Amerx Health Care Corporation's Commercial Lease

Contract Teardown

Commercial leases are one of the most common contracts businesses encounter. But how does the average business owner protect themselves from the terms of a landlord-friendly lease? Florida attorney and adjunct law professor Arthur Baker tears down a commercial lease to a medical supply company and explains what terms to watch for and how to even the playing field for your lessee client.

Questions in this Episode:

  1. What should you look for in a Use of Premises section?
  2. Where do you use the “ancillary use” clause?
  3. Who checks for proper zoning?
  4. How do you avoid an environmental liability?
  5. Who pays the broker?

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Landlord-Friendly Commercial Lease

While some issues are specific to healthcare in this contract, most terms are standard, landlord-friendly clauses. Understanding how to recognize and negotiate them will help you even the playing field for your lessee client.

Most lessees are not giant companies that need a million square feet of an office building and a couple of stories or a massive warehouse. They are companies and businesses with more traditional needs, like 10,000 square feet, an extra suite, and some framework. Many smaller companies believe they don’t have much negotiating leverage against larger landlords. (And they may not.)

“Get some wins and some high-ROI returns…address some risks and make sure what they’re paying is what they wanted.” Arthur Baker

Because of that, business owners often don’t have a professional review the document for them. Nor do they thoughtfully analyze the lease and ask relevant questions, like: Does this lease really work for my purposes? Should I be paying money for it? Does it make sense?

Use of Premises – What You Can and Can’t Do With the Space

The Use of Premises section describes what the tenant can, and sometimes more importantly what they cannot, do under the lease. As a tenant, your client needs to think about this clause in a few different ways.

First, how is the landlord limiting your client’s use of the space under this lease? Also, how else might your client’s use be restricted by zoning or other factors?

In Section 3, the landlord limits the use by describing the place as being leased for the purposes of a “medical supply business.” But this vague description might lead to future problems.

You can’t tell if the space is being used to manufacture prosthetic limbs or to make surgical gauze. You don’t know if there is heavy machinery involved or if it is for a headquarters for the staff. You don’t know if there is an office space as a lease component.

"In short, you can only use the premises for what [the landlord] said in the first sentence." Arthur Baker

That use limitation gets a bit more complicated with the last sentence in Section 3.1 that states the premises may be used for “other lawful purposes reasonably similar” to the operation. But you must get permission from the landlord first, and the landlord may withhold approval under their absolute and sole discretion.

Landlords Want Restrictive Use Language – Tenants Want it Broad

So why doesn’t the Use of Premises sections simply specify “any lawful businesses?” For example, why does this lease have an industry-specific Use of Premises section?

Landlords insert this restrictive language to gain greater control and advantage over the tenant.

"They [the landlord] have a reasonable framework of not wanting you to have a Ringling Brother Circus or a tattoo shop or a pornography store, everything that may not necessarily jive with some of the other tenants or their goals for the property." Arthur Baker

While the landlord has the right to control the mix of businesses they lease to, defining an overly restrive use can be bad for the tenants. Lessees want and often need broader terms than those stated in the restrictive lease.

As a contract drafter, it helps to talk to your client and find out their actual plans to use the property and their current and future needs. For example, are they making prosthetics legs on-site? Are there needed storage components? Do they need a truck docking component? Will they need future office space? Will they need to sublet the property or assign the lease? Find out their plans and put the protective language in the lease.

"Ancillary uses - we shouldn't have to be coming back to the landlord to ask 'May we add a break room for the workers?', as long as it's within the confines of the building and consistent with zoning and all those other items." Arthur Baker

One important drafting strategy is to add the phrase “and ancillary uses.”

By adding the term “ancillary uses” you give your client the freedom to expand the use of premises, for similar activities, without having to constantly get the landlord’s approval.

Restrictive Use of Premises Limits Subleasing Options

Real estate can be a significant capital expense for many businesses, even smaller leases like this one. But over the past two Covid years, companies learned that things change and the unforeseen can happen.

Your client’s well-planned goals may not happen, and their business may need to go in a different direction. Your client may be manufacturing gauze and supplies and decide to pivot and make prosthetic limbs. Or, your client may have too much space and decide to sublease to a sporting goods manufacturer to help cut down on fixed costs.

But, this is when your landlord’s restrictive Use of Premises clauses can complicate things.

Assume you have a friend who, manufactures sporting goods, agrees to the lease assignment, then discovers the only use allowed under the lease is for a medical supply business. The assignment won’t go through. Your landlord’s restrictive language traps you in a lease you don’t want and cannot assign.

Do the Premises Work For Your Client?

The second sentence of Section 3.1 states that you inspected the property and find it acceptable, subject to completion of the Lessor’s work. But this is only half the battle.

Even if your client agrees that the property passes inspection, other factors exist. If zoning does not allow your client’s particular business, your client is prohibited from doing that business there.

And the configuration of the building might not suit your client. If they have a high volume of manufactured items and need an easily accessible loading dock, is there one available? What are the logistics and framework for access to the property? These are questions that your client needs to  answer before signing the lease.

It’s crucial, especially on these smaller leases where the landlord might not be willing to listen to too many negotiable points, for your client to do proper diligence to make sure the building works for their situation.

"You don't need the landlord to rep that the building is zoned for XYZ if we feel confident, and the tenant works with an attorney like myself and others, in the assessment or other framework." Arthur Baker

Typically you want a representation and warranty from the landlord that they will not rezone the property while your client is there. Or make any changes that would inhibit or make your client’s use of the property illegal.

In addition to the landlord’s representation and warranty that they won’t change or rezone the property, you also want the same protection that the space is suitable for your client’s use as of the commencement date.

Completion of the Lessor’s Work

You accept the premises conditioned upon the completion of the lessor’s work. But in this case, there are not many references to the lessor’s work, which can be problematic.

Typically in a warehouse or distribution building, you might have shelving that is being installed, or maybe they are building a loading dock for you.

If you have a January signing date and a May occupation date, like this lease, you should have a detailed list of what will be built for your client and when it will be completed and ready for inspection. 

This lease has a buildout payment but does not address what the tenant needs to know, namely, the quality of the buildout and when it will be finished. And, if the buildout is not done on time, there are no real ramifications against the landlord.

"Usually, it is helpful to have some back-end walk away time period or some right to recoup that payment. But when you look at this, it really doesn't provide much detail on that." Arthur Baker

And currently, the market works against the tenant because the supply of industrial and warehouse space is in high demand but low supply.

If your client is in desperate need to expand their space, they may not want to wait three months for a delayed buildout of six months or a year, and you should have some protective language if the buildout is late, delayed, or not completed.

Beware of Hazardous Material Liability

Hidden environmental liabilities are another primary concern when leasing industrial or warehouse space. A typical example might be a dry cleaner, with dangerous chemicals and solvents, as the previous tenant or a neighboring tenant. 

The environmental impact and clean-up cost for some environmental issues can be astronomical, with a ballpark estimate of up to $500,000, depending upon when the remediation is identified.

Unsurprisingly, these issues are often discovered years after they begin. And, the deeper these chemicals seep into the earth, the more expensive the clean-up will be.

A careful review of the lease can protect your client from being on the hook for this significant liability. It is reasonable for the landlord to represent no hazardous material or contamination as of the commencement date. And there should be a carve out of the indemnification terms protecting the tenant from liability for contamination that happened before they moved in.

Who Pays the Broker?

Brokers often bring the buyer or lessee in a real estate deal and earn a commission or fee. This is a Florida lease, and typically in Florida, the landlord is responsible for paying the commission unless the lease states otherwise.

Tenant brokers are usually good at making sure they are recognized and paid for their services.

"It's important that everyone is taken care of, and there's no surprise where the tenant's broker gets stiffed, or there are claims coming from other brokers." Arthur Baker

But in today’s low supply market, it is not uncommon for many tenants to be bidding on a space. And, if a broker brings a ready, willing, and able buyer or lessee in Florida, they may have earned their fee even if that deal does not close.

You don’t want a claim from another broker stating they are due a commission or finder’s fee. Make sure the lease language addresses every broker that needs to be paid, and protects your client for any unknown future claim for a broker’s commission or finder’s fee.

Use Thoughtful Drafting to Reduce Risk

There are certainly tenant protections and needed clarifications that are not included in this lease. But, we don’t know the specifics of the negotiations. Did the tenant get a great below-market rate? Can they make up money on the back-end or an adjacent unit lease? We don’t know what terms the tenant might have given up in the negotiations. 

But, there are often many tenant protections left out on smaller leases like this one. The lawyer’s goal is to help the tenants make an informed decision. 

For example, if the landlord won’t negotiate on any significant points or make any reps or warranties, then maybe it’s worth spending $2,500 on an Environmental Phase 1 assessment to make sure there are no major looming environmental liabilities. Then the client can make a risk assessment.

"Typical tenant leases can be fifty, sixty, seventy pages, and are very long complicated documents that most tenants don't read in full detail as well as they should." Arthur Baker

We found out from Covid that when everyone’s making money and doing well, everyone is happy. But when things get tight, or you have to pivot your business plans, you better have your protections spelled out and in writing in the lease.

And in the low supply warehouse and industrial space market, the landlord knows they can quickly lease the space to another tenant, probably at a higher rate. The best way to improve future negotiations with your client’s landlord is to have as much tenant lease protection in place as possible from the beginning.

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Show Notes

THE CONTRACT: Amerx Commercial Real Estate Lease

THE GUEST: Arthur Baker is a commercial real estate and business law attorney in Florida. He helps business and property owners efficiently navigate real estate and business issues. His specialties include commercial leasing with a focus on tenant representation, land use and development, and drafting and negotiating contracts. He can be found on LinkedIn.

THE HOST: Mike Whelan is the author of Lawyer Forward: Finding Your Place in the Future of Law and host of the Lawyer Forward community. Learn more about his work for attorneys at www.lawyerforward.com.

If you are interested in being a guest on Contract Teardown, please email us at community@lawinsider.com.

Transcript

Arthur Baker [00:00:00] Get some wins and high ROI return edits to address some risk and make sure that what they’re paying is what they wanted.

Intro Voice [00:00:06] Welcome to the Contract Teardown show from Law Insider, where legal experts tear down contracts from some of the most well-known companies and high profile executives around the world.

Mike Whelan [00:00:19] In this episode, Florida Attorney Arthur Baker turns down a standard corporate lease agreement from Amerx Health Care Corporation. Arthur points out where a corporate tenant has leverage in these standard agreements and the due diligence needed to make sure your client’s use of the space complies. So let’s tear it down.

Mike Whelan [00:00:38] Hey, everybody, welcome back to the Contract Teardown show from Law Insider. I’m Mike Whelen. The purpose of this show is exactly what it sounds like. We take contracts and we beat them up. We’re mean to them? Occasionally nice, but not often because that’s not as funny. I hang out with smart friends like Arthur Baker here, Arthur, how are you today?

Arthur Baker [00:00:57] I’m fantastic. Thanks for having me.

Mike Whelan [00:00:59] I am excited. I mean, let’s excited is over overselling it to. I am interested in this subject that we’re talking about because we are talking about a document that I feel like probably comes up a lot for attorneys that are sort of doing general practice. See things for their clients, and it’s this I’ll share it with you guys. This is a standard lease agreement. We’re pulling this one from Law Insider. This is from a health care corporation, so there are some things that are specific to this. But before we dig into it, Arthur, what is this document? When our lawyers going to see this thing?

Arthur Baker [00:01:34] Yeah. Well, thanks, Mike. So it’s not every day and not every company that needs a million square feet of an office building, a couple of stories or a giant warehouse. But there are a lot of companies and businesses that need 10000 square feet, an extra suite and some framework. And a lot of times they don’t think they have much negotiation leverage and they may not. But because of that, a lot of times they don’t have anybody take a look at the lease or really thoughtfully think through. Does this lease really work for why I’m signing it? Should I be paying money for it as this makes sense? So I want to take a look at this, go through a few items that I think are real, practical tips to help businesses that are looking at smaller leases get some wins and high ROI return edits to address some risks and make sure that what they’re paying is what they wanted.

Mike Whelan [00:02:23] Cool. All right. Well, before we do that, tell the people at home about yourself, what’s your background? What brings you to documents like this?

Arthur Baker [00:02:31] Yeah, thanks. So I am the managing attorney and president at Concord Advantage Legal. We do a lot of general counsel services and commercial real estate transactions. I do a lot of these tenant rep office leases for clients, primarily throughout Florida. And then my general counsel services. I help a lot of businesses of all shapes and sizes work on their workflows, process building compliance and day to day transactions. I also teach at the University of Miami School of Law Transactional Skills course, helping students learn some day to day practical contract, tear down, reviewing and helping clients get value for the services.

Mike Whelan [00:03:11] Cash going to that law school, as an aside, was the last pre-pandemic conference that I went to. I went to something for the Miami Dade Bar and spoke at it with our friend Jane, who is the president now at the bar there. I think anyway, it was wild because, you know, they were all handing out waters like the workers. They were handing out the waters, but you couldn’t touch the doorknobs. There was this. It was it was madness. That was the last pre-pandemic thing that I’m very I’ve been stuck at home for a long time. I’m very lonely. But fortunately, we have the power of video. You see that pivot from my bad therapy session and we can talk to each other about documents like this. So what we are going to do is run through this lease agreement. I don’t know how standard this is. We’ll talk about that, but I want to start. You are there in three one under three talks about the use of the premises. There’s a lot to unpack in three one. Talk to us about that section.

Arthur Baker [00:04:10] Right. So look at section three, they address a lot of the different components of the use of the premises, and when you’re a tenant, you want to think of it in a couple of different ways. First, thinking of how is the landlord limiting my use under this lease? And then also thinking through how else my use might be limited from zoning or other sort of framework. So starting with the landlords letting you use, you can see in the first sentence of three one that describes the premises being leased for the purposes therein of a medical supply business. Not. Pretty vague. Do you know what a medical supply business is?

Mike Whelan [00:04:49] My could be. I mean, I’ve seen Breaking Bad. It could be something. It could be a drug dealership for all I know it,

Arthur Baker [00:04:55] it could be. And so we don’t really know. I’m just an optical view here. Are they making and molding prosthetic limbs? Is it a supply framework of a bunch of gauze? Is there heavy manufacturing that goes into it if there’s headquarter employees or other staff there? Is there any office space? There’s a component of it. We don’t really know, and that use limitation can be a little compounded complication. When you look at the end of that second sentence of three one where it talks about the less you may upon the express written consent of lessor, which may be withheld unless there’s absolute discretion. Yada yada yada uses for other purposes, reasonably similar to the aforesaid operation. So in short, what it’s saying is you can only use the premises for what I said in the first sentence. And even for reasonably similar items, you have to get my approval, which can be withheld. My sole discretion.

Mike Whelan [00:06:01] Yeah. I mean, I would assume this is a debated point, like if you’re if you’re whether you’re the drafter or the other side of this, would you prefer this is like specificity that isn’t right. It’s almost the illusion of specificity, would you? Do you think it’s better practice to have, like you can operate any profitable business with an office environment or whatever? Like why do this industry specific thing? Who does that advantage?

Arthur Baker [00:06:27] Oh, unsurprisingly, it’s the landlord’s advantage, and I represent a lot of tenants. And prior to optimal office, I was in house for a global real estate services company where we had a lot of tenant rep brokers. So I’m very passionate for my tenants and tenant brokers. So unsurprisingly, the landlords form is very narrow. They they have a reasonable framework of not wanting you to have a Ringling Brothers circus or a tattoo shop or a pornography store, everything that may not nearly as easily jive with some of the other tenants of their goal for the property. But having an overly restrictive uses it again. Medical supply business If it was a the office framework for that business, the lease doesn’t expressly allow that. And I think those landlords base form goes a little bit more overbroad. So from a tenants perspective, obviously, you want to have very broad uses. A typical edit that I would typically do is try and describe and talk to my client of What are you really doing? Are you making prosthetic legs or is there a lot of storage components here? Is there back office? And I like to have that description. And then uncleared and ancillary uses so ancillary issues, we shouldn’t have to be coming back the landlord to maybe add a break room for the workers as long as it’s within the confines of the building, consistent with zoning and all those other items. So yeah,

Mike Whelan [00:07:57] well, and I know there is a connection to 12:1, like, what’s the relationship between this one and 12:1 and when you start subleasing,

Arthur Baker [00:08:05] right? So thinking about it, yeah, real estate can be a large capital expense for a lot of businesses. Even in some small places like this, you may have your business going a different direction. You may currently be a manufacturing, gauze and supplies, but you may pivot into making those prosthetic limbs that gets a little more complicated. You may have too much space initially, and you want to sublease to a sporting goods manufacturer a contact that you have to help save on some of the costs. Or you may just want to sign the lease entirely because maybe you’re moving to a different location or some other framework. And because these are private rights that go with the parties, the agreement you assign this agreement to your sporting goods manufacturing brand, but the use was still limited to medical supplies. That would be a little problematic for your sporting goods. Brand may not be a friend much of a after him getting that lease right?

Mike Whelan [00:09:03] Yeah. So, you know, the difference in the language of in those two sections is a bit confusing. You know, you had mentioned that this is all part of this question of is the landlord, you know, limiting your use. But but you mentioned in preparation that there’s the second question here of are you doing what’s required to make sure that the premises are good for you? So talk to me about that sort of that question and what three, one and three to the guidance that gives in terms of your use as the tenant.

Arthur Baker [00:09:32] Yes, certainly so if you look at the first sentence or the second sentence of three one where it talks about the lessee has inspected the premises and is satisfied itself that they’re acceptable subject to completion of lessors work, which we’ll get into in a second. So when you sign this lease, you’re saying I’ve looked at it and everything’s great. Even if we get some broader language of the ancillary uses for this medical supply business. If zoning doesn’t allow the manufacturing and some of the heavier industrial uses that you intend to use, right, you still can’t use that property for it. If the configuration of the building. Say you have a high volume business of which the standard prosthetic limbs, I don’t know why we’re there, but let’s say that you’re moving a whole bunch of legs and you’ve got trucks that are going to be coming in and out of your business all the time. Is there a loading dock that is sufficient? We’re going to have 18 wheelers coming through. What’s the actual framework and logistics for getting access to the property? Does it work? A lot of times I’ll be helping clients all over the state of Florida. So Google Maps is a big friend of mine. Obviously, the data isn’t always up most up to date, but it helps me take a peek at the building and get a general understanding of where am I? What’s going on to get us back to that key baseline question of does this lease work? So when you look at the building, it’s a one storey building. So I’m I’m less concerned if I had issues going up and down stairs or needed a special elevator. Well, it’s a one storey building, so I’m less concerned about whether that’s going to work or not. And it’s it’s just important that especially on these leases where the tenants don’t have and the landlord may not be as willing to listen to that many negotiable points for you to do the things that you can on your end and the proper diligence to make sure that the building works. So we don’t need the landlord to rep that the building is zone for x y z. If we feel confident and the tenant worked with an attorney like myself or others in our assessment and other frameworks, similarly in how the zoning and the landlord those concepts still work together is difficult. We want to have some kind of representation and warranty from the landlord that they’re not going to rezone the property while we’re there or cause some changes that would inhibit or make illegal argues or make any changes, such as build outs or other frameworks that would prohibit our use of a big sell for us was having that access with back loading docks that our trucks could get in. But the landlord decides to make it all gas parking in the front framework and adds a little zen garden in the back where we used to have our trucks. Well, we want to have some of that protection, so just making sure that the landlord doesn’t change it when we have it. So a lot of the things that will typically push for now, I think is fair is that the landlord reps some warrants that it’s suitable for your use as of the commencement date, at least.

Mike Whelan [00:12:50] Hmm. So then what’s this? I’m looking at the second sentence and three one that talks about the completion of the lessers work as the condition that the premises is acceptable. What’s the relationship with that and the landlord saying that’s done? What is the completion of the lessers work?

Arthur Baker [00:13:05] And that’s a good question. So when I look through the lease, interestingly, you don’t see many other references to what this lessors work is, and that can be problematic. So if you looked at the building and a lot of these warehouse distribution uses, you might have some shelving that’s going to be installed at the loading dock, maybe being built for you or being adjusted. So it’s important for does this lease work? Meaning what is it going to take from signing this one? I’m using and occupying it and selling my prosthetic legs, but to get it to work. And usually you’ll describe in more detail what that work is. And when I looked in this lease, I noticed that it deals with a four point one B. It talks about an office buildout out payment, as well as for one year. That’s over $100000. So it deals with the payment aspect of some build out, which presumably is that work, but it doesn’t deal with what a tenant usually wants to be concerned of. Well, what’s the quality of that build out? When is it done? Because if you look at this, I see it. It’s a January signing date and a May commencement date, roughly. So in that in those four months, is that work going to get completed if it doesn’t? There’s now real ramifications that are right, and it has here, especially in the market now with industrial and office leases and some institutions. And these aren’t staying on the market very long. Their supply is very low. So if you’re in desperate, need those you expand your business for some space. You may not be wanting to wait three months for a delay to build out six months a year. Usually, it’s helpful to have some back and walk away time period or some right to recoup that payment. However, it is, but when you look at this, it doesn’t really provide much detail on that.

Mike Whelan [00:15:19] Hmm. Well, I know you use you are familiar with the Law Insider’s functions, including the common contracts function and as you look across at other contracts that are trying to accomplish similar things, what do you see that might be better incorporated in this agreement? What kind of differences are you saying that matter?

Arthur Baker [00:15:36] Yeah, and that’s good. You brought up that function was interesting on this list. There was another common contract listed for the adjacent property with the same tenant and a similar landlord entity. Again, I don’t know the specifics of this deal or other framework. And as you know, the facts and what was really going on are really what’s important, easy for us to call shots from the balcony on what’s perfect, right or wrong. But looking through it, I was able to compare that list to this list and notice that their standard form was years and there is no build out concept or lessors work, which is fine and good and would make sense in that lease. But there, as I’ve seen, especially in some of these smaller frameworks where people may not have sophisticated counsel or just may not be put in the effort into the deal because it’s smaller on either end, not really realizing that that standard form works when there isn’t a built out component, but in this framework may not and could have just been added as a one off line. And while the payments do, but the tenant doesn’t really have much protection here from that,

Mike Whelan [00:16:49] I’m scrolling down to 20. This is a very specific I, you know, I’ve worked in a in a warehouse environment before and one of these strips in in Austin. And if we move to hazardous materials when I work for this freight forwarding company, there’s a specific section in here and 20 about dealing with hazardous materials. What do you think about this section? And 20?

Arthur Baker [00:17:13] Yeah, so to give the viewers a little overview, especially an industrial warehouse, there’s a lot of environmental concerns start thinking of dry cleaners. That’s the typical example that everyone worries about. And when I checked the zoning and other framework, dry cleaning is a permitted use, so there may be a dry cleaner adjacent to this unit in the same building. Whether it’s owned by the same landlord or not. But the environmental impact and cleanup costs under some federal regulations and laws can be astronomical. Just ballpark and the remediation and cleanup of some of the dry cleaners, in fact, can be up to $500000, depending on when the remediation is identified. Unsurprisingly, we don’t normally find these environmental issues. The moment of the first drip, it’s it’s usually years down the line and the deeper in the Earth that it goes, the more expensive it can get. So looking at this contract, it’s important that we’re not signing a contract that’s putting us on the hook for some big liabilities just at signing. So it’s fairly reasonable. And one of the typical carve outs I have are to at least have the landlord represent that there’s no hazardous materials or contamination as of the commencement date. And to this carve out then our indemnification obligations to issues that are already there before we moved in or items that were caused by the landlord or others. You look at Section 20 and it talks about the indemnification there has been actual emissions caused by the lessee and occurring during our occupancy of it. But. There are things that can be caused by other parties that could be arguably blamed on us, or it may be less certain of the causal framework on that. So it’s very important, especially in these smaller places, that. You’re not signing on to a massive liability from the front end. And again. When trying to negotiate with landlords, I’ve had fairly good success of talking through these reasonable points and rather than Red Line in the whole document with a material here or change in discretion framework, they’re just having a few carve outs that properly address these high level risks. Hmm.

Mike Whelan [00:19:50] Yeah. You only got so many conversations you can even have with these guys. All right. Take me to twenty one. You had mentioned that in these kinds of deals, all kinds of people are being paid and money is crossing each other. What do you think about the broker section on 21?

Arthur Baker [00:20:08] Yeah, so look at twenty one for those may be less familiar, know unless the lease provides differently and Florida, the landlords responsible for paying a commission and. A lot of times on surprise, land landlords says they’ll make sure that they’re listing agents, the landlords broker is stated, gets paid. Tenant rep brokers, unsurprisingly, are pretty good at making sure that their name is addressed and getting paid in the framework. But what’s important thinking through this example again of low supply, a bunch of prospective tenants may be taking a look at this. There could have been a bidding war for the space, right? You don’t want some claim of other prospective tenant brokers that they helped effect the deal and have some rights and commission that’s owed as a result from the transaction. And when you look at the wording of Section Twenty One, it. I typically like a clearer statement of the landlord is going to pay the commissions owed under this under a separate agreement and twenty one here is silent on that payment framework. It talks about, you know, the only other real estate broker involved was this entity and will each indemnify each other for any other claims arising out of it. But breaking that down, there can be finders. They may not have been the broker on the deal, but again, those that are have a procuring clause argument which. In Florida, if you help bring a reading, will enable Tenet tenant, it doesn’t matter that the deal transaction doesn’t necessarily close the signing of that lease. If you brought them ready, willing and able, you could have a procuring cause argument there. So it’s important here just to make sure that everyone’s taken care of and there’s no surprises on the back end. Where are the tenants broker? Gets stiffed, where there’s claims coming from other potential brokers and we don’t live some of those payment obligations uncertain.

Mike Whelan [00:22:24] I’m trying desperately right now in my mind to make a tie in to the TV show Burn Notice, which was recorded in Miami and has an excellent show where everything blows up all the time. I’m not really sure how Michael and the team on burn notice like fit into a contract like this, but I am thinking about sort of stepping back from the lessee, which sounds like is your general approach, thinking of just the contracting exercise. When you’ve got people in these warehouse spaces who are doing everything from having an office to, you know, selling drugs to blowing up with old dodge chargers, prescription prescription drugs, you know, or it’s Florida anyway, it could be all over the place, right? Do you think this document from the drafting perspective, was drafted well for the landlord’s purpose? Or do you think that as this was drafted, it’s creating confusion that, you know, is going to cause problems for the compliance that they want to happen? Like is the is the lessee looking at this going, Oh, what the freak I’m supposed to do with this like that that seems to undermine the landlord’s purpose.

Arthur Baker [00:23:29] Mm hmm. Yeah. And I think this document is problematic in that regard. Again, we don’t know the exact specifics of the background. We don’t know whether this is a market rate. They might have gotten a really great deal on this. They might have made it up on the back end of that adjacent unit. They might be doing some other business transactions where they’re, you know, the tenant got a pretty good windfall. So this is how it was and similar to it, it can be a trust factor. You know, if you were to have a brother that you had opened a business and you were going to sublease some space to him. Yeah, he should still be. From a legal standpoint, concerned, a potential hazardous waste, other frameworks, but your brothers, you’re less likely to sue him about it, you’re less likely to try and bring a raw deal. But what happens in a lot of these smaller leases is as you can look through your system and typical tenant leases, they can be, you know, 50, 60, 70 pages, very long, complicated documents that most tenants don’t read full details well as they should. So unsurprisingly, with the shorter lease like this, there are components that are left out. So as a bare standard process, it’s definitely missing a lot of key items that I would typically look for. But that might have been some of the deal and risk assessment here. I think it’s especially in these smaller transactions and dealing with tenants, it’s helping clients make an informed decision. So if the landlord is wont even address any potential negotiations or any reps just knowing, well, maybe I can spend twenty five hundred dollars on an environmental phase one to see if there’s any of that crazy stuff there and then to feel more comfortable moving forward and then make it a risk assessment as opposed to just signing as is. Because as we found out in Covid that when everyone’s making money and everyone’s doing well, everyone’s happy. But then when things get tight and the business might pivot necessarily, and now their use may not fall within a medical supply business or the landlord is going to not approve any other use because the supply of similar property is so low that I’ll just put them out and get up another tenant at a higher rate.

Mike Whelan [00:25:55] Because you really do imagine these landlords sitting at home, all the stuff they didn’t care about before, but now they’re surrounded by their kids yelling at them while they’re trying to work. And it’s like, OK, now I’m going to get really upset about seven point three and dig into that. Well, we will have this contract at LawInsider.com/Resources, where people can look at it and get an idea of it and some comparable contracts. So I appreciate you sharing it with us. Also on there, I want to include your contact information if people want to reach out to you and learn about your practice in your work. What’s the best way to connect with you?

Arthur Baker [00:26:28] That’s what it’s probably just on LinkedIn should get search out, Arthur Baker again at Concord Advantage Legal LinkedIn. It’s where all the happenings happens, how it’s how we connect the are blinked

Mike Whelan [00:26:39] and oh, I could rant about that. OK, well, I appreciate you showing up and having this conversation about the leases. For any of you who want to join the show and tear down a contract like this. Just email us. We are at Community@LawInsider.com. Arthur, thank you again. We’ll see you guys next time.

Contributors

Arthur Baker
Arthur Baker
President, Managing Attorney
Mike Whelan
Mike Whelan
CEO @Lawyer Forward

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