1. Basic Leasing Law Concepts
Presented By:
Andy Jacobson, Maslon LLP
Howard Lind, Wendel Rosen Black & Dean, LLP

2. TOPICS FOR DISCUSSION 3 General Legal Concepts
The Nature of a Retail Lease
Basic Components of the Lease
Parties
Premises & Shopping Center
Term
Rent
Use
Transfers

3. General Concept #1 The Law has Multiple Layers -- Real Estate Laws Vary from State to State
Federal / State / Local
Statutory, Regulatory & Common Law
Variations by State
Formalities of Execution
Time is of the Essence
Landlord’s Duty to Mitigate Damages

4. General Concept #2 Substance Usually Trumps Form
“A rose by any other name would smell as sweet” [William Shakespeare]
“When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck” [James Whitcomb Riley]

5. General Concept #3 Beware of the White Squirrel
Majority & Minority Rules
Bad Facts Make for Bad Law
Sensational v. Mundane

6. WHAT IS A LEASE? Both a Contract and a Conveyance
Key Defining Characteristics
Tenant has exclusive possession,
For a specified period of time, and
At expiration, possession reverts to landlord.
Also establishes non-real estate rights and obligations between landlord and tenant
Operational requirements
Attorneys Fees
Financial Statements

7. THE PLAYERS Landlord & Tenant Master Landlords & Sublandlords
Lenders / Mortgagees
Assignors & Assignees
Franchisors & Franchisees
Guarantors

8. DESCRIPTION OF THE PREMISES
Square Footage (Usable v. Rentable)
Measurement / Remeasurement
Exhibits with a plan of the Premises and site plan of the Shopping Center
Adequate description of key common areas (e.g., parking, patios, restrooms, etc.)
Legal Description of Premises / Center
Address for Premises

9. LEASE TERM Delivery Date / Outside Delivery Date Commencement Date
Fixturization Period
Pre-Commencement Obligations
Rent Commencement Date
Expiration Date
Option Terms / Exercise Dates
Early Termination Rights

10. RENEWALS / EXTENSIONS Unilateral Right for Tenant’s Benefit
Negative v. Affirmative Option Rights
Fixed Rent v. Market Rent
Watch for conditions to exercise option!
Option windows monitoring is critical!
Include all material terms to ensure enforceability!

11. USE OF THE PREMISES Permitted Use Spectrum
Most Broad – Any lawfully permitted use
More Restrictive – Designate prohibited uses
Most Restrictive – Limited to specified use
Exclusive Uses – Restricts other users
Prohibited Uses – Restricts tenant’s use
Radius Restrictions

12. CATEGORIES OF RENT Minimum Rent / Base Rent Percentage Rent
Additional Rent (NNN)
Operating Costs / CAM
Real Estate Taxes & Assessments
Insurance Costs
Additional Rent (Other Charges)
Marketing Charges
Utilities
HVAC Maintenance
Rental or Transfer Taxes
Other (e.g., Trash, Pest Control)

13. KEY TENANT COVENANTS Pay Full Rent on Time Operation for Specific Use
Operate under Specific Name
Continuous Operations
Indemnity
Maintain Insurance
Maintenance & Repair

14. KEY LANDLORD COVENANTS
Quiet Enjoyment (Right of Tenant not
to be Disturbed in its Possession of the Premises)
Structural and Common Area Repairs, Maintenance and Operations
Access & Visibility
Exclusive Possession for the Tenant

15. TRANSFERS - SUBLEASE
An agreement between the Tenant (as Sublandlord) and a third party (as Subtenant) desiring to use some or all of the Premises for a portion of the remainder of the Term.
Subtenant is not in direct contract with the Landlord. Subtenant pays its rent to Sublandlord and Sublandlord continues to pay rent under the Lease to Landlord.
If the Master Lease is terminated, absent an agreement to the contrary by the Landlord, the Sublease automatically terminates.

16. TRANSFERS - ASSIGNMENT
A transfer by the Tenant (as Assignor) of all of its remaining rights and obligations under the Lease to a third party (as Assignee).
Following an assignment there is a direct contractual relationship between the Landlord and the Assignee. However, the Assignor typically also remains liable for the obligations of the Assignee under the Lease.
Assignee pays rent and performs other Lease obligations directly to the Landlord.

17. TRANSFER ISSUES Standard for Landlord’s Approval/Consent
Conditions to the Transfer
Payments to Landlord (Transfer Fees, Bonus Rent)
Tenant’s Right To Cure Defaults by the Assignee/ Sublessee
Sale of Business & Corporate Level Transactions
Recapture by Landlord
Negotiate Expressly Permitted Transfers
Going Public
Sale of the business (stock or assets)
Franchise related transfers

18. LEASE EXECUTION CHECKLIST
Do you have the correct and authorized parties?
Are the Premises and Shopping Center properly identified, including on all Exhibits?
Are all exhibits completed and attached?
Do the final basic deal points reconcile with the applicable Letter of Intent or deal sheet?
Does the Lease (or Memorandum) need to be recorded?
Beware of auto-kill and auto-option provisions.

19. QUESTIONS

20. Thank You Andy Jacobson, Maslon LLP andy.jacobson@maslon.com
Howard Lind, Wendel Rosen Black & Dean, LLP