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For most landlords, the procedure is routine. A broker calls with a potential tenant, the landlord does some due diligence and sends over its fine-tuned landlord-drafted lease, the parties negotiate and the lease is signed with some modest modifications. When a national retail or service company comes calling, however, the rules of the game can change, especially if the landlord lacks a similar national presence. A national tenant brings with it instant name recognition, some degree of income stability, and the prospect of increased foot traffic for the landlord’s other tenants, as customers who might not otherwise bother to cross the street find themselves drawn to the store selling that familiar pair of khakis or offering a latte from heaven. Many landlords may find themselves unwilling or without the financial resources to turn away such a tenant, even one who essentially wants to play by its own rules.

Unfortunately, along with these potential benefits, a national tenant also brings with it a tenant-drafted and tenant-slanted lease. If the decision is made to work with the tenant’s lease, careful reading and creativity are required. The explicitly pro-tenant sections are usually easy to spot, but hard to delete. The following are examples of a few of the more common pro-landlord provisions.

A tenant may expect a multitude of landlord representations and warranties about the condition of the premises, ADA compliance and environmental conditions on not just the premises but the building, the property and sometimes neighboring property. For ADA compliance, a landlord should limit any representation and landlord responsibility to the date of the lease, or the landlord may be liable for a subsequent change in the law. A landlord should limit representations concerning environmental conditions to “landlord’s actual knowledge” and to those conditions existing “since landlord has owned the property.” A landlord should only agree to address any contamination “as and to the extent required by law,” so that a tenant is not in a position to demand, for instance, asbestos removal when encapsulation may be both practically and legally sufficient.

A landlord should be sure that the indemnification provisions are mutual, that the insurance clauses include waivers of subrogation, and that the landlord can pass on to the tenant any increases in the landlord’s insurance premiums resulting from tenant’s use of the premises. Because the lease will probably require the landlord to make certain repairs, make sure the lease allows the landlord to erect scaffolding and obstruct signs or entrances for a reasonable period without any rent abatement. Eliminate, or negotiate down, any tenant self-help clauses which provide for a surcharge on the costs of repair performed by the tenant. Compare the continued on page 6 tenant default provisions in the lease to those in the typical landlord’s lease, and try to re-insert the ones found to be absent. Beware of the use clause which includes “or any other lawful use,” especially if the tenant demands the right to assign or sublet without landlord’s consent.

Harder to spot are those pro-tenant aspects of the lease resulting from the absence of certain common provisions. Re-insert the late rent fee, and if the tenant balks, suggest a cure period or require written notice. No notice or cure period, however, should be required for the second late payment in a calendar year. If the landlord is preparing the space, make sure the tenant must accept the premises within a specific period once the landlord is finished with the work. If the tenant demands a penalty provision for late delivery of the premises, be sure the deadline can be met, and include a force majeure provision.

With respect to the lease termination, be sure to insert a holdover provision with an additional rent penalty if the tenant is not out of the space by the end of the term. A landlord should have the option of requiring a tenant to remove its improvements at lease expiration, and to repair at tenant’s cost any damage caused by such removal. In a multi-tenant retail center be sure the lease allows the landlord to recapture the premises if the space goes dark, even if the tenant wants to continue to pay rent. Since the lease will probably include provisions about landlord default, limit the landlord’s liability to its interest in the property. And finally, make sure the entity signing the lease is actually the large national company you expect and not a shell with few or no assets.

Although it is unlikely that landlords will be able to completely re-work a national tenant’s lease to the point where it is pro-landlord, keeping key negotiating provisions in mind should help landlords minimize the risks inherent in reaping the benefits of leasing to a national tenant.