Administering The Offer To Lease

The offer to lease is the single most important lease document a tenant ever signs. This document describes tenancy terms and conditions which may continue for 50 or more years. Not properly administering your offer to lease can and will cost hundreds of thousands of dollars, and in some cases the value of your practice.

Typically, the offer to lease negotiation is the first step towards a lease when considering new premises. The offer is an abbreviated version of the lease, enabling the parties to focus on a simplified summary of tenancy terms.

In order to successfully negotiate an offer to lease, you need to administer two critical issues.

• Know which terms and conditions you require, and
• Know who should negotiate the offer on your behalf.

REQUIRED TERMS AND CONDITIONS

Your advisor will guide you through the hundreds of tenancy terms and conditions that define the value of your practice, now and throughout the life of your practice. You need to be prepared to abandon the location if certain terms cannot be negotiated.

PRIMARY TERMS INCLUDE:

Renta. Is the rent reasonable in the context of the market?

b. Is the method used to calculate rent fair and reasonable?

c. Will rent in renewal options be acceptable?

d. Is the additional rent fair, reasonable and manageable?

e. Are you getting the best rent, free rent, tenant allowance and landlords work negotiable possible?

Tenanta. Who is the tenant?

b. Can the lease be assigned together with all obligations?

c. Can the premises be shared or sublet?

d. Is there personal exposure?

Usea. Does the permitted use enable your practice throughout the tenancy?

b. Does the zoning permit the use?

c. Do the electrical, heating, cooling and ventilation, and plumbing systems permit the use?

d. Does the landlord guarantee that no competitor may practice in your developmentat any time?

Lease form and content.a. Will you have the ability to negotiate the lease?

b. Will the lease be based only on offer to lease terms and conditions?

c. What form of lease will be used?

WHO SHOULD NEGOTIATE THE OFFER TO LEASE Choose the person to negotiate your offer to lease based on three fundamental qualities: how much experience does that person have negotiating offers to lease, is that person properly licensed to provide the service, and is that person working to protect your interest only. Consider the following common choices.

1. Realtors:

• Are paid a commission only if they broker a deal — no deal, no pay. Do you want this bias governing the future of your practice?
• Are often paid by the landlord who is the “other side” in the negotiation; do you want this conflict of interest governing the future of your practice?
• Commission is factored into the rent over time – make no mistake, you paid for the service; it’s not “free”.
• Are not specialized, typically “negotiating” the odd offer in addition to residential and commercial property sales.

2. Tenants:

• Are not objective because of an emotional attachment to the premises.
• Ought to spend their time doing what they are trained and paid to do; trying to save costs at the expense of billable time is false economy.
• Have little or no experience negotiating or dealing with an offer to lease and are a danger to themselves.

3. Lawyers:

• Are invaluable to ensure that the offer is correct in law but not business. Few lawyers have the experience of personally negotiating thousands of offers to lease, or current knowledge of the rental market.

4. Lease consultants, accountants and equipment suppliers:

• Does the person who will actually complete the negotiation have experience of thousands of offer to lease negotiations, or are they a representative of a company who has the experience?
• Has the person ever been a tenant and personally experienced the penalty of a mistake?
• Is the person professionally qualified and licensed to provide the service?
• Are the fees reasonable and rational; is there a relationship between cost and benefit?
• Is the person a bully who will leave you with a negative landlord-tenant relationship for the tenancy?

Building a practice based on a flawed offer to lease is building on an unstable foundation and will lead to trouble. Administer your position wisely before proceeding with an offer to lease negotiation. PA