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Parties and Payments of All Types
Posted on Sep. 6, 2012

The parties to a lease agreement often are one landlord/lessor and one tenant/lessee. However, it is not unusual for other parties to be involved. For example, there may be guarantors who back up the promises of the parties. The lease may also provide for assignment to an assignee, or for the sublease of a portion of the leased property (or all of the leased property for a part of the term) to a sublessee. There may be a lender to involved in a leveraged lease transaction.

Payment obligations that must be set out in a lease, quantified, and assigned to a party may include the following, which is by no means an all-inclusive list:  base rent; percentage rent; late fees; interest on late payments; holdover rent; security deposit; common area maintenance costs; tenant improvement allowances; taxes (real property, personal property, transfer taxes, special assessments, etc.); insurance; penalty rent; costs of utilities and security services; snow removal costs; etc.  When costs are agreed upon, the parties may wish to provide for periodic increases. For example, the base rent may adjust annually based on a particular index. The index must be described with particularity, and the parties will need to spell out any caps on increases (and whether the base rent can be reduced or only increased over time).

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About Marianne

marianneAttorney Marianne G. Sorensen

As a practitioner in the commercial real estate legal area for a number of years, I’ve often thought that leases should get more respect. While multi-million property purchases take center stage, leases are signed which have the potential to tie up very valuable property rights for very long terms. It’s still somewhat of a rude awakening for me to realize that a lease I am crafting with an initial term of 30 years, for example, and several options to renew for additional lengthy terms, will be likely be in force long after I expire! It’s like legislating for future generations, and the consequences of an ill-drafted lease can be huge.

Please join me as we take an informal look at leasing in general, then work our way towards specific lease situations and drafting issues. I welcome your input here, on LinkedIn and on Twitter.  Here’s to the Art of Leasing!