The offer to lease is typically a short document between the landlord and tenant that sets out the key terms and conditions governing their relationship. The parties and their respective real estate agents often negotiate the offer to lease. However, legal advice at this stage may reduce costs in negotiating the formal lease and in dealing with matters that arise following offer to lease execution even if it creates greater upfront time and expense. This may be particularly true in the not-for-profit sector where there may be unique Board approval requirements, or alterations to the premises due to an atypical use.
Timing issues are often not well planned in the offer to lease. Many events following execution of the offer to lease will have dates attached to them. Some typical examples include:
- Delivery of tenant's financial information;
- Tenant's condition to obtain senior management approval;
- Landlord's condition to review the tenant's financial information and/or obtain senior management approval;
- Approval of head landlord if the premises are being subleased;
- Tenant's requirements to provide evidence of insurance to the landlord; and
- Delivery by landlord, and ultimate execution by both parties, of a formal lease document.
Very often, the obligations of the landlord to commence landlord's work, the tenant's right to commence tenant's work and/or the tenant's right to commence business from the premises are conditional upon items such as those noted above being completed or satisfied. Creating a table of critical dates is therefore highly recommended.
Be aware of dates being based on days versus business days, and the ramifications of using these terms. Also, be aware of certain obligations on either party that do not have any time frames attached to them. For example, if the parties are obligated to complete the formal lease within 15 days of delivery of the form of lease by the landlord, there must be a corresponding obligation on the landlord to deliver such form within a certain number of days following execution of the offer to lease.
Failure to appreciate timing intricacies can cause numerous problems for both parties. Consider a situation where the tenant wants to begin its fixturing work on the premises within a few weeks of execution of the offer to lease. However, under the terms of the offer to lease, the tenant is not permitted to begin fixturing until a formal lease has been signed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
