Carolene A. Folse
SMALL BUSINESS GUIDE
Commercial and retail growth is a constant in the State of Texas. Economic recovery promises a restart of new commercial and retail business opportunities. If you are considering starting a new business in Texas, carefully consider how you negotiate for that all important commercial or retail space that will be the face of your business to the public.
Among many issues to evaluate and negotiate in commercial and retail leases are such items as:
• Identification of the proper parties (including the best form of business organization to be selected for a new business);
• Length of the primary term of the lease and any options to be negotiated;
• Exclusivity clauses and restrictions;
• Handling of utilities to the leased premises and apportioning costs;
• Rentals to be paid, including whether percentage rent is to be paid;
• Common Area Maintenance Charges (CAM) and audit rights and remedies;
• Insurance and tax pass-throughs;
• Legal descriptions of the project and the leased premises to avoid Statute of Frauds issues and discrepancies in additional rentals;
• Finish out responsibilities (landlord and tenant work), i.e., how the leased premises are to be delivered to the tenant (cold dark shell, vanilla or white box, etc);
• Dark provisions;
• Co-tenancy issues with anchor tenants;
• Systems and component maintenance, repair and/or replacement, including HVAC systems and roofs;
• Assignment and subletting issues;
• Reciprocal Access Easements, parking easements, access and visibility protections;
• Guaranty agreements and other security options;
• Default and remedies issues, including notices and rights to cure;
• Franchisor rights and remedies; and
• Subordination and attornment provisions.
Commercial and retail leases are complex and cumbersome. Negotiations can be complicated by the involvement of many parties, including the Landlord and Tenant, their lenders and financiers, broker representatives, franchisors and the attorneys for all. Involving legal counsel early in the process is highly recommended to ensure that the rights and responsibilities important to the parties are properly considered and addressed as well as to ensure that anticipated costs are accurately incorporated in budgets and projections.
Virginia A. Moore has extensive experience in representing both landlords and tenants on projects throughout the Southwest, including assisting with negotiation, drafting and preparation of Letters of Intent and commercial and retail leases.
Topics are for general information only and not intended to provide specific legal advice. Please contact us to schedule a convenient appointment to discuss your legal needs.
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