Mid Atlantic Real Estate Journal — August 30 - September 12, 2013 — 9A
www.marejournal.com
c oMMeRciAl R eAl e stAte l Aw By Tony DiFlavis, Esq., Arrow Real Estate Services, LLC Lease Commencement: Start Me up
I
n the movie Casablan- ca, one memorable line is when Rick Blaine (Hum-
walks, parking lots, driveway, entrances, exits and common areas. The delivery to the tenant also may require the satisfac- tion of other contingencies such as issuance of a landlord’s architect certificate of comple- tion; permanent or tempo- rary certificate of occupancy; contractor and subcontractor waiver of liens; and comple- tion of punch list items. Any additional contingencies the landlordmay require due to the specifics of the deal should be included in that paragraph. A good practice point is to
abstract your lease commence- ment paragraph and note the dates of the various date benchmarks on the abstract for later inclusion into the Lease Commencement Agreement attached to the lease as an ex- hibit and to be signed by land- lord and tenant. This extra step ensures the confirmation of the correct dates in the agree- ment, critical for confirming when the lease, rent and lease expiration occurs. The tenant usually will want the rent to commence when it opens its store for business to the pub- lic. The landlord should set
specific dates (usually 30, 60 or 90 days after landlord delivery to tenant) for the completion of tenant’s construction and store fixturing period. This is a critical period, especially for the inexperi- enced tenant. The landlord should monitor the progress of tenant’s construction. An- other suggestion would be to have the tenant’s contractor provide the landlord with a timeline of work so the land- lord can monitor the progress (or lack thereof) thus allowing early landlord intervention to avoid any present or future
disputes. Despite the continuing slow economy, a proactive landlord who nurtures his novice tenant in the ways of the commercial lease will have the beginning of beautiful business relation- ship. Tony DiFlavis, Esq. is the General Counsel for Arrow Real Estate Services, LLC a client-centered organiza- tion providing a full comple- ment of commercial real estate brokerage and con- sulting services with offices in Doylestown, PA. n
phrey Bogart) tells Captain L o u i s R e - nault (Claude Rains) “Louis, I think this is the beginning of a beautiful friendship.” Jus t l i ke
Tony DiFlavis
Rick and Louis, carefully draft- ing the delivery and commence- ment lease provisions, the landlord and tenant can begin their relationship by avoiding future disputes concerning dates. This is the primary func- tion of the lease commence- ment paragraph in a shopping center lease; to confirm the keys dates for when the lease starts and rent is to be paid and, ultimately, when the lease will end. It is important for the tenant to understand the subtle differences and deliv- ery obligations for each party. This is especially important when the landlord is dealing with tenant/franchisee or lo- cal retailer unfamiliar with a shopping center lease. While most new store leas- ing today involves second gen- eration space, there are new shopping center projects being developed with each type of project having its own bench- marks. For example, in a new shopping center, delivery of the store to the tenant can be affected by impediments, such as weather, material avail- ability, labor issues and other obstacles. The landlord should carefully craft the lease commencement language to allow the greatest flexibility to deliver the store to tenant. While some tenants may object to an unspecified delivery date, this permits the landlord to retain the tenant without penalty or lease ter- mination that larger national tenants would demand. Usu- ally, the lease commencement clause will state the lease term to begin on a specific lease execution date, but may use a different date for the rent com- mencement. The landlord obli- gations to deliver the premises to the tenant should be made contingent upon the comple- tion of landlord construction work. Regarding new shopping center development, this would also include the completion of all improvements to the shop- ping center, including side-
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