 Attornment
§ 20.05 Reasonable Contractual Requirements
§ 20.06 Estoppel Certificates
[1] Sample Estoppel Certificate
[2] Landlord Uses
[3] Tenant Pitfalls
[4] Tenant’s Wedge
[5] Timing
[6] Remedies
[7] Landlord’s Wedge
[8] Benefits, Burdens and Protections
§ 20.07 The Document Trap—Lease Amendment by Later Documents
[1] Fee Mortgage Provisions from a Ground Lease
[2] Proposed Subordination of Mortgage and Attornment Agreement
[3] Revisions to Proposed Subordination of Mortgage and Attornment Agreement
[4] Comments on Revisions to Proposed Subordination of Mortgage and Attornment Agreement
§ 20.08 Summary

CHAPTER 21
Transferability of Leasehold Interests

§ 21.01 Transferability
[1] Rights to Assign or Sublease
[2] Consent to Assign or Sublease
[3] Standard of Reasonableness
[4] Implied Reasonableness Standards
[5] Interaction with the Use Clause
[6] Tax Consequences of Assignments and Subleases
[7] One State’s Legislative Response—California
[8] Free Assignability
[9] Restricting Transfers and Other Changes in Control
[10] Addition of Tenant Entity
§ 21.02 Right to Acquire or Dispose of Space
[1] Reacting to Business Cycles and Normal Growth
[2] Excess Space
[3] Landlord Recapture of Excess Space
[4] Marketing the Excess Space
[5] Sharing Profits with Landlord
[6] Competitive Protections for Landlord
§ 21.03 Summary

CHAPTER 22
The Covenant of Quiet Enjoyment

§ 22.01 Quiet Enjoyment
[1] Scope
[2] History of the Covenant
§ 22.02 Construction of the Covenant
[1] The Terms of the Covenant as Expressed in the Lease
[2] Limiting the Landlord’s Liability
[3] Successor Rights and Obligations
[4] Fairly Expressing the Covenant in the Lease
§ 22.03 Theories of Liability
[1] Actual Eviction
[2] Constructive Eviction
[3] Partial Constructive Eviction
§ 22.04 Remedies for Breach of the Covenant of Quiet Enjoyment
§ 22.05 Summary

CHAPTER 23
Restrictive Clauses

§ 23.01 Examples of Restrictive Clauses
[1] Exclusives
[2] Restrictive Covenants
[3] Radius Clauses
§ 23.02 Antitrust Implications
[1] Under the Sherman Act in General
[2] The Current Climate
[3] Relevant Geographic Market
[4] Relevant Product Market
§ 23.03 Tortious Interference
§ 23.04 Summary

CHAPTER 24
Renewals and Options

§ 24.01 Options to Renew or Extend
[1] Why Obtain an Option?
[2] Definitions
[3] Essential Option Terms
[4] The Right to Renew
[5] Timeliness of Exercise
[6] Notice of Intention to Exercise Option
[7] The Renewal Rate
[8] Comments
§ 24.02 Impact on Escalation Rentals
§ 24.03 Holdover and Expansion Options
[1] The Holdover Option
[2] The Expansion Option
[3] Operation of the Options
[4] Rights of First Offer
§ 24.04 Purchase Options
[1] Introduction
[2] Comment
[3] Case Studies
§ 24.04A Assignment and Subletting
§ 24.05 Termination Options and Buyouts
[1] Termination or Cancellation Options
[2] Buyouts
§ 24.06 Summary

Chapter 24A
Rent Reset Clauses in Long-Term Leases

§ 24A.01 Introduction
§ 24A.02 Arbitration Clause, Valuation Clause or Both?
§ 24A.03 What Should the Valuation Experts Value?
§ 24A.04 Summation of Questions to Be Considered
§ 24A.05 Suggested Solution: Clauses Representing Intent of the Parties and Understood by Appraisers
§ 24A.06 One Way to Avoid All of This

CHAPTER 25
Casualty and Insurance

§ 25.01 Allocation of Risks and Responsibilities
[1] Introduction
[2] Common Law Standards
[3] The “Hub and Spokes” View of Casualty and Insurance
[4] A Modern Perspective
§ 25.02 Modern Liability
[1] In General
[2] Tort
[3] Contract or Lease Covenant
[4] Indemnification
[5] Vicarious Liability
[6] Fraud or Misrepresentation
[7] Environmental Insurance
[8] Mold: The Associated Risks and Insurance Coverage
[9] Notifying the Insurer About Material Changes in Circumstance
[10] Defective Construction
§ 25.03 Types of Coverage
[1] Property Coverage
[2] Property Endorsements
[3] Liability Coverage
[3A] Self Insurance/Captive Insurance Companies
[4] Post 9/11 Changes
[5] The Terrorism Risk Insurance Act of 2002 (TRIA)
[6] Terrorism Risk Insurance Program Reauthorization Act of 2007
[7] Evidencing that Coverage Exists
[8] Insurance Coverage for Tenant Improvements
[9] Casualty and Insurance Issues Related to Green Leases
[10] Additional Insured
§ 25.04 Coinsurance
[1] Express Coinsurance
[2] Implied Coinsurance
§ 25.04A Determining the Adequacy of Insurance Coverage
[1] Coverage Layers
[2] Defense Within Limits Policies
[3] Enforceability
[4] Establishing an Insurance Coverage Plan and Understanding Forms of Coverage
§ 25.05 Subrogation and Waivers of Subrogation
[1] Principles of Subrogation Law
[2] Waivers of Subrogation
§ 25.06 Indemnification and Exculpatory Clauses
[1] In General
[2] Drafting the Indemnity Clause—What to Include and Why
§ 25.07 The “No Fault” Approach
[1] In General
[2] A Sample “No Fault” Clause
§ 25.08 Arbitration of Insurance Disputes
[1] In General
[2] States Limiting Arbitration of Insurance Policies
[3] Venue Provisions
[4] Choice of Law Provisions
§ 25.09 Summary

CHAPTER 26
Work Letters

§ 26.01 Preparing the Work Letter
[1] Importance of a Work Letter
[2] Essential Definitions
[3] Conditions Existing Within Demised Premises
[4] Materials and Labor Provided by the Landlord
[5] “Turnkey” Work Letter
[6] Timing Concerns
[7] Landlord Involvement with Tenant’s Plans and Specifications
[8] Landlord Credits in a “Modified Turnkey”
[9] Effective Use of Consultants
§ 26.02 Insulating the Parties from Liability
[1] Unanticipated Claims and Liens
[2] Distancing the Parties from Project Control
[3] Contractor Agreements
§ 26.03 Summary

CHAPTER 27
Financing Real Estate Development Through Participation Leases

§ 27.01 Introduction
§ 27.02 How Participation Leases Work
[1] What Is a Participation Lease?
[2] Working with the Numbers: An Example
[3] Landlord Benefits
[4] Tenant Benefits
§ 27.03 Structuring an Equity Participation
[1] Joint Venture and Lease
[2] Phantom Equity Arrangements
[3] Condominiums
[4] Tenants-in-Common Arrangements
[5] Special Leases
§ 27.04 Environmental Concerns
§ 27.05 Summary

Chapter 27A
Synthetic Lease Transactions and“Off-Balance Sheet” Financing

§ 27A.01 Introduction
§ 27A.02 Accounting Literature
[1] SFAS No. 13 (Classification of Leases)
[2] SFAS No. 98, EITF No. 96-21 and EITF No. 97-10 (Sale-Leaseback Accounting Treatment)
[3] EITF 90-15 and EITF Exposure Draft (Revised) No. 194-B (Consolidation Rules)
§ 27A.03 Tax Considerations
§ 27A.04 Detailed Description of Synthetic Lease Structure
[1] Lessee
[2] Lessor
[3] Construction of Improvements
[4] Debt and Equity Structure
§ 27A.05 Provisions of a Synthetic Lease
[1] Triple Net, Bond-Type Lease
[2] Lease Term and Financing Term
[3] Rights and Obligations at Lease Expiration
[5] Rent
[6] Defaults
[7] Indemnities
§ 27A.06 Conclusion

CHAPTER 28
Bankruptcy

§ 28.01 The Bankruptcy Code and Rules: An Overview
[1] The Bankruptcy Code and Court System
[2] Chapter 7 Cases—Types of Bankruptcy Cases Affecting Commercial Leases
[3] Chapter 11 Cases
[4] Chapter 9, 12, and 13 Cases
[5] Landlords and Tenants
§ 28.02 Principal Bankruptcy Code Sections and Rules Applicable to Commercial Leasing Transactions
[1] Introduction
[2] Bankruptcy Concepts
[3] Claims
[4] The Automatic Stay
§ 28.03 Leases and Contracts: The Effect of Bankruptcy
[1] Options Available to Trustee/Debtor-in-Possession
[2] Underlying Disputed Contract Issues
[3] Is a Certain Lease or Contract Executory for the Purposes of the Code?
[4] Assumption or Rejection of Commercial Leases by Debtor
§ 28.04 Assumption and Its Effects on Landlords and Tenants
[1] Assumption of the Lease by the Tenant—Adequate Assurance
[2] Legal Standards Governing Assumption; Procedural and Evidentiary Matters
[3] Invalidity of Restrictions on Assignment
[4] Contesting a Proposed Assignment of the Commercial Lease
[5] Appealing an Assignment
§ 28.05 Rejection and Its Effect on Landlords and Tenants
[1] Character of Rejected Contracts or Leases
[2] Effect of Rejection on Subtenants and Leasehold Mortgages
[3] Legal Standards Governing Lease Rejection
[4] Refusal to Authorize Rejection
[5] Rejection Damages
§ 28.05A Bankruptcy Risks Associated with Pre-Filing Date Lease Termination Agreements
[1] The Risk that an Entire Transaction Memorialized in a Termination Agreement Will Be Voided in a Subsequently Filed Bankruptcy Case as a Preferential or Fraudulent Transfer
[2] The Preferential Transfer Risk—Payments
§ 28.06 Sample Bankruptcy Clause
§ 28.07 Appendix: Bankruptcy Definitions and Terms of Art
§ 28.08 What to Do When a Petition Is Filed
§ 28.09 Bankruptcy Code Amendments to Section 365
[1] Bankruptcy Reform Act of 1994
[2] The 2005 Bankruptcy Act Amendments

Chapter 28A
Can You Draft a Fair Lease?

§ 28A.01 Introduction
§ 28A.02 Traditional Clauses
[1] Who Are the Parties?
[2] What Are the Premises?
[3] Does the Building Exist When the Lease Is Signed?
[4] How Long Should the Term of the Lease Be?
[5] What Is a Fair Rent?
§ 28A.03 The Premises
§ 28A.04 Transfer of Interest
§ 28A.05 Remedies
§ 28A.06 Getting the Lease Signed

Chapter 28B
Tenant’s Checklist of Silent Lease Issues (Third Edition)

§ 28B.01 Tenant’s Checklist of Silent Lease Issues

Chapter 28C
Landlord’s Checklist of Silent Lease Issues (Third Edition)

§ 28C.01 Introduction
§ 28C.02 What Is Included in a Standard Form Lease
[1] Getting Around to the Standard Form Lease
[2] How This Checklist Was Born
§ 28C.03 What the Checklist Does
[1] Does the Checklist Give Landlords an Unfair Advantage?
[2] Intended for Major Commercial Space Leases
[3] Caveats, Warnings, Disclosures
[4] Notes on Style
[5] The Case Law
[6] Beyond the Four Corners of the Lease
[7] Have at It
§ 28C.04 The Landlord’s Checklist of Silent Lease Issues
[1] Alterations and Build-Out
[2] Assignment and Subletting: Consent Requirements
[3] Assignment and Subletting: Implementation
[4] Bankruptcy
[5] Bills and Notices
[6] Compliance with Laws
[7] Consents
[8] Default
[9] Destruction, Fire and Other Casualty
[10] Development and Asset Management
[11] Electricity
[12] End of Term
[13] Environmental
[14] Escalations
[15] Estoppel Certificates
[16] Failure to Deliver Possession
[17] Fees and Expenses
[18] Future Documents, Deliveries, Events, and Information
[19] Guaranty
[20] Inability to Perform
[21] Initial Alterations
[22] Insurance
[23] Landlord’s Access
[24] Landlord’s Liability
[25] Landlord’s Representations
[26] Maintenance and Repairs
[27] Occupancy
[28] Options (Expansion/Renewal/Reduction/Termination)
[29] Percentage Rent and Radius Clause
[30] Quiet Enjoyment
[31] Real Estate Taxes
[32] Recognition of Subtenants
[33] Remedies
[34] Rent
[35] Rules and Regulations
[36] Security Deposit
[37] Services
[38] Subordination and Landlord’s Estate
[39] Tenant’s Equipment and Installations
[40] Use
[41] Vault Space
[42] Due Diligence, External Considerations
[43] Other Documents and Deliveries
[44] Post Closing; Monitoring

CHAPTER 29
Negotiating the Lease

§ 29.01 Negotiation Basics
[1] In General
[1A] Negotiating on Behalf of a Small Tenant—Issues and Strategies
[2] Negotiating Techniques
§ 29.02 Negotiation Players
[1] Developer
[2] Real Estate Consultant
[3] Real Estate Brokers
[4] Advertising Company
[5] Tenant’s Representatives
[6] Architects, Designers and Engineers
[7] Attorneys
§ 29.03 Negotiation Objectives
[1] Landlord’s Objectives
[2] Tenant’s Objectives
§ 29.04 Net Present Value Analysis
[1] Terms of Potential Deals Under Consideration
[2] Method of Comparison for Competing Properties
§ 29.05 Negotiation Process
[1] Preliminary Preparation
[2] Interaction of Negotiation Participants
[3] Threshold Negotiation Points
[4] Tenant’s Proposal Letter
[5] Letter of Intent
[6] Exchanging Lease Drafts
[7] Comment Letter
[8] Finalizing the Negotiation
[9] Work Letter and Working Drawings
§ 29.06 A Study of Negotiating Strategies and Styles
§ 29.07 Summary

CHAPTER 29A
Lease Brokerage

§ 29A.01 General Considerations
[1] Concerns Specific to Leasing Transactions
[2] Broker Liens for Commissions
[3] Ethical Standards
§ 29A.02 Basic Provisions of the Leasing Brokerage Agreement
§ 29A.03 The Leasing Situation: Creation of the Leasehold
§ 29A.04 The Calculation of Commission
[1] Base Rent
[2] Additional Rent: Reimbursement of Landlord’s Costs
[3] Additional Rent: Percentage Rent
[4] Additional Commission-Generating Events
§ 29A.05 Subleasing
§ 29A.06 Other Transactions
§ 29A.07 Lease Provisions Relating to Brokers
§ 29A.08 Form of Brokerage Agreement for Services to a Landlord
[1] Issues of Scope
[2] Form of Brokerage Agreement
[3] A Special Twist on Indemnity
§ 29A.09 Brokerage Services on Behalf of a Tenant
[1] In General
[2] Form of Brokerage Agreement for Services on Behalf of a Tenant
§ 29A.10 Co-Brokerage in the Commercial Setting
[1] In General
[2] Form of Co-Brokerage Agreement

Chapter 29B
The Appraiser’s View of the Lease: Appraisals 101

§ 29B.01 Introduction
§ 29B.02 What Is an Appraisal?
[1] Cost Approach
[2] Sales Comparison Approach
[3] Income Capitalization Approach
§ 29B.03 The Relationship Between the Lease Agreement and the Income Approach Analysis
§ 29B.04 Who Are Appraisers?
§ 29B.05  How to Select an Appraiser
§ 29B.06  How Is an Appraiser Hired?

CHAPTER 30
Subleasing

§ 30.01 What Is a Sublease?
[1] In General
[2] Critical Distinction: Sublease or Assignment?
[3] Key Issues to Consider When Negotiating the Terms of an Assignment or Sublease Clause
§ 30.02 Limitations
[1] Legal Limitations
[2] Practical Limitations
[3] Protecting a Tenant’s Sublease Rights—The Importance of Non-Disturbance and Recognition Agreements
§ 30.02A Landlord Considerations Following a Tenant’s Request to Sublease
[1] Creating a Sublease Strategy
[2] The Prime Lease and the Sublease
[3] Obtaining an Express Covenant
[4] Estoppel-Like Statements
[5] Subtenant Bargaining Power
[6] Restoration Provisions
§ 30.02B Subtenant Considerations and Concerns When Entering into a Sublease Arrangement
[1] The Sublease Terms
[2] Insurance Coverage and Liability Concerns
[3] Shared Services
[4] Potential Problems under the Master Lease
[5] Landlord’s Obligation to Provide Services for a Sublet Space
[6] Protecting Subtenant from a Sublandlord’s Default
[7] Protecting Subtenant Against a Landlord’s Default
[8] Issues Regarding Improvements
§ 30.03 The Sublease Document
[1] Form of Sublease Agreement
[2] Analysis of the Sublease Agreement
[3] Additional Considerations—Retaining Parts of the Subleased Premises
§ 30.04 Landlord’s Consent to the Sublease
[1] Generally
[2] Forms of Landlord’s Consent
§ 30.05 Conclusion

Chapter 31
Responding to a Tenant’s Assignment or Subletting Request

§ 31.01 Introduction
§ 31.01A Transfer Clauses
§ 31.02 The Various State Laws and Views
[1] Alabama
[2] Alaska
[3] Arizona
[4] Arkansas
[5] California
[6] Colorado
[7] Connecticut
[8] Delaware
[9] Florida
[10] Georgia
[11] Hawaii
[12] Idaho
[13] Illinois
[14] Indiana
[15] Iowa
[16] Kansas
[17] Kentucky
[18] Louisiana
[19] Maine
[20] Maryland
[21] Massachusetts
[22] Michigan
[23] Minnesota
[24] Mississippi
[25] Missouri
[26] Montana
[27] Nebraska
[28] Nevada
[29] New Hampshire
[30] New Jersey
[31] New Mexico
[32] New York
[33] North Carolina
[34] North Dakota
[35] Ohio
[36] Oklahoma
[37] Oregon
[38] Pennsylvania
[39] Rhode Island
[40] South Carolina
[41] South Dakota
[42] Tennessee
[43] Texas
[44] Utah
[45] Vermont
[46] Virginia
[47] Washington
[48] Washington, D.C.
[49] West Virginia
[50] Wisconsin
[51] Wyoming
§ 31.03 Jurisdictional Table Covering the State Views on a Tenant’s Right to Assign or Sublease

CHAPTER 32
Preparing for an Effective Subleasing Program While Negotiating the Lease

§ 32.01 Introduction
§ 32.02 Remarketing Issues
[1] The Ability to Market and Offer Space with a Minimum of Lead Time, Pricing Limitations and Other Regulation by the Landlord
[2] The Ability to Eliminate the Need for the Landlord’s Consent or Assure Consent Quickly When the Landlord’s Consent Is Required
[3] The Ability to Trigger Consent Through Intentions Rather than Formal Offers or Fully Executed Sublease Documents
[4] The Ability to Offer Space Through Commercial Channels of the Tenant’s Choice Without the Landlord’s Interference or Limitations
[5] The Ability to Demise, Alter and Install Fixtures in the Space Without Inappropriate Limitations, Roadblocks or Delayed Landlord Consents
[6] The Ability to Preclude Landlord Limitations on or Added Criterion for Pricing or Marketing the Space
[7] The Absence of Limitations on Type of Use or Type of Subtenant for the Space
[8] The Ability to Preclude Artificial Limitations on the Extent and Duration of the Landlord’s Recapture Rights
[9] The Right to Recoup All Installation and Subleasing Related Costs Before the Landlord’s Profit-Sharing Rights Kick In
[10] The Ability to Reoccupy the Space and Collapse the Sublease in the Event of Economic Cycle Recovery Without Landlord Consents or Further Economic Sharing with the Landlord
[11] The Ability to Maximize the Subleasing Target Market by Providing for an Increase in the Tenant’s Security Under the Direct Lease to Offset or Alleviate Any Landlord Concerns About the Creditworthiness of the Tenant’s Proposed Subtenant
[12] The Ability of the Subtenant to Further Remarket and Sublet the Space
§ 32.03 Lease Articles Addressing Assignment, Mortgaging and Subletting Rights
[1] Introduction
[2] Restrictions on the Tenant’s Assignment, Mortgaging and Subletting Rights—An Onerous Provision
[3] A Somewhat “Kinder and Gentler” Version of the Assignment, Mortgaging and Subletting Provision
§ 32.04 Conclusion

CHAPTER 33
Leases vs. Licenses

§ 33.01 Introduction
[1] Understanding the Distinctions
[2] The Importance of the Distinctions
§ 33.02 Form: Standard License Agreement
§ 33.03 Form: License for Temporary Use of Premises for Storage
§ 33.04 Form: Limited Purpose License (“Early Access to Space”)

Chapter 34
The Killer Lease: What It Is and Why It Exists

§ 34.01 Introduction to the Killer Lease Form
§ 34.02 The “Neutered” Form with Commentary
[1] Permitted Use
[2] Demised Premises and Appurtenances
[3] Commencements of Rent, Term and Delivery Condition of Premises
[4] Completion and Occupancy
[5] Restrictions on Use of the Premises
[6] Appurtenances, etc., Not to Be Removed
[7] Various Covenants
[8] Changes or Alterations by Landlord
[9] Damage by Fire, etc.
[10] Condemnation
[11] Compliance with Laws
[12] Accidents to Plumbing and Other Systems
[13] Notices and Service of Process
[14] Conditions of Limitation Defaults
[15] Re-Entry by Landlord
[16] Damages
[17] Waivers by Tenant
[18] Waiver of Trial by Jury
[19] Elevators, Cleaning, Heating, Air Conditioning, Services, etc.
[20] Lease Contains All Agreements—No Waivers
[21] Parties Bound
[22] Curing Tenant’s or Landlord’s Defaults
[23] Inability to Perform
[24] Adjacent Excavation—Shoring
[25] Article Headings
[26] Electricity and Water
[27] Assignment, Mortgaging, Subletting, etc.
[28] Escalations
[29] Subordination
[30] Miscellaneous
[31] Layout and Finish
[32] Insurance [Risk Management to Review for Tenant]
§ 34.03 Costs to Owners of Killer Leases

Appendices
Glossary of Commercial Leasing Terms with Practice Pointers
Index