The Commercial Lease Clauses New York Tenants Regret Signing
Five provisions that look like boilerplate, are heavily negotiated by anyone experienced, and are almost impossible to fix afterwards.
A commercial lease is not a consumer contract and carries none of the protections of a residential one. New York courts generally enforce commercial leases as written between sophisticated parties, which puts the entire burden on the negotiation.
The good guy guarantee
Common in New York and widely misunderstood. It is a limited personal guarantee: the individual is personally liable for rent until the tenant vacates, surrenders possession properly and is current on rent through that date.
It is far better than a full personal guarantee, and it is not nothing. The conditions for release are precise, and failing one of them — improper notice, leaving property behind — can keep the guarantee alive.
Escalation clauses
Rent rarely stays flat. Escalations may be fixed percentages, index-linked, or based on the landlord's operating expenses and taxes. Expense-based escalations are the ones to examine: without a base year properly defined and a cap, the tenant is absorbing uncapped increases in someone else's costs.
Assignment and subletting
If the lease prohibits assignment or allows it only at the landlord's sole discretion, the business cannot easily be sold, because the buyer cannot be sure of keeping the premises. For any business whose value depends on its location, this clause is an exit-value clause.
Negotiate for consent not to be unreasonably withheld, and for a permitted transfer to a purchaser of the business.
Condition, delivery and the certificate of occupancy
Confirm the premises are legally usable for your intended purpose. Discovering after signing that the certificate of occupancy does not permit your use is a catastrophic and entirely avoidable problem.
Restoration obligations
Some leases require the tenant to remove installations and restore the premises at the end of the term. On a fitted-out space this can be a substantial unbudgeted liability years away. Negotiate it at signing, when you have leverage.
The rule
Every one of these is negotiable before signing and none is afterwards. Pay a lawyer who does New York commercial leases specifically.
This is general information, not legal advice. Speak to a qualified New York attorney before acting on any of it.
