Premise Lease Negotiations

Discomfort Zones – Lease Time Lines


Ian D. Toms


November 19, 2014

November 19, 2014

“Time is the essence of this agreement” is a common, indeed necessary, phrase in every lease. It means that the agreement is based on time. This article considers a number of lease time lines which if improperly handled can and will cause periods of anxiety and expense, both of which are uncomfortable.

The first discomfort zones experienced by tenants are during the three stages of initial practice development.

First, site selection and offer to lease negotiation often take three months. In some cases, the perfect location may take years to secure, especially if the practice is to be developed in a development not yet built. To avoid discomfort, take your time and carefully consider all available sites to be in a position to choose the best location, and tenancy terms.

Secondly, the plan, permit and approval process often takes two months. Give yourself ample, unpressured time to consider all possible premises layouts, have your engineered drawings completed, wait for the building permit to be issued, and to carefully shop for exactly the right finishes and equipment package.

Third, it takes three months to construct a new practice. Inevitably there will be delays related to delivery schedules and holidays. Plan for delays, and use this time to rest and prepare for the flurry of activity you will encounter during the weeks following opening day.

In total, plan on eight months elapsed time from the beginning to look for a new site until the day you open. If your new practice is opened sooner, consider this a bonus. An inexperienced advisor may try to sell you a service with a promise of a shorter time line, but discomfort will arise when unrealistic time lines are not achieved, a less than perfect site has to be accepted, or you are required to throw money at a problem that would have been avoided with educated advice.

Discomfort may arise throughout the term of the lease.

A short lease term which does not provide enough time to complete your career and prepare for retirement is the norm in Ontario. Imagine the comfort you would feel signing a lease for space in your dream location for a term of 45 years! Bliss. Consider purchasing a property, or make sure you have the necessary terms and conditions in your plan and lease, to protect your interests over the course of your career.

Missing or impaired options to renew will put you in the discomfort zone, because you may be forced to accept less than ideal lease terms and conditions at the end of your current term, if you are permitted to remain as a tenant. It will be very uncomfortable for you to have to spend the money and effort to relocate your practice prior to paying off the initial development cost.

Missing or unreasonable lease assignment provisionswill impair your ability to finance, share your premises with associates, or assign your lease if you wish to sell your practice at some point putting you in the discomfort zone.

A landlords’ option to terminate the lease on short notice for any reason including demolition is an open invitation to put you in the discomfort zone if you expect to finance or sell your practice at any point. An experienced advisor can provide you with the mechanisms to ensure that you do not experience this discomfort.

An improperly negotiated relocation provision can put you in a discomfort zone. Properly negotiated and then administered, a relocation clause can be used to improve your position. Imagine relocating your practice to better space in the development at the landlords’ expense!

Each of these circumstances, if not properly handled, will produce anxiety and therefore discomfort for you as the tenant.

An ounce of prevention is worth a pound of cure.

Take charge of your tenancy issues. By taking control, you can set your own time lines and commit to the solution rather than trying to address the problem at a time when you have little or no leverage.

First, have a realistic, educated overview of your tenancy and what is likely to happen as time passes. Address periods of uncertainty by creating optional approaches triggered at your discretion at that time.

Secondly, make sure your advisor is experienced, and services are provided on a cost:benefit basis. An inexperienced advisor may convince you to sign up for services which give you the warm fuzzies at the time, only to find out later that the advice you received was based on inexperience and actually created alternate problems.

Third, remember that your lease does control the value of your practice, and is therefore the cornerstone of your comfort. Make your own plans; do not wait for your landlord to take care of you. First, progressively identify opportunities and options as your tenancy progresses. Second, make sure that your advisor is an experienced specialist. Third, do not procrastinate; take charge of your own affairs to avoid discomfort zones.