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Commercial and Industrial Leases

Commercial and industrial leasing is very different from residential leasing. Especially in California, many of the protections available to residential tenants as a matter of law do not apply to commercial or industrial tenants. As a result, there are many issues that have to be addressed in such leases that do not come up in residential leases. For example, these leases can either be gross (meaning the landlord is responsible for property taxes, building insurance and maintenance) or net (which means that the tenant bears the cost of these items. In multiple tenant developments, such as office buildings and shopping centers, there can be common area charges, which can be charged in different ways. There are a host of other issues, such as insurance, condemnation, and the rights of the parties in the event of damage to the building, that need to be considered.

For single tenant commercial and industrial facilities, tenants often request options to purchase. Few people realize that such options can only be enforced on the exact terms stated in the option – meaning that any option to purchase should be reflected in a full-blown purchase and sale agreement. In addition, there can be distinct disadvantages to a landlord in grating an option to purchase to a tenant.

There are many landlords and tenants who rely on their real estate brokers to negotiate commercial or industrial leases. While brokers who specialize in leasing are often knowledgeable about the economic impacts of the issues mentioned above, they are not lawyers. By law, they are forbidden from providing advice about the interpretation of language in the lease, whether it is form language or specifically negotiated language. In situations where the broker is a dual agent, he or she has obligations to both parties, placing limits on the ability of the broker to represent either side aggressively.

For all of these reasons, it is prudent to have the representation of an attorney in commercial and industrial lease negotiations.

Peter Niemiec has represented both landlords and tenants in lease transactions involving office, retail, and industrial space. He also has handled ground lease transactions for a variety of uses, including gasoline stations, other retail uses, and industrial uses, including a major port facility. Many of the industrial leases and ground lease transactions involved properties with contamination issues.