KEY LEASING ISSUES A Tenant's Perspective Andy Jacobson Maslon LLP March 7, 2017
TERMINOLOGY & STATE LAW "Standard" Leases? Elements of Real Estate Law are State and Local Specific Terms of Art v. Legal Terms Gross Lease Triple Net Lease Vanilla Shell Pro Rata Share / Gross Up
FUNDAMENTAL OBJECTIVES Landlord Project Control & Net Operating Income Economics (Net Effective Rent & NOI) Ability to Sell and Finance Control Use (Tenant Mix / Operating Covenants) Recourse & Credit Enhancement Limit Liability
FUNDAMENTAL OBJECTIVES Tenant Flexibility & Cost / Risk Control Stable Economics (Emulate Gross Rent) Flexibility of Use Obligations (v. Costs) Transfer Rights (Assignment and Subletting) Limit Liability
Rent Base Rent TI Allowance / Free Rent Adjustments (CPI / Set Escalator / FMRV) Percentage Rent CAM / Operating Expenses Real Estate Taxes and Assessments Insurance Costs Tenant's Pro Rata Share
Premises Precise Space / Substitution Leasable Area (USF/RSF) Remeasurement Parking Rights & Key Common Areas Relocation
Term Contingencies Delivery & Outside Delivery Date Term Commencement v. Rent Commencement Partial Lease Years & Partial Calendar Months
Improvements & TI Allowance Landlord's Work v. Tenant's Work Amount and Timing of TI Allowance Landlord Control and Oversight Fees Nonpayment of TI Allowance Impact of TI Allowance on Extension Rent
Repairs & Maintenance Scope of Obligations Capital / Structural Items Compliance with Laws Hazardous Materials Surrender & Deconstruction
Transfers by Tenant Types of Potential Transfers Assignment Sublease License / Concession Change of Control Consent Standard Reasonable Prior? Landlord Safe Harbors
Transfers by Tenant Expressly Permitted Transfers Parent / Subsidiary / Affiliates Mergers & Spinoffs Sale of Assets Sale or Transfer of Stock Recapture Bonus Rent / Consideration Landlord Fees and Timing
Defaults & Remedies Categories of Tenant Default Notice and Cure Periods Softening Remedies No Self Help Rent Acceleration Mitigation Landlord Liens Recapture of Inducements
Defaults & Remedies Guarantees Hard Cap Burn Off / Burn Down Sunset Defenses of Tenant Landlord Defaults Notice and Cure Periods Limitations on Tenant Remedies Limitations on Landlord Liability Lender Rights
Special Rights Renewal / Extension Expansion / Contraction Exclusive Use Rights Early Termination Purchase Option Additional TI Allowance Note: Beware of conditions placed on special rights or special rights that are "personal" to the original tenant.
SUBLEASING ISSUES Tenant/Sublandlord Perspective Maximize Flow Down from Lease Landlord Consent Coordinate Sublease and Lease Defaults Existence of Sublease Linked to Lease Included FF&E
SUBLEASING ISSUES Subtenant Perspective Limit Flow Through from Lease Gross Rent Necessary Consents from Landlord and Lender Nondisturbance Protection from Landlord Right to Pursue Landlord
ESTOPPEL CERTIFICATES A Tenant's Perspective Factual Snapshot Unilateral Document Who Can Rely? Knowledge Standard Inconsistencies with Lease Accommodating Landlord
SUBORDINATION (SNDAs) A Tenant's Perspective Address Tenant's Obligations in Lease Overreach by Lenders / Shift of Risk Lender Notice and Cure Rights Lender Consent and Approval Rights
ANDY JACOBSON andy.jacobson@maslon.com p 612.672.8333 ANDREW N. JACOBSON is a partner in Maslon's Real Estate Group. His practice covers a broad range of commercial real estate issues, with a particular focus in commercial and retail/restaurant leasing, land use, telecommunications as well as design and construction-related agreements. Andy is also a licensed architect and practiced as such prior to attending law school. He is a frequent author and speaker on real estate subjects and teaches Real Estate Transactions at the University of St. Thomas School of Law.