Commercial Real Estate Investment/Commercial Office Lease

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Expert: - 3/17/2007


Question
Hi Jim,

When I lease a commercial office space, is it absolutely necessary to hire an attorney to go over the contract? I can see somewhat if it applys to me finding the property myself, but would needing an attorney to go over the contract apply to my locating the property through a realtor as well?

Thank you!

Mike E.

Answer
Mike-

Although real estate attorneys and realtors deal in many of the same issues, each has expertise in matters that the other does not.  If your commercial lease is a relatively simple arrangement without any complicating terms, it is tempting to think that you can do without an attorney to advise you.  Still I believe you would be taking unnecessary risk.

A related mistake that many businessmen make is to ask an attorney that they have used for another business matter to also advise them on their proposed commercial real estate lease.   
You should find a legal specialist that deals with commercial leases on a daily basis.  If the attorney you choose is a specialist he should be able to provide you with the legal advice you need for a very reasonable fee.  He will also be able to tell you in simple understandable language - while providing you germane examples, why he advises you to seek the changes he suggests in the proposed lease.  Often, an attorney who specializes in divorce or intellectual property will simply go to a book that provides him with checklists of the legal provisions that should be included or avoided in a commercial lease.  Unfortunately, in some situations, they may not understand fully all the implications of the terms they are dealing with, and end up missing important nuances of a word interjected here or there in the text.  

Your realtor should be able to help you quite a bit in the lease acquisition effort and identify the general terms that should or should not be in the lease.  Most importantly, the realtor should also be able to advise you if the economic terms of the deal are reasonable, and be able to provide examples of comparable leases signed in the recent past that can vouch for the reasonableness of the terms found in your proposed lease.  

I know of many experienced realtors who have excellent knowledge of the legal issues that may be found in a lease,  but they are in the minority.  There is always the fear that your realtor may choose to omit bringing up certain issues that you are not fully aware of so that his commission is  not put at risk.   

I suggest you get the majority of the terms of the lease agreed to between you and your landlord, then send the proposed lease document to an attorney specializing in commercial leasing matters for review.

If you are having trouble identifying a commercial lease specialist, check with the local Bar Association for help.  
The may also refer to commercial leasing specialists as "Landlord/Tenant" lawyers.  Often, if you go to the office of a large legal firm, a partner specializing in leases may refer you to one of the junior (younger)attorneys that assist him to handle your lease matters.  The partner should be able to determine the relative sophistication of your lease with a very cursory review of the proposed lease document and then asking you a few questions.   

I hope I have been helpful.

-jim  

Commercial Real Estate Investment

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Jim Avancena, CPM

Expertise

Best qualified to answer questions that involve commercial leases, that is, basic issues as well as the often unexpected effects of the complexities and inter-relationships of the provisions a lease may contain, explain how seemingly innocuous text in your lease can have a major impact on a Tenant or Landlord and their business operations, and the common practices utilized in the industry. I can untangle most matters that may come up from the time a tenant begins searching for a office or store space and the lease acquisition process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of problems that may come up during the lease term and even after a tenant moves out. I have practical experience with most property management issues and resolving landlord and tenant disputes - especially those involving what may appear to be overcharges assessed for additional lease charges like CAM costs, operating expense reimbursement, real estate taxes, utilities, construction improvements etc. Note that I am not an attorney and cannot provide legal advice.

Experience

Thirty years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area (DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.

Organizations
Currently my three children keep me so busy that it is difficult to participate in organizations with continuing and specific time requirements.

Publications
I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 full pages) feature story on January 13, 1993; titled "Overcharging Overhead".

Education/Credentials
BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license in Maryland and the District of Columbia.

Awards and Honors
The same plaques and honors that most others in my industry have earned. I have none that I consider especially meaningful.

Past/Present Clients
Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.

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