Real Estate Practice
Case Study: Reading the Contract’s Fine Print Reduces Client’s Risk
Opportunity: Client is contemplating selling his business. The term of the lease for his office premises is expiring soon. He has been presented with a 5 year renewal. He wants protection and flexibility.
Action: We identified several significant issues:
- The "base year" for determining increases in real estate taxes is the initial year of its occupancy (1980).
- Upon the sale of the business, the client may need to assign his office lease to the purchaser.
- The landlord has the right to re-take the space if our client requests permission to assign the lease to the purchaser.
Result: We made the following lease renewal revisions in order to protect the client:
- The client received a 5 year lease, along with a 5 year option to renew. This renewal option was important if a purchaser of the business wanted to remain in the space;
- The landlord could not unreasonably withhold it's consent to assign the lease, and the landlord is not permitted to re-take the space if consent is not granted;
- The "base year" is brought up to the current tax year, saving the client significant amounts in additional rent;
- The personal guarantee is changed to a "good-guy" guarantee, eliminating our client’s personal guaranty under certain circumstances.
- Releasing our client from liability when the lease is assigned to the purchaser.
