What You May Expect From Your Landlord -
If you are a tenant, or considering becoming a tenant, then your tenancy will be governed by a written lease agreement. This lease agreement specifies your relationship with your landlord. It can only be changed by a further written agreement between you and the landlord, a lease amendment. In the paragraphs below, typical lease clauses have been summarized into this list and relationship description. Please keep in mind that these general statements do not govern; your lease governs.
The Business Relationship:
Your lease is a business contract between the landlord and you, the tenant. It requires each party to complete periodic tasks, make specified financial transactions and operate in a specified manner. Your lease creates a business relationship between you and the landlord that cannot be unilaterally modified or terminated. Changes are made by mutual agreement or at expiration.
The Landlord is Providing a Business Opportunity:
The landlord is responsible for providing a reasonably maintained business environment. You and you alone are responsible for the success of your business. The landlord is leasing you a facility to give you an opportunity to be successful. Your success is then solely your responsibility, even if there are changes in the rest of the property or in the neighborhood of your leased facility.
How You Operate Your Business and Use of the Premises:
How you operate your business is not defined within your lease beyond a few rules and regulations followed by all tenants so everyone can get along. Although you may operate your business within a broad latitude, your lease is quite specific as to what that business may do. In other words, your use of your leased facility is tightly defined within your lease. If you need to make changes to that use, the landlord’s prior approval must be sought.
Legally Binding on Both Parties:
Your lease is legally binding on both the landlord and you as the tenant. The landlord is legally expected to uphold and perform under their end of the lease contract. You are legally expected to uphold and perform under your end of the lease contract. Failure of you to maintain your end of the business bargain almost surely will bring legal action, for legal enforcement or legal pursuit of damages are the landlord’s remedies under a lease.
Who Is Responsible for What In Typical Retail or Industrial Leases:
Typical retail or industrial leases rent you the premises with you responsible for all interior maintenance, maintenance to your doors and glass, and maintenance to the heating and air conditioning equipment serving your facility. Additionally, you will be financially responsible for your pro rata share of the operating expenses of the property in which your facilities are located. These expenses are typically referred to as “CAMs” or “Triple Nets”. The landlord is responsible the maintenance of the area used commonly by all tenants, typically called the common area. Note that the cost of such common area maintenance is generally included in the CAMs or the Triple Nets, of which you are financial responsible. The provisions of your lease may vary from these general statements. Your lease governs absolutely.
Who Is Responsible for What In Typical Office Leases:
In typical office leases you rent the premises with the landlord responsible for all interior maintenance associated with your facility. Like with retail and industrial leases, the landlord is responsible for the maintenance of the area used commonly by all tenants. The landlord may or may not be responsible for the electricity used by your business and the janitorial costs associated with cleaning your business premises. The provisions of your lease may vary from these general statements. Your lease governs absolutely.
Expect your landlord to be in business to make a profit. The landlord makes a profit only if the property is near fully leased. Therefore, the landlord typically will be delighted to have you renew your lease. When your lease has expired or is rapidly approaching that date, you will need to negotiate a renewal. Anything may be discussed during these negotiations, but you should expect the focus of the discussions will be on the lease term extension you desire and the lease rent the landlord desires. In almost all cases, the parties will reach agreement, but agreement is not required. Furthermore, the landlord does not have to renew your lease. In this rare circumstance, when your lease ends you will need to depart the premises, relocating your business to another property.
A typical lease option allows you to renew your lease for a specified term at a rent that is either fully or partially specified in the option. You must exercise your option in writing to the landlord by the date specified in the option. Under an exercised option, once the rent is determined, the lease discussions are closed. If you open discussions with the landlord about issues not specified in the option, you should expect the landlord will want to renegotiate other provisions of the lease as well. All is fair.
Payment of Rent On Time:
Expect the landlord will want the rent paid on time. All rent is due on the first of the month. Your lease may have a grace period where late charges do not apply, for instance in the first 5 or 10 days of the month. However, rent is still due on the first day and delinquent if outstanding on the second day. If the landlord needs to institute collection procedures against you in order to obtain the rent, you may expect the landlord to remember this mark against you for a very long time.
Fair and Reasonable Net Lease Charges (CAMs and Triple Nets):
Fair and reasonable CAMs and Triple Nets billed by the landlord and paid by the tenant are frequently a matter of contention between the parties. There is no reliable “rule of thumb” for what these may cost, for the property-to-property differences can be as much as double from one to the next. However, you may expect from our company (1) a full and complete annual accounting, (2) an accurate, but typically complex, billing for your share of these costs, and (3) a sincere effort on our part to be fair and judiciously careful with these charges as they represent real costs to you. Most landlords cannot provide you all three of the above; we do for all of our tenants.
Prompt Response to Your Inquiries:
You should expect from us a prompt response to any inquiry about your premises, your lease, or the property. It is best if you call your assigned property supervisor during our regular business hours for your need (408/556-0200).
REALTY MANAGEMENT, INC.
4020 Moorpark Avenue, Suite 218
San Jose, CA 95117
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