A lease is a contract granting a tenant use or occupation of a landlord's property for a specified period of time in exchange for a specified amount of rent. Leases are used in both residential and commercial property situations. When a tenant enters into a commercial lease (hereinafter referred to as "lease"), the tenant must be completely aware that the lease might be the most important economic obligation he will have. The terms of the tenant's lease might, in the end, be the determining factor for success or failure of the business.

While a tenant might assume the landlord's lease form is fairly standard and straightforward, such an assumption will rarely be true. Tenants must understand that the landlord's lease is drafted to protect the landlord's interests rather than those of the tenant. Unfortunately for many tenants, they lack either meaningful negotiating leverage or the necessary capital to spend on attorney's fees to protect themselves during the negotiating process. In such cases, tenants who are about to enter into leases should consider the following helpful tips:

Construction completion date

Often times a tenant and landlord will enter into a lease that contemplates improvements to be made in the rental space before the tenant moves into the space. If it is the landlord's obligation to start and finish the improvements, then the tenant must make certain that the lease contains a deadline for the completion of the improvements and for the delivery of the leased premises. If the improvements are not completed and the space is not turned over to the tenant by the deadline, and it is not due to any fault of the tenant, then the lease should provide that the landlord is in default and the tenant should have its remedies at law or in equity. However, most landlord leases do not provide such a remedy to the tenant. Alternatively, the tenant should be able to either terminate the lease and obtain its deposit and look elsewhere for space, or extend the commencement date of the lease. If the landlord is unwilling to allow the tenant to terminate the lease, then the tenant can attempt to negotiate a lease provision whereby the tenant's time for payment of rent is delayed by the same amount of time the construction of improvements has been delayed.

Landlord build-out

If the lease obligates the landlord to construct improvements prior to the beginning of the lease, then the tenant should be sure to specifically set forth in the lease a complete list of those improvements. Whether the improvements are comprised of constructing a sink, kitchen area, a bar, or a closet, the plans, specifications, and costs of each improvement should be set forth in great detail.

Additionally, the tenant should have the lease set forth whether any warranties covering the leasehold improvement will be conveyed to the tenant.

Accepting the premises "as is"

Some leases provide that the tenant will accept the delivery of the premises "as is." "As is" means that the tenant will lease the property in its current condition, with all its faults. If this is the case, the tenant should inspect the premises before signing the lease. After inspection, the tenant should submit a checklist of items to be repaired to the landlord before signing the lease.

Tenant's default

Most leases will contain an abundance of acts that will constitute a default by the tenant. The tenant should make certain that the lease obligates the landlord to provide the tenant with written notice of the alleged default prior to termination of the lease, that the written notice details the exact nature of the alleged default, that the written notice sets forth what action can be taken to cure such alleged default, and that the lease provides a reasonable period of time to cure the alleged default.

Insurance premiums

Landlords will include insurance premiums as part of the actual operating expenses that the tenant must pay for in the lease. Tenants should try to have the landlord exclude any portion of the insurance premiums that include an increased cost resulting from a specific use by another tenant.

Landlord's obligations

Many leases will not clearly define the landlord's obligations to the tenant with regard to services that the landlord is to provide. The tenant should try to have the lease state that: i) the landlord will at least maintain and repair the roof, the foundation and the exterior walls, ii) the landlord will repair and replace common areas (as opposed to just maintaining common areas), and iii) if the landlord fails to provide essential services for a certain amount of time (i.e., 30 to 60 days), the tenant will have the right to terminate the lease, or alternatively, abate its rent payments for that period of time.

The aforementioned tips barely scratch the surface of issues that tenants should address before signing a lease. It is highly recommended that the tenant review the lease with an attorney of its choice before executing the lease so as to have a clear understanding of the obligations and liabilities set forth in the lease.

Brett L. Slobin is an attorney in the Houston law firm of Slobin & Slobin, P.C. (This email address is being protected from spambots. You need JavaScript enabled to view it. ). His practice focuses on commercial and residential real estate.