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| Michael Bull |
ATLANTA (June 17, 2013) – Leases are at the heart of commercial
real estate. Well-crafted contracts can create value for both landlords and
tenants, and poorly designed agreements will do just the opposite. Be as
careful and thorough as possible when negotiating a real estate contract, or
else you’ll find yourself saying, “Oops, I should have put that in the lease!”
That was the take of a panel of real estate experts on the
most recent episode of the “Commercial Real Estate Show,” hosted by Michael
Bull of Bull Realty. The show provided an enlightening look at the common
trouble spots in leases and provided an array of tips for crafting good
contracts.
The requirements for commercial leases can vary widely from
state to state so obtaining the guidance and advice of local experts is
essential, said John Wiles, a managing partner of the Wiles & Wiles
law firm in suburban Atlanta.
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| John Wiles |
“We regularly
negotiate leases with out-of-town lawyers,” Wiles said. “It’s always fun
because they think what’s going on in New York is the law all around the
country, and we sometimes clean up on them just because they don’t know the
local law.”
Laws requiring commercial landlords to make disclosures
about their properties are relatively few, Wiles said. Therefore, it is
imperative for tenants to ask questions during lease negotiations. “If you’re a
tenant or a tenant’s lawyer and you’re concerned about security, flooding or
any other thing, you need to ask, because there is a duty [on the part of the
landlord] to be truthful,” he said.
Too often, tenants are not as diligent as they need to be in
determining exactly who their landlords are, guests noted. “I’m amazed at how
few people really understand who their landlords are,” said David Tennery,
the principal of Regent Partners’ Office Properties and Development Group in
Atlanta. “That is critical and before you really begin to negotiate that
document, run a title report and make sure early on you understand exactly who
that landlord is.”
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| David Tennery |
On the other side of the equation, landlords should be
hesitant to grant tenants early termination rights in leases, Tennery added.
Property owners were fairly willing to give tenants the rights during the
recession, when space was hard to fill, but the clauses “are value killers for
a number of reasons,” Tennery said.
As landlords, “we want long-term, stable net-operating
income, and anything that interrupts that, in the middle [of the lease] or
earlier, affects everything we’ve done, the capital we’ve put out on the front
end,” Tennery said.
Leases for residential properties feature more disclosure
requirements – such as the federal requirement that owners disclose any
information they have about the existence of lead-based paint or other lead
hazards, said Robert Hein, an attorney with Fowler, Hein, Cheatwood
& Williams in Atlanta.
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| Robert Hein |
Additionally, “in a residential lease, you cannot shift the
duty of repair from the landlord over to the tenant,” Hein said. “Even if that
provision is in there, it’s not going to be enforceable.”
The entire "Oops, I Should Have Covered that in the
Lease" episode is available for download at www.CREshow.com.
The next “Commercial Real Estate Show” will be available on June 20 and will
examine the U.S. REIT market.
For a complete copy of the company’s news release, please
contact:
Stephen Ursery
The Wilbert Group
E-mail: sursery@thewilbertgroup.com
Please note new office number: (404) 549-7150
Cell: (404) 405-2354
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