The Unsuspecting Tenant: How To Avoid Being Trapped By Your Landlord
Avoiding harmful lease language
by Darren Fleming
Every year, unsuspecting tenants fall prey to the use of overreaching lease terms, employed by savvy landlords. Often, these terms trap tenants, robbing them of the ability to capture competitive rates in subsequent leases.
While many of these clauses appear to be reasonable on their face, personal experience reveals the devastating effects of their employment. It is our responsibility, as Tenant Advisors, to ensure that our clients are aware of these lease traps, so that they can avoid the high costs associated with their inclusion. Clauses of concern include:
- The obligation to use the landlord’s contractors.
- The requirement to restore the leased premises at the end of the term.
- The Landlord’s right to charge supervision fees on the tenant’s leasehold improvements.
Used together, these clauses can have devastating consequences. To better understand how these innocuous terms can render a tenant powerless in subsequent negotiations, consider the following landlord/tenant conversation:
| Landlord: | Your Lease is coming up for renewal in a few months and we’d like to talk about your staying on. By the way the market has changed and we are going to be looking at a stiff rent increase. |
| Tenant: | Well, I guess we’ll be leaving you. |
| Landlord: | That’s unfortunate but not unexpected. Just make sure you put the place back the way it was when you first leased it from us ten years ago. (Restoration Obligation) |
| Tenant: | Huh? What are you talking about? |
| Landlord: | You know, you have to rip all the walls and doors down, fix the ceiling and tear up the carpets? |
| Tenant: | What?! |
| Landlord: | We’ll be sending our project manager down next week to look at the space, in order to budget for the cost of the demolition. (Obligation to use the Landlord’s Contractor). |
| Tenant: | You mean Gerry? His prices are always so high! I’ll get my own price…. thank you very much. |
| Landlord: | Sorry but you don’t have the right to do that. You might want to read your lease. You can find the relevant terms on page 47, paragraph 11, part b, section iiix. |
| Tenant: | Huh? |
| Landlord: | Don’t worry. Our fees are very reasonable. In fact, I think that we can get this done for about $70,000. |
| Tenant: | But based on our figures, it should cost approximately $60,000? |
| Landlord: | Yes, but your figure doesn’t include the supervision charges. That’s an extra 15%. (Supervision of construction) |
| Tenant: | But he’s your employee! Why do I need to pay for you to supervise him? |
| Landlord: | Did I mention you should really read your lease? |
| Tenant: | You’ve got to be kidding me. $70,000 is almost half a year’s rent! I can’t afford that. At that rate, I can’t afford to move out. |
| Landlord: | I had a feeling you might say that. Now about that rent increase… |
Used together, these seemingly reasonable clauses can provide an overwhelming obstacle to a cost effective relocation or renewal negotiations. Tenant advisors play a key role in identifying overreaching lease clauses and ensure that tenants are not stripped of future negotiating leverage.
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