Become an Expert Lease Negotiator

Understanding the needs and concerns of all interested parties is the only way to effectively facilitate and complete lease negotiations. Key to this understanding is knowing who are the “interested parties.” The landlord and tenant are the obvious interested parties, but that is only the beginning of the story. In the background there often is a lender whose approval is required in order to complete the lease transaction, and sometimes there may be more than one lender if the landlord has placed subordinate or mezzanine financing on the property.

For example, the typical lease paragraph identifying the parties sets forth the names, addresses, and types of entities of each party to the lease. It also serves to identify the particular entity that is the landlord. The landlord wants to ensure that the lease lists the proper legal entity as tenant and tenant’s state of organization in the event landlord must sue tenant to collect rent, enforce tenant’s obligations under the lease, or evict tenant. The tenant, on the other hand, wants to ensure that the lease lists the proper legal entity as landlord and landlord’s state of organization in the event tenant must sue landlord to enforce landlord’s obligations under the lease. Further, the lender wants to make sure that the landlord described in the lease and lender’s borrower are the same entity, or that the borrower is a successor in interest to the stated landlord. A lender is also interested in the name of the tenant obligor under the lease for purposes of underwriting the credit of that particular tenant. Additionally, lender will request that the lease be assigned to the lender as additional collateral for the mortgage loan. An “Assignment of Leases and Rents” will be recorded on the land records and tenant may be asked to acknowledge the existence of this document.

Information should be verified as correct and complete. It is important to specify the type of entity and state of organization for both landlord and tenant so that appropriate service of process and credit information can be obtained.

More information about the book The Lease Manual: A Practical Guide to Negotiating Office, Retail, and Industrial Leases

Related CLE

In addition to examining the attorney’s role in lease agreements, our interactive online course Title Transfer & Title Insurance—Part 1: Conveyancing & Title Commitment provides a comprehensive review of real property tenets in title conveyancing and insurance in an engaging and substantive format. This is the first in a continuing three-part series.

By Janice Carpi
ABA Center for Continuing Legal Education, ABA Section of Real Property, Probate and Trust Law

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