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ACCOUNTING TODAY
4TH EDITION
Negotiate
Best Lease
the
for Your Business
• Understand common lease clauses
• Plan for business disruptions and emergencies
• Negotiate expanding, renewing, or leaving early Attorney Janet Portman
Don’t Sign A Lease Without Reading This Book!
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LOS ANGELES TIMES
4th Edition
Negotiate the Best Lease
for Your Business
Attorney Janet Portman
LAW for ALL
FOURTH EDITION JANUARY 2021
Editor JANET PORTMAN
Book Design SUSAN PUTNEY
Production SUSAN PUTNEY
Proofreading ROBERT WELLS
Index SONGBIRD INDEXING SERVICES
Printing BANG PRINTING
Names: Portman, Janet, author.
Title: Negotiate the best lease for your business / Attorney Janet Portman.
Description: 4th Edition. | Berkeley : Nolo, 2020. | Revised edition of the
author’s Negotiate the best lease for your business, c2005.
Identifiers: LCCN 2020021806 (print) | LCCN 2020021807 (ebook) | ISBN
9781413328028 (paperback) | ISBN 9781413328035 (ebook)
Subjects: LCSH: Commercial leases. | Office leases. | Small
business--Management.
Classification: LCC HD1393.25 .P67 2020 (print) | LCC HD1393.25 (ebook) |
DDC 658.15/242--dc23
LC record available at https://lccn.loc.gov/2020021806
LC ebook record available at https://lccn.loc.gov/2020021807
This book covers only United States law, unless it specifically states otherwise.
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to practice in your state.
About the Author
Janet Portman, an attorney and Nolo’s Executive Editor, received undergraduate
and graduate degrees from Stanford and a law degree from Santa Clara University.
She is an expert on landlord-tenant law and the coauthor of Every Tenant’s Legal
Guide, Renters’ Rights, The California Landlord’s Law Book: Rights & Responsibilities,
California Tenants’ Rights, Every Landlord’s Legal Guide, First-Time Landlord, and
the author of Every Landlord’s Guide to Finding Great Tenants.
Table of Contents
Part I
Finding and Evaluating Space and Developing a Negotiation Strategy
1 Get Ready to Negotiate Your Commercial Lease ................................................3
There Are No “Standard” Leases ............................................................................................4
How This Book Can Help You Negotiate a Favorable Lease ......................................5
2 Looking for Space and Using Brokers ..........................................................................9
How to Find Space on Your Own .......................................................................................10
Working With a Real Estate Broker ....................................................................................15
The Value of Hiring Your Own Broker ..............................................................................19
How to Find a Real Estate Broker ........................................................................................20
How to Choose a Broker .........................................................................................................21
Signing a Contract With Your Broker ...............................................................................23
Handling Problems With Your Broker ..............................................................................29
3 Evaluating the Space and the Landlord ..................................................................33
Visiting and Evaluating Prospective Space ......................................................................35
Further Investigation of Promising Space .......................................................................40
Environmental Issues to Consider When Evaluating Space ....................................43
Learning About the Landlord ...............................................................................................48
Management Companies .......................................................................................................53
Holding the Space With a Deposit .....................................................................................54
4 Understanding the True Size and Cost of the Rental ....................................57
How Landlords Measure Square Feet ...............................................................................59
Additional Rent: Gross Versus Net Leases.......................................................................65
Percentage Rent—Sharing Income With the Landlord .............................................68
Computing the True Rental Cost ........................................................................................70
5 Setting the Stage to Negotiate ......................................................................................75
How Much Clout Do You Have? .........................................................................................77
Your Landlord’s Compliance With the Executive Order on Terrorism ..............83
Getting Past Deal Breakers. ....................................................................................................84
Letter of Intent ............................................................................................................................88
Finding and Paying for a Lawyer ..........................................................................................96
6 Your Negotiation Strategy .............................................................................................101
Your Negotiation Strategy Worksheet ..........................................................................103
How to Use Your Negotiation Strategy Worksheet ................................................109
How Your Lawyer Can Help With Negotiations ........................................................113
How to Modify the Landlord’s Lease ..............................................................................114
Part II
Common Lease Terms
7 Lease Basics ..............................................................................................................................121
Naming the Landlord and Tenant: Parties to the Lease..........................................122
Describing the Leased Space ...............................................................................................123
The Use Clause and Exclusive Clause ..............................................................................126
8 The Length of Your Lease ................................................................................................131
When Do Your Legal Responsibilities Begin and End?.............................................132
The Crafty Use of “As of” [Date] ........................................................................................135
How to Keep Track of Dates With a Timeline .............................................................136
Staying After the Term Ends: Holdover Rent ...............................................................136
9 Rent ...............................................................................................................................................139
Basic Rent .....................................................................................................................................141
Taxes as Additional Rent ......................................................................................................146
Insurance as Additional Rent ..............................................................................................151
Operating and Common Area Maintenance Costs as Additional Rent ..........161
Audit Rights ................................................................................................................................165
10 Security Deposits ................................................................................................................169
Where the Landlord Will Keep the Deposit .................................................................170
How the Landlord Will Use the Deposit ........................................................................171
When the Landlord May Use the Deposit ....................................................................172
The Fate of the Deposit at the End of the Lease ........................................................173
Letter of Credit: An Alternative to a Cash Deposit...................................................173
11 Improvements and Alterations ..................................................................................175
Improvements Versus Trade Fixtures ..............................................................................176
Renting Space in a Building Under Construction ......................................................178
Improvements to Your Space .............................................................................................179
Paying for the Improvements ............................................................................................182
The Tenant Improvement Allowance (TIA) .................................................................185
The Building Standard Allowance, or “Build-Out” ....................................................187
Paying a Fixed Amount for Improvements ..................................................................188
The Landlord Pays for All Improvements .....................................................................188
When Do You Start Paying Rent?.....................................................................................188
Making Alterations During Your Tenancy ....................................................................193
12 Maintenance, Utilities, and Code Compliance ................................................197
Maintenance, Repairs, and Janitorial Services ............................................................198
Utilities .........................................................................................................................................202
Compliance With Building Codes and Other Laws .................................................204
Compliance with the Americans with Disabilities Act (ADA) ............................208
13 Parking, Signs, Landlord’s Entry, & Security ......................................................211
Parking ..........................................................................................................................................212
Hours of Operation .................................................................................................................212
Signs ...............................................................................................................................................214
Landlord’s Right to Enter Your Rental Space ...............................................................214
Building Security .......................................................................................................................216
14 Option to Renew or Sublet and Other Flexibility Clauses .......................219
Restrictions on Your Flexibility ..........................................................................................221
Option to Renew the Lease ................................................................................................223
Option to Expand Clause ....................................................................................................225
Rights of First Refusal and First Offer .............................................................................228
Option to Lease Less ..............................................................................................................230
The Assignment and Sublet Clause.................................................................................233
Termination Clause .................................................................................................................243
Option to Purchase ................................................................................................................248
