Landlord's Checklist of Silent Lease Issues

Landlord's Checklist of Silent Lease Issues

TABLE OF CONTENTS

1. Alterations

2. Assignment and Subletting: Consent Requirements

3. Assignment and Subletting: Implementation

4. Bankruptcy

5. Bills and Notices

6. Compliance with Laws

7. Consents

8. Default

9. Destruction, Fire and Other Casualty

10. Development-Related Issues

11. Electricity

12. End of Term

13. Environmental

14. Escalations

15. Estoppel Certificates

16. Expansion/Renewal Options

17. Failure to Deliver Possession

18. Fees and Expenses

19. Future Documents and Deliveries

20. Guaranty

21. Inability to Perform

22. Insurance

23. Landlord's Access to the Premises

24. Landlord's Liability

25. Landlord's Representations

26. Maintenance and Repairs

27. Occupancy

28. Percentage Rent and Radius Clause

29. Quiet Enjoyment

30. Real Estate Taxes

31. Landlord Remedies

32. Rent

33. Rules and Regulations

34. Security

35. Services Provided by the Landlord

36. Subordination and the Landlord's Estate

37. Tenant's Equipment and Installations

38. Use

39. Vault Space

40. Miscellaneous

41. Due Diligence; Other Documents

42. Post-Closing; Monitoring

1. ALTERATIONS

1.1 Completion Bond. Before the tenant undertakes alterations estimated to cost above , require the tenant to deliver a bond or letter of credit in an amount equal to of the estimated cost.

1.2 Restoration. State that the landlord's consent to any alteration does not waive the tenant's obligation to remove it and restore the premises at the end of the term.

1.3 Artists' Rights. Prohibit the tenant from installing any artwork that could give the artist a right under federal law to prevent the artwork from being removed.

1.4 Third-Party Fees. Require the tenant to reimburse the landlord for its architect's and other professional fees in reviewing plans and specifications.

1.5 Supervisory Fee. Provide that the landlord may charge a supervisory fee for supervising the making of alterations and reviewing environmental conditions.

1.6 ADA. Require tenant's alterations to comply with the Americans with Disabilities Act of 1990.

1.7 Labor Harmony. The tenant's obligation to maintain labor harmony should relate not merely to construction, but also to any other activities at the property.

1.8 Exterior Hoist. If the tenant wants to use a hoist outside the building, all lease provisions, rules and regulations that govern alterations and activities within the premises should also apply to the hoist.

1.9 Tenant's Records. Consider requiring the tenant to maintain records of the costs of its improvements for six years.

1.10 Warranties. Require the tenant to provide a warranty on completed restoration work or at least an assignment of any warranty it receives from its contractor.

1.11 Modifications to Plans and Specifications. If the tenant modifies its plans and specifications after the landlord approves them, the alterations as modified should still meet a certain level of quality.

1.12 Plans and Specifications. Require the tenant to deliver plans and specifications in a specified computer aided design format.

1.13 Activities Outside Premises. If the lease lets the tenant perform any alterations outside the premises, then require the tenant to comply with all the same requirements that would govern alterations within the premises.

2. ASSIGNMENT AND SUBLETTING: CONSENT REQUIREMENTS

2.1 Change of Control. Treat a change of control of the tenant as an assignment.

2.2 Continuing Status as Affiliate. If the lease allows free transfers to the tenant's affiliates, require that the assignee or subtenant thereafter remain an affiliate throughout the lease term.

2.3 Restriction. Prohibit assignments/sublets to certain parties and under certain conditions.

2.4 Future Sublease-Related Transactions. Require landlord approval for future modification or termination of a sublease, recapture, or any assignment by the subtenant.

2.5 Discretionary Consents. If consent is not required to be reasonable, simply ban both assignment and subletting.

2.6 Prohibit Collateral Assignment of Lease. Any prohibition against assignment and subletting should also prohibit any collateral assignment of the lease.

2.7 Assignment/Sublet of Other Tenants' Leases. Ask this tenant to agree not to accept an assignment of any other tenant's lease or a subletting of any premises without consent.

2.8 Diplomatic Immunity. Prohibit assignment/subletting to any person entitled to claim diplomatic immunity, or to any domestic or foreign governmental entity.

2.9 Fixture Financing. Prohibit the tenant from financing its fixtures, or impose appropriate protective conditions upon any such financing arrangements.

3. ASSIGNMENT AND SUBLETTING: IMPLEMENTATION

3.1 Tenant's Profit. If the tenant must pay the landlord a share of the consideration or other profit, the landlord can audit the tenant's books and records and may estimate profits if information is not furnished.

3.2 Assignor Guaranty. As a condition to any assignment, consider requiring any unreleased assignor and any guarantor to deliver a guaranty with full suretyship waivers or an estoppel certificate.

3.3 Subtenant Nondisturbance. If the landlord agrees to provide nondisturbance or recognition rights to subtenants, require clear and objective standards.

3.4 Contiguous Subleased Floors. Consider requiring sublet floors to be contiguous, ideally at the top or bottom of the tenant's stack.

3.5 Recapture Right. If the tenant wants to sublease any space, give the landlord a right to recapture that particular space.

3.6 Transactional Requirements. For any assignment/sublet, the tenant must satisfy certain conditions and deliver certain documents satisfactory to the landlord.

3.7 Prohibited Use. Even if the tenant has certain rights to assign or sublet, the new occupant should expressly remain bound by the use clause in the lease.

3.8 Rent Increase upon Assignment. If the tenant assigns, let the landlord increase base rent to fair market rent.

3.9 Leasing Agent. Require the tenant to designate the landlord's managing agent as leasing agent for any contemplated assignment or sublet.

3.10 Processing Fee. Charge a processing fee for any assignment/subletting.

3.11 Advertisements. The landlord should have the right to pre-approve any advertisements for assignment or subletting.

3.12 ADA. Prohibit any assignment or subletting that triggers incremental ADA compliance requirements.

3.13 Confidentiality. Require the tenant to keep confidential the terms of any assignment or sublease.

3.14 Partial Subleases. Wherever the lease refers to subletting, it should refer to a subletting of all or any part of the premises.

3.15 Breach of Anti-Assignment Covenant. A breach of the covenant not to assign the lease without consent should create an automatic event of default.

4. BANKRUPTCY

4.1 Multiple Leases. If the same tenant leases multiple locations, try to structure the transaction as a single combined lease.

4.2 Shopping Center Premises. Consider including favorable language confirming the building is a shopping center.

4.3 Characterize Tenant Improvement Contribution as Loan? Consider restructuring such payments as payments on a loan, independent of the lease, evidenced by a note.

4.4 Letters of Credit. If the tenant delivers a letter of credit in place of a security deposit for more than a year's rent, check the drawdown conditions carefully.

5. BILLS AND NOTICES

5.1 Who May Give Notices. State that the landlord's counsel or managing agent may give notices for the landlord.

5.2 Tenant's Notices. Copies of notices from the tenant should also go to the landlord's counsel.

5.3 Next Business Day Delivery. Define overnight delivery as next business day delivery.

5.4 Routine Rent Bills. Avoid any suggestion that the landlord cannot send routine rent bills by ordinary mail.

6. COMPLIANCE WITH LAWS

6.1 Notice. Require the tenant to give prompt notice to the landlord of any violation of any legal requirement.

6.2 Legally Required Improvements. Require the tenant to perform all improvements to the premises required by law.

6.3 ADA. If the tenant uses the premises as public accommodation, the tenant should pay for the work necessary to comply.

6.4 Definition. Define Laws broadly to include future enactments and amendments.

7. CONSENTS

7.1 Reasonableness. When the landlord agrees to be reasonable, set criteria for reasonableness.

7.2 Scope of Consent. Any consent applies only to the particular matter under consideration.

7.3 Deemed Consent. If the landlord has agreed that failure to grant or withhold consent within days is deemed consent, build in reminders and conspicuous notices.

7.4 Expenses. Require the tenant to pay any expenses the landlord incurs in connection with any consent.

7.5 Conditions to Consent. Build in conditions such as no pending default and delivery of an estoppel certificate.

7.6 No Representation. Make clear that the landlord's consent is not a representation or warranty.

7.7 Survival of Conditions to Consent. Consider whether conditions should remain satisfied after consent is granted.

7.8 Limitation of Remedies. The tenant's only remedy should be specific performance, not monetary damages, if consent is wrongfully withheld.

8. DEFAULT

8.1 Guarantor's Net Worth. Provide that a decline in a guarantor's net worth or the bankruptcy of a guarantor is an event of default.

8.2 Cross Defaults. Provide for cross defaults as against other leases or obligations of the tenant or its affiliates.

8.3 Default Notices. Provide that default notices need not specify cure periods.

8.4 Impairment of Business. Define an event of default to include events indicating the tenant is preparing to shut down.

8.5 No Right to Cure Event of Default. Once an event of default has occurred, consider whether the tenant should have an open-ended cure right.

8.6 Discount for Timely Payment. Consider increasing face rent by %; provided however, if the tenant pays by the day of the month, the tenant receives a discount.

8.7 All Rent Due at Signing. Consider requiring the tenant to pay all rent for the term at signing, subject to monthly installments if no default exists.

9. DESTRUCTION, FIRE AND OTHER CASUALTY

9.1 Rent Abatement. Limit the tenant's rental abatement right to the amount of rental income insurance proceeds the landlord receives.

9.2 Time to Restore. Measure any deadline from the landlord's receipt of insurance proceeds, not from the date of casualty.

9.3 Termination Right; Limitation on Restoration. Provide no right or a limited right for the tenant to cancel upon casualty.

9.4 Tenant Waiver. Require the tenant to waive New York Real Property Law § 227 and comparable provisions in other states.

10. DEVELOPMENT-RELATED ISSUES

10.1 Air and Development Rights. Have the tenant waive any right to object to any merger or transfer of development rights.

10.2 Landmark District; Historic Designation. The tenant should agree not to file for historic designation of the premises.

10.3 Relocation Right. Give the landlord the right to relocate the tenant to comparable premises.

10.4 Demolition. Allow the landlord to terminate the lease after reasonable notice if the landlord intends to demolish the building.

10.5 Building Name and/or Address. Allow the landlord to change the name or address of the building.

10.6 Construction Restrictions. State that nothing in the lease limits the landlord's right to construct or alter improvements anywhere on the property.

10.7 Building Standard Specifications. The landlord should reserve the right to modify building standard specifications.

11. ELECTRICITY

11.1 Change of Provider. If the landlord changes the electricity provider, the tenant must use the new provider to the extent legally allowed.

11.2 Delivery of Electrical Service. The tenant should comply with electrical conservation measures and any limits on power grid availability.

11.3 Electrical Service. If the tenant's space is directly metered, require the tenant to keep the landlord informed of consumption.

12. END OF TERM

12.1 Obligation to Restore. Require the tenant to restore the premises at the end of the term.

12.2 Landlord's Property. At the landlord's option, the tenant should leave behind any improvements, fixtures, or personal property the landlord paid for.

12.3 Cables, Conduits. The landlord should retain ownership of all cables and wiring in the building.

12.4 Holdover. Consider providing that if the tenant fails to vacate, the tenant must pay the greater of % of final adjusted rent or 150% of fair market rent.

12.5 Tenant Waiver. Have the tenant waive any civil procedure rule that would allow a court to issue a stay in holdover summary proceedings.

12.6 Abandoned Personalty. State that upon lease termination, any personalty in the premises is deemed abandoned.

12.7 Consequential Damages. If the tenant holds over, the tenant should agree to pay all damages the landlord incurs, including consequential damages.

12.8 Time of Essence. State that time is of the essence with respect to the tenant's obligation to vacate the premises.

13. ENVIRONMENTAL

13.1 Reports; Inspections. The tenant should agree to deliver updated environmental reports and reimburse inspection costs if required.

13.2 High Risk Uses. For a gas station or other high-risk use, consider additional environmental protections and financial assurances.

13.3 Required Tank Removal. The landlord might want the right to perform a further environmental assessment at the end of the term.

13.4 Landlord Indemnification. If the landlord indemnifies the tenant, limit it to liability that exists under present law based on present violations.

13.5 Interior Air Quality. Disclaim landlord liability for bad air or sick building syndrome and prohibit smoking if desired.

14. ESCALATIONS

14.1 Operating Costs. Consider reality, off-site costs, GAAP, CAM, major repairs, and broad definitions of costs.

14.2 Audit Issues. Allow the tenant to audit operating costs only if they increase more than % over a specified year or base year.

14.3 Other Escalations. Include fringe benefits and all other labor costs; consider CPI-U.

14.4 Generally. Escalation formulas should never allow rent to go down.

15. ESTOPPEL CERTIFICATES

15.1 Lender Requirements. In defining the scope of an estoppel certificate, allow the landlord to require any additional information a lender might request.

15.2 Ratify Guaranty. Allow the landlord to obtain a confirmation or ratification of any guaranty, not merely an estoppel certificate from the tenant.

15.3 Exhibit. Attach a form of estoppel certificate as a lease exhibit.

15.4 Estoppels. Require the tenant to agree to deliver future estoppel certificates at any time on the landlord's request.

15.5 Reliance. Allow reliance by prospective purchasers, mortgagees, or participants in a future securitization.

15.6 Failure to Respond. Establish specific remedies for failure to sign an estoppel certificate within a short period.

15.7 Attach Lease. Require the tenant, if asked, to attach a copy of the lease and all amendments to any estoppel certificate.

15.8 Legal Fees. If the landlord agrees to give an estoppel, require the tenant to pay the landlord's legal fees and expenses.

16. EXPANSION/RENEWAL OPTIONS

16.1 Timing. Make time of the essence for exercising any option or right of first refusal.

16.2 Multiple Bites at the Apple. If the tenant declines space or an option, deem the tenant to have waived related rights for a specified period.

16.3 Timing. Make the exercise deadline early enough to give the landlord time to relet if the tenant does not exercise its option.

16.4 Coordination of Options. Time the exercise and lapse dates so adjacent blocks of space may become available at the same time.

16.5 Update Due Diligence. Reconfirm the due diligence requirements for the tenant.

16.6 Option Subject. Make any expansion option subject to existing exclusives and renewal clauses of other tenants.

16.7 Carveouts from Purchase Rights. Exclude foreclosure, affiliate transfers, and other permitted transactions.

16.8 Conditions. Condition any option exercise on the tenant not being in default both on the exercise date and on the effective date.

16.9 Option Rent. Set a floor for option rent equal to the previous rent under the lease.

16.10 Covenant to Notify. Require the tenant to notify the landlord if the tenant needs more space.

16.11 Option Maintenance Fee. Require the tenant to pay a nominal annual fee to preserve future options.

16.12 Miscellaneous. State that the tenant may not separately assign any option.

17. FAILURE TO DELIVER POSSESSION

17.1 No Liability. The landlord should incur no liability for failing to deliver possession on the commencement date for any reason.

17.2 Delivery Procedure. Tie the Commencement Date to an objective event or date rather than to any notice from the landlord.

17.3 Condition of Premises. Substantial completion should suffice for the landlord's delivery of the premises.

17.4 Termination Right. The landlord may want a termination right if possession cannot be delivered by a date certain.

17.5 Delivery Dispute. Provide for a short deadline for the tenant to report any issue or problem about the premises.

17.6 Rent Abatement. Limit the duration of any rent abatement for late delivery.

18. FEE AND EXPENSES

18.1 Fee and Expenses. The tenant should pay a fee and expenses for the landlord's review of plans, specifications, or consent requests.

18.2 Attorneys' Fees and Expenses. The tenant should reimburse the landlord's attorneys' fees and expenses broadly and specifically.

18.3 Witnesses. The tenant should indemnify the landlord if personnel are called as a witness in any proceeding related to the lease or tenant.

19. FUTURE DOCUMENTS AND DELIVERIES

19.1 Tenant's Financial Condition. Require the tenant to deliver annual financial statements for itself and any guarantor.

19.2 Reporting. Require the tenant to immediately report adverse financial changes or litigation affecting performance.

19.3 Further Assurances. Require the tenant to enter into amendments reasonably requested to correct errors or achieve the parties' intentions.

19.4 Future Events. The parties should agree to memorialize any commencement date, rent adjustment, or option exercise in a lease amendment.

19.5 Termination of Lease Memo. If the tenant obtains a memorandum of lease, require a termination of memorandum in recordable form if the lease terminates early.

19.6 Governmental Benefits, Generally. Require the tenant to cooperate to help the landlord qualify for any tax or governmental benefits.

19.7 Permitted Disclosure. Allow the landlord to disclose information to actual or prospective mortgagees or purchasers.

20. GUARANTY

20.1 Social Security Number/Address. State the social security or driver's license number and home address of any individual guarantor beneath his or her signature line.

20.2 Guarantor Consents. Tailor the guarantor's consent and waiver boilerplate to reflect the lease circumstances.

20.3 Lease Assignment. If the landlord sells the property, the guaranty should automatically travel to the purchaser.

20.4 Net Worth. Any net worth test or other financial covenant should apply to both the tenant and the guarantor.

20.5 Estoppel Certificate. The guarantor should agree to issue estoppel certificates upon request.

20.6 Springing Guaranty. Consider a springing guaranty if certain adverse events occur.

20.7 Tenant Bankruptcy. The guarantor should acknowledge liability is not limited by bankruptcy rent caps.

20.8 Good Guy Guaranty. Consider a good guy guaranty continuing only until the tenant surrenders the premises vacant and in satisfactory condition.

20.9 Security. Consider securing a lease guaranty obligation with a letter of credit or other security.

21. INABILITY TO PERFORM

21.1 Triggering Event. If the tenant negotiates a force majeure clause, require the tenant to notify the landlord promptly of any force majeure event.

21.2 Exception to Force Majeure. Force majeure should never apply to any monetary obligation.

21.3 Governmental Consents. For the landlord, force majeure should include a failure to obtain governmental consents or permits.

22. INSURANCE

22.1 Additional Insureds. Include the landlord and its managing agent and mortgagee as additional insureds, not named insureds.

22.2 Changed Requirements. Conform the insurance requirements in the lease to those in the landlord's mortgage.

22.3 Business Interruption Insurance. Any rental/business interruption insurance should cover additional rent and percentage rent as well as base rent.

22.4 Evidence of Insurance. Require evidence of insurance at lease signing, not merely a certificate of insurance.

22.5 Landlord Insures. Consider having the landlord insure the tenant's improvements, with the tenant reimbursing the allocable premium.

22.6 Plate Glass Insurance. Require any retail tenant to carry plate glass insurance.

22.7 Insurance Broker. Allow the landlord to deal directly with the tenant's insurance broker to obtain required insurance documents.

22.8 Approval Rights. Allow the landlord to approve the identity and financial condition of the tenant's insurance carriers.

22.9 Waiver of Subrogation. Waiver of subrogation should be mutual and cover all losses caused by any insured risk.

22.10 Tenant's Rights to Proceeds. Make any right of the tenant to receive insurance proceeds subject to the rights of the landlord's mortgagee.

22.11 Tenant Failure to Insure. If the tenant fails to insure and a fire occurs, the tenant should be liable for the entire loss.

22.12 Insurance Advice. Work with the landlord's insurance broker/consultant to check, update, and improve the insurance requirements of the lease.

23. LANDLORD'S ACCESS TO PREMISES

23.1 Emergency Contact. Require the tenant to provide the name and telephone number of an emergency contact.

23.2 Reconfiguration. Reserve for the landlord the right to reconfigure or change the means of access to the premises.

23.3 Notice Requirements. The landlord may enter without notice in an emergency; even absent an emergency, oral notice to someone on site should suffice.

23.4 Keys. The tenant should deliver copies of all keys and access codes to the landlord.

23.5 No Eviction. Make clear that the landlord's entry or inspection is not an actual or constructive eviction.

23.6 Purpose of Access. The landlord should insist on the right to show the premises and post signs.

24. LANDLORD'S LIABILITY

24.1 Exculpation. Limit the landlord's liability to its interest in the property and negate personal liability of related parties.

24.2 Landlord Default. Give the landlord open-ended cure periods for nonmonetary defaults.

24.3 Liability. Liability of the landlord should cease if the landlord transfers its interest in the premises.

24.4 Liability for Prior Owners' Acts. After conveyance, the new owner should not be liable for claims against the former owner.

25. LANDLORD'S REPRESENTATIONS

25.1 Express Not Implied. State that the landlord makes no implied covenants, representations, or warranties.

25.2 Merger. State that any agreements predating the lease merge into the lease.

25.3 Other Leases. State that the landlord makes no representations regarding other tenants or their leases.

26. MAINTENANCE AND REPAIRS

26.1 No Overtime. The landlord has no obligation to do any work at overtime or premium rates.

26.2 Tenant's Obligation. The tenant must maintain and repair parts of the building that exclusively serve the premises.

26.3 Right to Perform. If the tenant's acts or omissions cause damage to another tenant's premises, the landlord can repair them at this tenant's expense.

26.4 Broad Repair Obligations. Where the tenant has broad repair obligations, expressly include ordinary or extraordinary repairs.

26.5 Specify Repair Obligations. Avoid vague distinctions between structural and nonstructural repairs.

26.6 Periodic Upgrades. Consider requiring the tenant to upgrade and renovate every years.

27. OCCUPANCY

27.1 As Is Condition. The tenant should represent and acknowledge that it takes possession in its as is, where is condition.

27.2 No Obligation Except Specific Work. Confirm that the landlord has no obligation to perform any work except as expressly stated.

27.3 Tenant Covenants. The tenant should covenant to file its plans, install its fixtures, and open for business by a certain date.

28. PERCENTAGE RENT AND RADIUS CLAUSE

28.1 Increases. Provide for an increase in percentage rent upon any change of use or change of the tenant.

28.2 Inclusions/Exclusions. For percentage rent purposes, include any catalog or Internet sales that the tenant makes through the store.

28.3 Limit Any Percentage Rent Penalty Period. Restore fixed rent after the landlord solves the problem or limit the percentage-rent-only period.

28.4 Effect of Casualty. If the premises are closed part of the year because of casualty or condemnation, the breakpoint for percentage rent will drop.

28.5 Gross Sales. Define gross sales to include sales by subtenants and concessionaires.

28.6 Fixed Rent Increases. Increase fixed minimum rent periodically over time based on increasing gross sales.

28.7 Audit Right. Let the landlord audit the tenant's gross sales.

28.8 Kick-Out Right. Give the landlord the right to terminate the lease if percentage rent does not reach a certain level by a certain date.

28.9 Recordkeeping. Require the tenant to maintain records sufficient to make any audit meaningful.

28.10 Radius Clause. Include a radius clause in any lease requiring percentage rent.

28.11 Violation. Consider requiring the tenant to include as gross sales the greater of a specified percentage of gross sales at the premises or the gross sales of the tenant's store in the restricted area if it violates the radius clause.

29. QUIET ENJOYMENT

29.1 Conditions. Quiet enjoyment should be subject to the rights of mortgagees, ground lessors, and all other terms of the lease.

29.2 Limit Obligation to Provide Services. Expressly limit the landlord's obligation to provide services to bare occupancy and express obligations under the lease.

30. REAL ESTATE TAXES

30.1 Tax Contests. Prohibit the tenant from contesting taxes without the landlord's consent.

30.2 Business Improvement District Charges and Special Assessments. Include BID charges and special assessments in the definition of Real Estate Taxes.

30.3 Base Year Real Estate Taxes. Define Base Year Real Estate Taxes as net of any special assessments and as finally determined.

30.4 Further Assurances. The tenant should agree to assist the landlord to qualify for tax abatements and benefits.

30.5 Estimated Tax Payments. Require the tenant to make monthly estimated tax payments.

30.6 Management Fee. If the landlord protests real estate taxes, impose an extra management fee.

30.7 Imperiled Abatement. If a tax abatement is challenged, allow the landlord to require the tenant to pay monthly contributions toward incremental taxes.

30.8 Transfer Taxes. Consider possible transfer taxes on the lease.

30.9 Contest Expenses. Have the tenant agree to pay its proportionate share of the cost of the landlord's real estate tax counsel.

31. LANDLORD REMEDIES

31.1 Yellowstone Injunction. Consider whether the landlord can proactively add language to limit the availability and effect of Yellowstone injunctions.

31.2 Default Rate. Require the tenant to pay interest at the default rate on amounts past due even after judgment.

31.3 Interest and Late Charge. Require the tenant to pay interest on late payments in addition to a late charge.

31.4 Waiver of Counterclaims. Require the tenant to waive counterclaims other than compulsory counterclaims.

31.5 Rights of Redemption. Require the tenant to waive any and all rights of redemption under existing or future laws.

31.6 Nonpayment. Allow the landlord to exercise a conditional limitation right and terminate the lease, not merely commence nonpayment proceedings.

31.7 No Mitigation. Provide that the landlord has no obligation to mitigate damages.

31.8 Inducement Repayments. Require the tenant to repay the unamortized balance of the landlord's rent concessions and brokerage commissions in the event of default.

31.9 Right to Cure. Allow the landlord to cure the tenant's defaults and bill the tenant for the landlord's expenses.

31.10 Specific Performance. Try to provide that the landlord can obtain specific performance regarding all nonmonetary covenants.

31.11 Intermediate Remedies. Consider meaningful but not Draconian remedies for minor defaults.

31.12 Abandonment. Define abandonment in the lease to reduce uncertainty.

31.13 All Payments Are Rent. Describe all payments to be made by the tenant as rent to obtain summary dispossess rights for nonpayment.

32. RENT

32.1 Payment. The lease should include an express covenant to pay rent, not merely a schedule of rental amounts.

32.2 Rent Concessions. Give the landlord the right to undo a rent concession if the tenant defaults before fully applying the concession.

32.3 Rent Not Per Square Foot. State rent as a flat amount rather than basing it on square footage.

32.4 Remeasurement. Negate any possible remeasurement of the space or common areas.

32.5 Stock Options. For tenants with IPO potential, consider whether to require or accept stock, options, or warrants.

32.6 Waiver. Require the tenant to waive New York Real Property Law § 232(a) and (c).

32.7 Free Rent. Define the free rent period as ending on a particular date.

32.8 Commercial Rent Control. Consider requiring the tenant to escrow the shortfall amount with the landlord each month during any rent control period.

32.9 Lockbox. Address the risk that the lockbox administrator deposits a check the landlord would have wanted to reject.

33. RULES AND REGULATIONS

33.1 Compliance. Require the tenant to comply strictly with the rules and regulations attached as an exhibit to the lease and any later changes.

33.2 No Liability. If the landlord does not enforce the rules against other tenants, that should impose no liability on the landlord.

33.3 Lease Incorporation. If the rules and regulations contain anything unusually important, move it to the body of the lease.

33.4 Recycling. Consider requiring the tenant to separate its waste.

34. SECURITY

34.1 Segregated Account. Comply with any state-specific requirements regarding how to hold security deposits.

34.2 Letter of Credit. Consider requiring the tenant to deliver a letter of credit in place of a cash security deposit.

34.3 Letter of Credit Requirements. If the tenant delivers a letter of credit, require a New York Clearinghouse bank and other protections.

34.4 Waiver. Require the tenant to waive any damages claim against the landlord for wrongful drawing on the letter of credit.

34.5 Security Deposit Is Additional Rent. State that any security deposit or increase in any security deposit constitutes Additional Rent.

34.6 Replenishment. Require the tenant to replenish promptly the amount of any security that the landlord draws.

34.7 Increased Security. A rent increase should trigger a requirement to post increased security.

34.8 Mortgagee Requirements. Accommodate future mortgagee requirements and allocate resulting costs.

34.9 Lien on Personalty. Consider taking a lien on the tenant's personal property, perfected with a UCC-1 financing statement.

35. SERVICES PROVIDED BY THE LANDLORD

35.1 Additional Services. If the landlord agrees to provide additional electricity or HVAC condenser water, the landlord should still have the sole right to determine how much it needs for other tenants.

35.2 HVAC. Define any HVAC standards as design criteria, not as performance specifications.

35.3 Tenant Complaints. Limit who can complain about any building services.

35.4 Tenant-Provided Services. Prohibit the tenant from providing its own building-related services.

35.5 Changes in Building Operation. Allow the landlord to change how the building operates and the services it provides.

35.6 Early Air-Conditioning. If the landlord provides air-conditioning before the regular season, the landlord may charge for that extra service.

35.7 Specifications. Consider the assumptions that underlie any landlord service specifications.

35.8 Telecommunications/Fiber Optics Cable Provider. Consider requiring the tenant to use the landlord's telecommunications/fiber optics cable provider.

36. SUBORDINATION AND THE LANDLORD'S ESTATE

36.1 Financeability Provisions. Include directly in the lease all mortgagee protections and benefits that an SNDA would typically give.

36.2 SNDA Form. Require the tenant to execute any SNDA form that the landlord's lender requires.

36.3 Expenses. Require the tenant to reimburse the landlord's expenses for delivering any SNDA from the landlord's mortgagee.

36.4 Condominium or Ground Lease. The landlord should retain the right to create a condominium regime or to enter into a ground lease.

36.5 Mortgagee Modifications. Require the tenant to agree to any reasonable modification that a mortgagee requests.

36.6 Mortgagee Right to Subordinate. State that any mortgagee can unilaterally subordinate its mortgage to the lease.

36.7 Lease Subordinate. Make the lease automatically subject and subordinate to the landlord's existing or any future fee mortgage.

37. TENANT'S EQUIPMENT AND INSTALLATIONS

37.1 Electromagnetic Fields. The tenant should agree not to cause any EMF interference.

37.2 Rooftop Equipment. The landlord should control roof rights, including penetration, relocation, and size and weight of rooftop equipment.

37.3 Conduits and Risers. The landlord should control and coordinate use of conduits and risers that run through or adjacent to the premises.

37.4 Signage and Identity. Confirm that the landlord controls all rights to exterior signage and building identity.

37.5 Uniform Elevator Lobbies, Signage, Entrance Doors and Window Shades. Require all tenants to maintain uniformity.

37.6 Supplemental HVAC, Backup Generator and Fuel Tank. The tenant must maintain its equipment in compliance with law and good practices and keep written maintenance records.

38. USE

38.1 Narrow Use. Draft the use clause narrowly and state that the premises may be used for no other use.

38.2 Recapture Right. In a retail lease with an operating covenant, give the landlord a continuous or periodic recapture right if the tenant ceases to operate.

38.3 Odors. If the tenant's operation emits odors, define specific odor mitigation measures.

38.4 Internet. Consider prohibiting in-store advertising promoting the purchase of merchandise over the Internet.

38.5 Single-Store Operation. Require the tenant to use and operate the premises only as a single retail operation.

38.6 Exclusive Uses. Track exclusive uses to avoid conflict.

38.7 Loss of Exclusive. Provide that if the tenant does not use its exclusive use right, the right permanently terminates.

38.8 Covenant of Continuous Operation. Require the tenant to open and stay open during certain prescribed hours with sufficient personnel and inventory.

38.9 Certificate of Occupancy. State that delivery of a certificate of occupancy does not constitute a representation or warranty of permitted use.

38.10 Cotenancy. Provide flexibility in cotenancy requirements and terminate them at some point.

39. VAULT SPACE

39.1 Use and Occupancy. If the tenant uses vault space, require the tenant to maintain, repair, and pay any municipal fees imposed from time to time.

39.2 Diminution. State that any reduction of vault space does not entitle the tenant to any rights.

39.3 Recapture Right. Give the landlord the right to recapture any vault area if a utility or governmental authority needs the space.

40. MISCELLANEOUS

40.1 Continued Status. The tenant should agree to update its representations and warranties from time to time and to maintain good standing throughout the lease term.

40.2 Survival. The tenant's obligations and liabilities under the lease should survive expiration or sooner termination.

40.3 Independence of Covenants; No Termination Right. Require the tenant to acknowledge that all covenants are independent.

40.4 Diplomatic Immunity. If applicable, obtain the tenant's waiver of diplomatic immunity.

40.5 Tenant's SEC Filing. A publicly held tenant whose lease is a material obligation must file a copy of the lease with its SEC filing.

40.6 Undesirable Elements. Make the tenant responsible for any undesirables that the tenant attracts.

40.7 Confidentiality. Require the tenant to keep the terms of the lease confidential.

40.8 Arbitration. If the tenant has the right to arbitrate disputes, condition this right on no rent default.

40.9 Interpretation. Say once that include means without limitation.

40.10 Concessions. Condition any special right or privilege on minimum occupancy, no default, or other criteria as appropriate.

40.11 Marked Leases. When preparing final lease documents for signature, mark them against the landlord's standard form.

40.12 Resale. Prohibit the tenant from reselling utility or service capacity to other tenants.

41. DUE DILIGENCE

41.1 Credit. Perform a credit check and UCC search for the entity that will be the tenant under the lease.

41.2 Financial Statements. Examine the tenant's and the guarantor's financial statements.

41.3 References. Obtain references for the tenant and its principals.

41.4 Tenant Representations. Obtain representations and warranties regarding the ownership structure of the tenant.

41.5 Identities of Tenant and Guarantor. Determine the entity on the lease, and the identity of any guarantor and stock ownership.

42. OTHER DOCUMENTS

42.1 Good Standing and Organizational Documents. Obtain and review the tenant's good standing certificate and organizational documents.

42.2 Entity Documents. Obtain certified copies of filed charters and the like to confirm exact names.

42.3 Opinion of Counsel. For a major lease, consider obtaining an opinion of counsel about the tenant's due authorization, execution, and delivery of the lease.

42.4 SEC Filings. If the tenant is publicly held, review prior SEC filings.

42.5 Brokerage. Consider the effect of a possible tenant default on the landlord's liability for unpaid brokerage commissions.

42.6 UCC-1 Financing Statement. The landlord should file a UCC financing statement if the landlord obtains a security interest in the tenant's personal property.

42.7 Memorandum of Lease and Release. If the lease requires the landlord to sign a memorandum of lease, also obtain a release of memorandum of lease.

42.8 Guaranty. Obtain a guaranty executed by the correct guarantor.

42.9 Letter of Credit. Review the letter of credit form in advance and obtain lender sign-off as needed.

42.10 Certificate of Insurance. Have an insurance consultant review the tenant's insurance certificate and underlying coverage.

42.11 Taxpayer Identification Number; W-9 Form. Require the tenant's taxpayer identification number under the tenant's signature.

43. POST-CLOSING; MONITORING

Note: The following suggestions on lease administration and enforcement are not intended as a complete guide.

43.1 Insurance. Monitor expiration dates of insurance and update coverage limits as markets change.

43.2 Delivery of Premises. Issue formal notice and confirmation of delivery of the premises.

43.3 Future Deliveries. Remember to ask for future documents such as financial statements and estoppel certificates.

43.4 Future Events. Memorialize any exercise of an option, delivery of additional space, and the resulting rent adjustments.

43.5 Alteration Consents. Remember to exercise any right to require restoration when appropriate.

43.6 Preemptive Rights. Remember to give the tenant notices under the right of first refusal and other preemptive rights.

43.7 Letters of Credit. Monitor expiration dates and draw at the earliest possible opportunity if necessary.

43.8 Tickler Reminders. If the tenant persuaded the landlord to remind it of certain matters, establish appropriate reminders in the calendar.

43.9 Future Amendments. If the landlord and tenant amend the lease, the landlord may want to obtain guarantor consent and amend any recorded memorandum of lease.

43.10 Abandonment. If the tenant appears to have moved out, consider sending an estoppel notice before taking control of the premises.

43.11 Change of Address. If the landlord relocates, it should send a formal notice of change of address to the tenant.

43.12 Estoppels. The landlord may wish to request periodic estoppel certificates and include reliance language.

43.13 Advice and Administration Memo. The landlord may desire a memorandum summarizing important provisions of the lease and advising on actions to avoid disputes.

Additional Notes: