(When I first tried my hand at blogging about commercial real estate I failed miserably.  So to resurrect some material that may not have circulated widely, I have compiled in the following article several posts from the beginning about commercial leases.)  

In the current climate we see numerous companies reworking their leases and resizing their space.  There are some very good lease deals to be had and those in the market for office or retail lease space should be mindful of the various concessions that are available just by asking. However, if you are unaware of the underlying lease document you may not know how or what to ask for.  In this and future articles, we will be reviewing common commercial lease sections and general principles that you can apply to both office and retail leases by working our way through a very simple general lease.   

As we begin to discuss commercial leases there is one general rule to always remember.....EVERYTHING IN A COMMERCIAL LEASE IS NEGOTIABLE.

If you take nothing else away from our review of commercial leases, remember the general rule above. There is no such thing as a “standard” or “general” lease.  Most leases follow only the form commonly used by the person who drafts the lease; so be mindful of who is writing the document, their intent or purpose, and adjust their lease suggestions toward your own under the rule above.  As you review commercial leases, always remember the above rule and it will greatly increase your ability to negotiate and execute leases favorable to your business needs.

One of the first things you will encounter when reading any lease will be the introduction.  There may be some legal language here but within the first two or three sentences you should see something like "XYZ Incorporated, Landlord" and "ABC Company, Tenant".  This is not an exact model, but what is important is that the parties are clearly identified. If you cannot clearly identify the parties after the first few paragraphs demand a clearer document.

Another issue that may arise in the introduction is when  a landlord or tenant is a legal business entity, i.e. corporation, partnership, LLC, etc.  In this instance it is important that you verify that the person signing the lease has the authority to sign the lease on behalf of the legal entity. This can be done by including it in the opening paragraphs, "comes now XYZ Incorporated, through its authorized representative, Joe Smith, President, ....." or by a formal acknowledgement of the signatory by the entity, as in a corporate resolution.  Either way make sure the person signing the lease has the authority to sign the document and is clearly identified somewhere in the agreement and/or its addendum(s).

Often the person signing for the entity will be another entity.  The same rule applies, make sure the signatory has the authority to do so.  "XYZ LLC, through its general partner, QRS Inc." The correct document with an unauthorized or wrong signatory will be an ineffective lease. Always identify the parties of the lease and the authority of parties.

Shortly after identifying the parties, the lease will identify the property.  Though important, technically it is only required that the space or location be easily identifiable from the provided description. "Joe Smith's old place" is not sufficient. "1234 Main, Unit 100, Joe's Smith's old place" is most likely sufficient.  Most often you will see both a physical and legal description of the property, something similar to "1234 Main, Unit 100, Houston, Harris County, Texas, also being described in the records of Harris County at page 1234, document 4783, as Unit 100 of Lots 3 and 4, Smith Subdivision, Rollins Survey."  

Always make sure that the lease space described in the agreement is what you are seeking, what you thought you were leasing, and what you actually are leasing.  Most errors of this type are caught early on but it could be a costly mistake.  Lastly, remembering our general rule about commercial leases, if you need half a unit, or a quarter of  a unit, ask for it and make sure it is properly described. There is nothing that says a certain address or unit cannot be partially leased. Do not be bound by borders set by developers, builders, landlords, or county officials.

This is Part 1 of our commercial lease review; please check back often as we work out way through common Texas commercial lease sections.