Learn To Love Your Lease

Learn to love your lease, said no one, ever. Yet, if you’re in this industry long enough (the industry being real estate, not education, medicine or engineering, so if you’re looking for those areas … Google has led you astray) your lease will either sink your ship, or save it.

In simple terms, your lease is your agreement between you (the lessor, who is the owner, landlord, head honcho), and your lessee, who is your tenant or resident.  Read this carefully; your lease is a legally binding commitment between lessor and lessee. Right off the bat, know the lease is vastly different from a month-to-month agreement. If you enter into a month-to-month agreement, you can cut and run, as can your tenant, typically with a 30-day notice. With a lease, you are tied to one another for the term of your lease unless the courts break you apart, or you negotiate a pre-term ending. And understand, breaking up, just as in human relationships, is hard to do.

Here is our number one piece of advice here at WT.  Do not borrow a lease from another property owner/friend and use it as yours.  Our second piece of advice? Do not Google ‘Lease’ and print off the document you find.  Take a few of those hard earned dollars out of your pocket and go to your real estate attorney and ask that person to draft you a lease document in which you can self-edit  changeable elements, such as names, dates, rates. After complete, put a reminder in your calendar to review annually.  Prior to heading to Jane T Law’s office, here are a few things to consider:

·       Is your lease for a commercial property or residential?  Do not assume you can use these lease documents interchangeably. You cannot. Do not even try.

·       When a lessee leases your property, what do they receive along with space to occupy?  This is where I ask developer clients to take note.  Developers often do not like to think about their lease, because in their mind, they are on to the next project when a building’s tenants are signing leases. But stay with me here ...  Do you want your tenants to pay for all those utilities in which you are convinced they are wasting? If so, when the property is in its design phase, the developer must make sure the infrastructure is in place to allow assumably wasteful tenants to pay for their own utilities, i.e. separate metering. Other things to think about are those items that can be impactful to your operational expense and income categories. In addition to utilities …  Pet fees? Needs to be in the lease.  No free parking? Put it in the lease.  Charges in the rare case rent is paid late.  You’ve got it … put it in the lease.

·       How detailed do you want your lease to be? This is an excellent discussion with your attorney, and with yourself.  The lease is a two-way street.  If the lease is, shall we say minimalist because that’s how you operate, well that’s fine. But understand that the minimalist approach may mean that a tenant’s idea of ‘in good repair’ may mean very different things to landlord  and without further detail in a lease, you’re probably out of luck enforcing your standard.  Like everything in real estate, consider your risk tolerance.

If things turn sour, what is your out?  Maybe that is nothing, and there is not an ‘out’ unless ordered by a judge.  But maybe it’s an opportunity to get out by way of some type of fee or other alternative? Sort of like a pre-nup.

WT has seen a lot of pages with big legal words when it comes to leases. This post is not a comprehensive look at leases. It is meant to be a reminder that as (yawn) boring as the lease may seem, it is a critical document for developers, owners, and managers.  So, set aside some time and READ YOUR LEASE, and call a meeting to review it with a qualified real estate attorney (not your divorce, personal injury, or any other attorney).

If you’ve got questions on your leases, we here at WT have answers.  Touch base anytime!

WT