[et_pb_section admin_label=”section”]
[et_pb_row admin_label=”row”]
[et_pb_column type=”4_4″][et_pb_text admin_label=”Text”]

Welcome to part two of our exploration of commercial leases. If you haven’t already read part 1, click here. The commercial lease is in blue, and my comments are in black. Remember that I am not a lawyer nor a commercial real estate professional. These comments and observations are from my own 10+ years of experience as a commercial tenant and landlord. They do not constitute advice and are for educational purposes only. Please consult your real estate lawyer or commercial real estate expert before signing any commercial lease for your business.

7. LANDLORD’S REPAIRS

(a) Structural and Systems Repairs.  Landlord shall be responsible, at its expense, for, but only for, the structural integrity of the roof, foundation, and exterior walls of the Leased Premises.  In further limitation on Landlord’s responsibilities hereunder, (i) any repair to the roof, foundation, or exterior walls occasioned by the act or omission of Tenant or Tenant’s Representatives shall be the responsibility of Tenant as provided in Section 6(b); (ii) the term “walls” as used in this Section 7(a) shall not include windows, glass or plate glass, interior doors, special store fronts, office entries or exterior doors; and (iii) Landlord’s liability with respect to any defects, repairs, or maintenance for which Landlord is responsible at its expense under this Lease shall be limited to the cost of such repairs or maintenance or the curing of such defect.  

The landlord must repair damage to the shell of the building – the roof, exterior walls, and foundation; however, if the tenant is responsible (by commission or omission – something you did or failed to do) for damaging the shell, the tenant will pay for the repairs.  Additionally, exterior walls do not include exterior doors, windows, or special storefronts.  The landlord will only be liable for repairs to the shell.  The landlord is not responsible for lost business or other issues that arise from damage to the building’s shell. 

Landlord shall also be responsible for the maintenance, repair and replacement of all lighting, heating, air conditioning, plumbing, and other electrical, mechanical, and electromotive installation, equipment, and fixtures located outside the Leased Premises and not solely serving the Leased Premises and also include all utility repairs in ducts, conduits, pipes and wiring, and any sewer stoppage located outside the Leased Premises and not solely serving the Leased Premises.  Tenant shall promptly give Landlord written notice of defects or need for repairs for which Landlord is responsible under this Lease, after which Landlord shall have fifteen (15) days to commence to repair or cure such defect, except in cases where such defects or need for repairs constitute an emergency or prohibit Tenant from being able to use the Leased Premises, in which case Landlord shall, as soon as reasonably possible, commence to repair or cure such defect.

The landlord is responsible for maintaining, repairing, and replacing everything OUTSIDE the building – HVAC, lights, plumbing, utilities, etc.  For example – If an electrical issue occurs outside the building, like a main power line or an external breaker box), it is the landlord’s responsibility.  If it occurs inside the leased space, it is the tenant’s responsibility.  You must notify the landlord in writing if you notice an issue.  The landlord has 15 days to commence repairs unless it is an emergency or prevents you from using the space, in which case it will be resolved as soon as reasonably possible.    

(b) Common Area Maintenance.  Landlord shall maintain the Common Areas of the Shopping Center in a condition that Landlord determines in its sole discretion to be appropriate.  If the need for any such work shall come to the attention of Tenant, Tenant will promptly so notify Landlord in writing.  Any costs incurred by Landlord pursuant to this Sections 7(a) and 7(b) shall be included as an Operating Expense.

The landlord will maintain the common areas of the shopping center.  This may include the parking lot, any grass areas, and sometimes a shared entryway, breezeway, or hallway, depending on the building type.  The landlord decides what condition is appropriate for the common area.  If you find work that needs to be done, you must notify the landlord in writing.  All maintenance costs for the common area will be included as an operating expense when CAM fees are determined. 

8. UTILITY SERVICE

Tenant shall be responsible pursuant to Section 5(a), for reimbursing Landlord for Tenant’s Proportionate Share of the cost of all utilities, including water, trash, and recycling services provided to the Shopping Center.  Landlord, in Landlord’s sole discretion, may elect to have the Leased Premises separately submetered or metered, and Tenant shall be responsible for the initial connection charges and deposits and all charges and costs for separately metered or submetered utility services, including heat, gas, electricity, and telephone services.  Tenant shall be responsible for all periodic utility usage charges regarding services associated exclusively with the Leased Premises and pay directly to provider the cost of all heat, gas, electricity, telephone, and other telecommunications services including, but not limited to, initial connection charges and deposits.  Tenant shall pay all costs caused by Tenant introducing excessive pollutants into the sanitary or storm sewer system, including permits, fees, assessments, fines, and charges levied by any governmental subdivision for any pollutants or solids other than ordinary human waste.  Notwithstanding the foregoing, Tenant shall remain responsible for reimbursing Landlord for the costs of all utilities provided to the Leased Premises and for Tenant’s Proportionate Share of the costs of all utilities provided to the Common Areas of the Shopping Center, which Landlord may bill Tenant for quarterly and Tenant will pay within thirty (30) days of receipt of invoice therefor.  Any costs incurred by Landlord pursuant to this Section 8 shall be included as an Operating Expense.

If there are shared utilities, the tenant must pay their proportionate share to the landlord.  This includes water, trash, and recycling services.  If the landlord wants to submeter the utilities (have a shared expense for the building broken down to each individual unit – for example, instead of a shared water bill, a separate water meter is placed in each unit), the tenant will be responsible for any initial fees and costs of starting service.  This includes electricity, water, telephone, and gas.  

If the tenant dumps anything but waste into the sanitary system, the landlord will ask for reimbursement for its repair, even if it is a shared service.  For example, if your customers or employees are flushing tampons down the toilet and it clogs the main sewer line outside the building, you will be responsible for the repair.

The last part is just a reminder that utilities for the common areas will be billed back to the tenants as CAM fees.    

9. SIGNS 

Tenant may affix and maintain upon the glass panes and supports of the show windows, and if within twelve (12) inches of any window, upon the exterior walls of the Leased Premises, only such signs, advertising placards, names, insignia, trademarks and descriptive material as shall have first received the written approval of Landlord as to type, size, color, location, copy nature and display qualities.  Anything to the contrary in this Lease notwithstanding, Tenant shall not affix any sign to the roof.  Tenant understands that Landlord may adopt or revise new or different sign criteria for the Shopping Center from time to time during the term of this Lease.  If the sign criteria is changed, Tenant agrees, at Tenant’s sole expense, to change Tenant’s sign to comply with same; furthermore, Tenant understands that such change may not be universally achieved, nor at any one given time due to other tenants’ various lease terms; however, Tenant shall comply with same upon written request of Landlord, even if other tenants need not yet comply.

You can place signs on your windows according to the guidelines presented. However, you must first receive the landlord’s permission and approval for the design.  You cannot put any sign on the roof.  The landlord can revise the sign policy as they see fit, and you will have to pay to have your signs altered to meet these criteria.  Even if other tenants don’t comply, you still have to.  

Subject to Landlord’s approval and compliance with all Applicable Laws and sign criteria, Tenant, at Tenant’s sole cost and expense, shall have the right to install and maintain the following signage:

(a) The tenant’s standard signage is on the exterior of the leased premises above the storefront.

(b) One panel on each side of the multi-tenant pylon sign for the Shopping Center (the “Shopping Center Sign”) in a location assigned by Landlord.  Tenant, at its sole cost and expense, is responsible for the cost of the fabrication and installation of the Tenant’s panel on Shopping Center Sign and Tenant’s Proportionate Share of the maintenance of the Shopping Center Sign.  

Tenant, at its sole cost and expense, is responsible for (i) approval and compliance with all Applicable Laws for the foregoing signage and (ii) the installation and maintenance of all Tenant’s signage. 

You can place a sign above your storefront, and you get one panel on each side of the pylon sign for the shopping center.  You have to pay for the signs and follow the landlord’s rules regarding size and location.  The landlord will usually provide a size guideline so that all the store-front signs are of uniform size.  Also, remember that many cities also have regulations regarding these types of signs.  The company that makes the signs usually will know the local laws, but you should ensure you don’t get a sign you can’t legally use.  

You must pay your proportionate share of the pylon sign maintenance, which will be billed as part of the CAM fee. 

10. USE  

Tenant warrants and represents to Landlord that the Leased Premises shall only be used solely for the Permitted Use set forth in Section 1 and for no other purpose, including those purposes prohibited by Exhibit C attached hereto and incorporated herein.  Tenant’s use shall further be subject to and restricted by the applicable rules and regulations to the Shopping Center set forth on Exhibit D attached hereto and incorporated herein, as same may be adopted or amended from time to time by the Landlord and the Encumbrances.  Any change in such use may be made only with the prior written approval of Landlord.

You can only use your leased space for the permitted use in Section 1.  You cannot use the space for other purposes, including those prohibited by Exhibit C.  There may also be restrictions in Exhibit D, which the landlord can change and update.  Any change to the use of your space must be approved by the landlord in writing.  

Landlords want to avoid signing a lease with you to open a nail salon and then have you change your mind and open a low-end liquor store.  Additionally, the landlord may be bound by restrictions in other leases.  If a BBQ restaurant is already in the shopping center, the landlord may have agreed not to allow any other establishment that serves smoked or BBQ meat.  

There may be blanket restrictions on the sale of alcohol, tobacco products, pornography, and more.  You may be unable to sell specific non-food items if another business within the same shopping center sells the same type of products.

11. INSURANCE

(a) Landlord Policies.  Landlord shall at all times during the Lease Term maintain a policy or policies of insurance insuring the Shopping Center for loss or damage by fire, explosion, and other customary hazards, subject to commercially reasonable deductible amounts.  Such policies will not insure any personal property (including, but not limited to, any furniture, machinery, goods, or supplies) of Tenant or which Tenant may have in the Leased Premises or any fixtures installed by or paid for by Tenant upon or within the Leased Premises or any Alterations or other improvements which Tenant may construct or install on the Leased Premises or any of Tenant’s Signs, insurance for all of which shall be Tenant’s responsibility.

The landlord must always maintain an insurance policy on the building.  The landlord’s policy will not cover the tenant’s personal property, including your fixtures, inventory, and signs.  The landlord basically insures the shell of the building only.  

(b) Effect of Tenant’s Use.  Tenant shall not permit the Leased Premises to be used in any way which would be hazardous or which would in any way increase the cost of or render void any insurance on the Leased Premises, and Tenant shall immediately, on demand, cease any use which violates the foregoing or to which Landlord’s insurer or any governmental or regulatory authority objects.

If the tenant’s business operations increase the premium or may potentially cause the landlord’s insurance policy to be voided, you must immediately cease the activity causing the issue.  

(c) Tenant Insurance.  Tenant, at its sole cost and expense, shall procure and maintain throughout the Term of this Lease a policy or policies of insurance insuring Landlord and Tenant against all claims for property damages, personal injury or death of others occurring on or in connection with: (i) the Leased Premises; (ii) the condition of the Leased Premises; (iii) Tenant’s operations in and maintenance and use of the Leased Premises; (iv) Tenant’s and Tenant’s Representatives’ use of the Common Areas of the Shopping Center, and (v) Tenant’s liability assumed under this Lease.  The limits of such policy or policies shall be not less than $1,000,000.00 combined single limit coverage per occurrence for injury to persons (including death) and/or property damage or destruction, including loss of use.  Tenant shall be solely responsible for and agrees to keep all personal property and equipment in the Leased Premises fully insured and to maintain adequate business interruption insurance.

The tenant must have insurance on the leased space as outlined above.  The landlord dictates how much insurance you must carry and what is covered.  The easiest way to comply is to copy this lease section and send it to your insurance agent.  

(d) Additional Tenant Insurance Obligations.  All such policies shall be procured by Tenant from insurance companies satisfactory to Landlord naming the following as additional insureds: (i) Landlord; and (ii) Landlord’s lender, if any.  All such policies must be in broad form satisfactory to Landlord, and Tenant shall obtain any available endorsements required by Landlord.  Certified copies of such policies, together with receipt for payment of premiums, shall be delivered to Landlord prior to the Delivery Date of this Lease.  Not less than fifteen (15) days prior to the expiration date of any such policies, certified copies of renewal policies and evidence of the payment of renewal premiums shall be delivered to Landlord.  All such original and renewal policies shall provide for at least thirty (30) days written notice to Landlord before such policy may be canceled or changed to reduce insurance coverage provided thereby.  

The tenant must prove sufficient insurance before the lease begins and when the policy is renewed.  Your insurance company must provide written notice to the landlord at least 30 days before the policy is canceled.  This ensures that you, the tenant, can’t just cancel the policy after they show proof of insurance.  

12. COMPLIANCE WITH APPLICABLE LAWS AND ENVIRONMENTAL REQUIREMENTS  

(a) Tenant shall comply with all Applicable Laws relating to the use, condition and occupancy of and business conducted on the Leased Premises, including, without limitation, the Americans with Disabilities Act (“ADA”), the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, and the rules, regulations and directives of the U.S. Environmental Protection Agency.  Tenant shall be responsible for the costs of any alterations or modifications of the Leased Premises that may be required under Applicable Laws for Tenant’s specific use or occupancy.  Landlord represents that the Common Area was constructed in accordance with the requirements of the ADA as they existed at the time Landlord constructed the Shopping Center.  If there are any changes to the ADA which require changes to the Common Area, Landlord will improve the Common Area of the Shopping Center in order to comply with the ADA.  All costs incurred by Landlord in complying with the terms of the immediately-preceding sentence may be included as Operating Expenses.

The tenant must comply with all legal and regulatory guidelines, including the ADA and EPA.  The tenant is responsible for making and keeping the leased space compliant with these regulatory guidelines.  

The landlord attests that the common areas were built to compliance and is responsible for maintaining the common areas in compliance with these guidelines.  If the landlord must pay to update the common areas to meet new guidelines, they will pass these costs along as CAM fees.  

(b) Except for Hazardous Material contained in products used by Tenant in de minimis quantities for ordinary cleaning and office purposes in compliance with all Environmental Requirements, Tenant shall not permit or cause any party to bring any Hazardous Material upon the Leased Premises or transport, store, use, generate, manufacture, dispose, or release any Hazardous Material on or from the Leased Premises without Landlord’s prior written consent.  Tenant, at its sole cost and expense, shall operate its business in the Leased Premises in compliance with all Environmental Requirements and all requirements of this Lease and shall not cause or allow any use of the Leased Premises that would constitute a public or private nuisance.  Tenant shall not install or place any above-ground or underground storage tanks on the Property.  Tenant shall promptly deliver to Landlord a copy of any notice of violation relating to the Leased Premises of any Environmental Requirement.  

You can’t use any hazardous materials in the leased space.  You must comply with the government’s environmental requirements.  You can’t install any above or below-ground storage tanks on the property. 

(c) The term “Environmental Requirements” means all applicable present and future statutes, regulations, ordinances, rules, codes, judgments, permits, authorizations, orders, policies or other similar requirements of any governmental authority, agency or court regulating or relating to health, safety, or environmental conditions on, under, or about the Leased Premises or the environment, including without limitation, the following:  the Comprehensive Environmental Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; the Clean Air Act; the Clean Water Act; the Toxic Substances Control Act and all state and local counterparts thereto, and any common or civil law obligations including, without limitation, nuisance or trespass, and any other requirements of this Lease.  The term “Hazardous Materials” means and includes any substance, material, waste, pollutant, or contaminant that is or could be regulated under any Environmental Requirement or that may adversely affect human health or the environment, including, without limitation, any solid or hazardous waste, hazardous substance, asbestos, petroleum (including crude oil or any fraction thereof, natural gas, synthetic gas, polychlorinated biphenyls (PCBs), and radioactive material).  For purposes of Environmental Requirements, to the extent authorized by law, Tenant is and shall be deemed to be the responsible party, including without limitation, the “owner” and “operator” of Tenant’s “facility” and the “owner” of all Hazardous Materials brought on the Leased Premises by Tenant, its agents, employees, contractors or invitees, and the wastes, by-products, or residues generated, resulting, or produced therefrom.

You REALLY can’t bring any hazardous materials into the leased space.  

(d) Tenant shall indemnify, defend, and hold Landlord harmless from and against any and all losses (including, without limitation, diminution in value of the Leased Premises or the Shopping Center and loss of rental income from the Shopping Center), claims, demands, actions, suits, damages (including, without limitation, punitive damages), expenses (including, without limitation, remediation, removal, repair, corrective action, or cleanup expenses), and costs (including, without limitation, actual attorneys’ fees, consultant fees or expert fees and including, without limitation, removal or management of any asbestos brought into the Leased Premises or disturbed in breach of the requirements of this section, regardless of whether such removal or management is required by law) which are brought or recoverable against, or suffered or incurred by Landlord as a result of any release of Hazardous Materials by Tenant, its agents, employees, contractors, assignees, or invitees or any breach of the requirements under this section by Tenant, its agents, employees, contractors, subtenants, assignees, or invitees regardless of whether Tenant had knowledge of such noncompliance.  The obligations of Tenant under this section shall survive any termination of this Lease.

If you bring hazardous materials into the leased space, you are responsible for any damages, cleanup expenses, loss of value of the shopping center, attorney’s fees, etc.  You will still be responsible even after your lease ends.  

13. ASSIGNMENT AND SUBLETTING

(a) Tenant shall not, without prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned, or delayed:

• (i) Assign or in any manner transfer this Lease or any estate or interest therein;
• (ii) Permit an assignment of this Lease or any estate or interest therein by operation of law;
• (iii) Sublet any part of Leased Premises;
• (iv) Grant any license, concession or other right of occupancy of any portion of the Leased Premises; or
• (v) Permit the use of the Leased Premises by any parties other than Tenant, its agents, and employees except as may be required by Tenant in order to carry out the Permitted Use as set forth in this Lease.

If your business fails, you may wish to assign the lease or sublet the leased space so you don’t have to keep making payments.  Assigning the lease means that someone “takes over” the lease in your place, with the terms and conditions of the lease maintained.  A sublease is when someone signs a new contract with the tenant in order to use the leased space under a new set of terms or conditions.  

This section states you can’t sublet the space, assign the lease, or let anyone else use the space unless you get prior written permission from the landlord.  The landlord signed a lease with you and your business and does not have to allow any sublet or assignment of which they don’t approve.  However, landlords (especially of shopping centers) want their buildings to be occupied.  So, they usually won’t withhold permission if you find a suitable subtenant. 

(b) Any such acts without Landlord’s prior written consent shall be void and of no effect.

Any contract, sublease, or agreement will be void if you do.  

(c) Any assignment or subletting of this Lease shall be expressly subject to all of the terms and provisions of this Lease, including any use restrictions.  Tenant shall not, without Landlord’s prior written consent, assign this Lease or sublet all or any portion of the Leased Premises for any monthly rent which is, or could become, less than the Rent from time to time due hereunder (per square foot), and any such act shall be void and of no effect.  Consent by Landlord to one or more assignments or sublettings shall not operate as a waiver of Landlord’s rights as to any subsequent assignments and sublettings.

You cannot sublet your lease without the landlord’s approval.  Any sublease must follow the terms of the original lease.  Additionally, if the landlord approves a sublease, it is only for that sublease/subtenant and not for any other.  

(d) In the event of an approved subletting or assignment, Landlord agrees to accept payment of Rent from Tenant, Tenant’s assignee, or sublessee.  Notwithstanding any assignment or subletting, Tenant and any guarantor of Tenant’s obligations under this Lease shall at all times remain fully responsible and liable for the payment of the Rent herein specified and for compliance with all of Tenant’s other obligations under this Lease.  No direct collection by Landlord from any such assignee or sublessee shall be construed to constitute a novation or a release of Tenant or any guarantor of Tenant from the performance of its obligations hereunder.  Receipt by Landlord of rent from any assignee, sublessee, or occupant of the Leased Premises shall not be deemed a waiver of the covenant contained in this Lease against assignment and subletting or a release of Tenant under this Lease.  The receipt by Landlord from any such assignee or sublessee obligated to make payments of rent shall be a full and complete release, discharge, and acquittance to such assignee or sublessee to the extent of any amount so paid to Landlord.  Landlord is authorized and empowered, on behalf of Tenant, to endorse the name of Tenant upon any check, draft, or other instrument payable to Tenant evidencing payment of rent or any part thereof and to receive and apply the proceeds therefrom in accordance with the terms hereof.  Tenant shall not mortgage, pledge or otherwise encumber its interest in this Lease or in the Leased Premises.

If the landlord allows you to sublet the leased premises, it does not relieve you of your obligations as a tenant under this lease.  You are still responsible for all terms and conditions of the lease.  

If the landlord collects rent directly from a sublessee (the person or business to whom you sublet the space) that was not approved, it does not mean the landlord agrees to the sublease.  

The landlord can endorse the tenant’s name on any rent check from a sublessee written out to the tenant instead of the landlord.    

(e) If Tenant requests Landlord’s consent to an assignment of this Lease or subletting of all or a part of the Leased Premises, it shall submit to Landlord, in writing, the name of the proposed assignee or subtenant and the nature and character of the business of the proposed assignee or subtenant, the term, use, rent and other particulars of the proposed subletting or assignment, including, without limitation, evidence satisfactory to Landlord that the proposed subtenant or assignee is financially responsible and will immediately occupy and thereafter use the Leased Premises (or any sublet portion thereof for the remainder of the Term of this Lease (or for the entire term of the sublease, if shorter).  

If you want to assign (have someone take over the lease space for you) or sublet (any or all of) the leased space, you must submit the request in writing with the above details.  

(f) In the event of any subletting or assignment by Tenant as hereinabove provided, if any rents received by Tenant under any such sublease are in excess of the Rent payable by Tenant under this Lease (per square foot), or any additional consideration is paid to Tenant by the assignee under such assignment, the Landlord may, at its option, either:

• (i) Declare such excess rents under any sublease or such additional consideration for an assignment to be due and payable by Tenant to Landlord as extra Rent hereunder; or
• (ii) Elect to cancel this Lease as provided above.

If you sublet the leased space, you can only collect rent due under the original lease.  You can’t profit from the sublet.  Any excess funds received must be paid to the landlord, or the landlord can cancel the lease.   

(g) Landlord shall be reimbursed by Tenant for any costs or expenses incurred as a result of Tenant’s request to consent to any such assignment or subletting, including reasonable legal costs.

If the landlord incurs costs, including legal fees, associated with the tenant requesting to sublease their space, the tenant is responsible for paying.

(h) Notwithstanding anything to the contrary set forth in this Section 13, Tenant shall have the right to assign the Lease or sublet the Leased Premises without Landlord’s consent to any of the following (a “Permitted Transferee”) (i) a parent, subsidiary or other affiliate of Tenant or the principals of Tenant or Guarantor; (ii) an entity surviving a consolidation or merger with Tenant and/or an affiliate of Tenant; (iii) an entity or person acquiring all or substantially all of Tenant’s or an affiliate of Tenant’s stock, other voting/membership interest or assets; (iv) a doctor (or professional corporation or other entity owned or controlled by such doctor) with whom Tenant has entered an agreement for the performance of business support services for such doctor (or professional corporation or other entity owned or controlled by such doctor) at the Leased Premises; or (v) an entity or person acquiring at least five (5) of Tenant’s or an affiliate of Tenant’s retail/office locations in the state where the Leased Premises are located (hereinafter, collectively, referred to as “Permitted Transfer“), provided: (1) Tenant is not in default under this Lease; (2) Tenant shall give Landlord written notice at least thirty (30) days prior to the effective date of the proposed Permitted Transfer (provided that, if prohibited by confidentiality in connection with a proposed Permitted Transfer, Tenant shall give Landlord written notice within ten (10) days after the effective date of the proposed Permitted Transfer); (3) transferee assumes in writing all of Tenant’s obligations under this Lease; and (4) Landlord receives a fully executed copy of the assignment or sublease between Tenant and the Permitted Transferee.  Tenant and Guarantor shall, nevertheless, at all times, remain fully responsible and liable for the payment of Rent and the performance and observance of all of Tenant’s other obligations under the Lease following any Permitted Transfer.  

The tenant can automatically assign the lease IF it is to a “permitted transferee  .”This section allows an assignment without the landlord’s approval if you sell your business, are taken over, are merged with another company, or if someone buys at least 5 of your business’s commercial leases (sometimes companies will buy leases in bulk so that they can change all the locations to their brand.  A recent example of this was Cava buying Zoe’s Kitchen locations in order to rebrand them).

If this happens, you must notify the landlord 30 days before the transition and be in good standing (not in default).  The assignee of the lease must agree in writing to assume all responsibilities.  

No matter what, the tenant still remains responsible for the lease, so if you sell your business and the new company doesn’t pay the rent, you will still be responsible.  

14. ALTERATIONS AND IMPROVEMENTS

(a) Landlord Consent Required.  Following the Delivery Date and subject to the terms and conditions contained herein, Tenant shall be allowed to make initial alterations to the Leased Premises in accordance with the terms of this Lease (the “Tenant’s Work“).  All of Tenant’s construction, improvements, and Alterations, including, without limitation, the Tenant’s Work, will comply with all Applicable Laws.  Tenant shall not make or perform, or permit the making or performance of, any initial or subsequent tenant finish work or any Alterations without Landlord’s prior consent.  Landlord shall be under no obligation to allow Alterations of any kind and may withhold its consent without cause.  Notwithstanding the foregoing provisions or Landlord’s consent to any Alterations, all Alterations shall be made and performed in conformity with and subject to the following provisions: (1) all Alterations shall be made and performed at Tenant’s sole cost and expense (subject to the Tenant Improvement Allowance for the Tenant’s Work) in a good and workmanlike manner; (2) Alterations shall be made only by contractors or mechanics approved by Landlord, such approval not to be unreasonably withheld; and Landlord may post on or about the Leased Premises notices of non-responsibility for payment; (3) Tenant shall submit to Landlord detailed plans and specifications (including architectural layout, mechanical and structural drawings) for each proposed Alteration and shall not commence any such Alteration without first obtaining Landlord’s written approval of such plans and specifications (provided, Tenant acknowledges that any Landlord review is solely for Landlord’s own purposes and does not imply nor shall Landlord have any liability for, compliance with Applicable Laws); (4) prior to the commencement of each proposed Alteration, Tenant shall furnish to Landlord a certificate evidencing worker’s compensation insurance coverage for all persons to be employed in connection with such Alterations, including those to be employed by all contractors and subcontractors, and of comprehensive public liability insurance (including property damage coverage) in which Landlord, its agents, and any lessor under any ground or underlying lease, and any mortgagee of the Building shall be named as parties insured, which policies shall be issued by companies and shall be in form and amounts satisfactory to Landlord and shall be maintained by Tenant until the completion of such Alteration; 

If you want to do construction to the space (build out to your business’s needs or make any alterations or improvements), you must submit architectural plans to the landlord in order to get permission ahead of time.  The landlord does not have to give you permission.  The tenant must pay for all alterations, except as outlined if there is a TI (tenant improvement) allowance.  The landlord must approve all contractors and anyone working on the space.  Tenant must have workers’ compensation insurance for anyone working in the space and general liability insurance for the construction.  All alterations must comply with all applicable laws (local, state, and federal).  

(5) Tenant shall cause its contractor and each subcontractor to provide Landlord with a certificate of completion of the Alterations and a bills paid affidavit and final lien waiver; (6) Tenant shall, if required by Landlord at the time of Landlord’s consent to the Alterations, agree to restore the Leased Premises at the termination of this Lease to their condition prior to making such Alterations; (7) all permits, approvals and certificates required by all governmental authorities shall be timely obtained by Tenant and submitted to Landlord and (8) all materials and equipment to be incorporated in the Leased Premises as a result of all Alterations shall be new and first quality, and such materials or equipment shall not be subject to any lien, encumbrance, chattel mortgage or title retention or security agreement.  Tenant shall keep the Leased Premises and the Shopping Center free from any liens arising out of any work performed, materials furnished, or obligations incurred by or on behalf of Tenant, and Tenant shall and does hereby indemnify and hold harmless Landlord therefrom.  

The landlord does not want to have a lien placed on the building.  Therefore, the contractor and all subcontractors must provide the landlord with a certificate of completion, a statement that all bills have been paid, and a lien waiver.  The landlord may require that the tenant agree, before commencement of work, to return the space to its original condition at the termination of the lease.  You must submit all government work permits, approvals, and certificates to the landlord.  You must use all new materials and ensure that no liens will be placed on the building for any reason.  

(b) Compliance with Laws.  Notwithstanding Landlord’s approval of plans and specifications for any Alterations, including without limitations the Plans for the Tenant’s Work, all Alterations shall be made and performed in full compliance with all Applicable Laws and orders, including, without limitation, all directions, pursuant to law, of all public officers, and with all applicable rules, orders, regulations and requirements of the local Board of Fire Underwriters or any similar body.  Landlord’s approval shall not in any way be considered an indication that the plans and specifications comply with Applicable Laws.  Whether such Alterations are being performed by Tenant in connection with Tenant’s initial occupancy of the Leased Premises or subsequently, Tenant agrees to make proper application for, and obtain, a building permit and a certificate of occupancy from the city in which the Leased Premises are located.  Tenant shall furnish copies of such permit and certificate to Landlord promptly after issuance of same.  

The tenant’s work must comply with all applicable laws.  The landlord’s approval does not indicate that these laws have been met – that responsibility is on the tenant.  It doesn’t matter if your alterations to the space are being made before your business opens or if they are being made later; you must obtain a certificate of occupancy from the city and provide a copy to the landlord.  

(c) Ownership Improvements.  All appurtenances, fixtures, improvements, and other property attached to or installed in the Leased Premises, whether by Landlord or Tenant or others, and whether at Landlord’s expense or Tenant’s expense, or the joint expense of Landlord and Tenant, shall be and remain the property of Landlord.  If no Event of Default has occurred, Landlord may, at its sole option and in its sole discretion, and if Landlord so elects, Tenant shall remove any such property belonging to Tenant at the end of the Term hereof, and Tenant shall repair or, at Landlord’s option, shall pay to Landlord the cost of repairing any damage arising from such removal.  Any replacements of any property of Landlord, whether made at Tenant’s expense or otherwise, shall be and remain the property of Landlord. 

All improvements to the lease are and will remain the landlord’s property.  If you build out the space with tile, walls, bathrooms, overhead lights, etc., these are all the landlord’s property, regardless of who paid for them (whether or not you received a TI).

The Landlord acknowledges and agrees that all trade fixtures supplied by Tenant shall, notwithstanding the affixation or attachment thereof to the Leased Premises, at all times remain the property of the Tenant.  At the expiration or earlier termination of the Lease, the Tenant shall have the right to remove any and all trade fixtures and personal property in accordance with Section 6(c) of this Lease.  The Tenant shall repair all damage caused by removal of any personal property items, cap any plumbing, repair the area around the pipes, and leave the Leased Premises in clean, broom-swept condition with any remaining alterations or leasehold improvements to become the property of the Landlord. 

All trade fixtures supplied by the tenant, whether or not they are attached to the leased space, are the tenant’s property.  This may include cooking equipment, refrigerators, built-in sales racks, and other such business-specific trade fixtures.  The tenant must repair any damages caused by removing these fixtures at the end of the lease.  The tenant must return the property broom-clean with the rest of the alterations in place at the end of the lease.  

For clarity, the Tenant shall not be required to restore the Leased Premises back to its original condition at the beginning of the Term, nor shall it be required to remove constructed alterations such as walls, bathrooms, ceilings, built in cabinetry, flooring, carpet or plumbing.  For greater certainty, the Tenant’s trade fixtures exclude and Tenant shall not remove any of the following (all of which are deemed to be leasehold improvements): (i) heating, ventilating, air-conditioning, electrical, plumbing and other similar systems, facilities and equipment, including washroom fixtures; (ii) floor coverings affixed to the floor of the Leased Premises; (iii) light fixtures which are not specialty light fixtures installed by the Tenant; (iv) internal stairways and doors; (v) ceilings and sprinkler systems and equipment; (vi) the storefront or doors; (vii) escalators or elevators; (viii) bathroom fixtures and (ix) any fixtures, facilities, equipment or installations which were in the Leased Premises when they were delivered to the Tenant or were installed by or at the expense of the Landlord.

The tenant is NOT required to return the space to its original condition at the end of the lease.  You don’t have to remove walls, bathrooms, etc.  The tenant specifically does not have to remove the items listed above.  These items are not considered trade fixtures and are the property of the landlord.  

15. CONDEMNATION

If the whole or any substantial part of the Leased Premises shall be taken or condemned for any public or quasi-public use under governmental law, ordinance, or regulation or by right of eminent domain, or by private purchase in lieu thereof, then Landlord may, at its option, terminate this Lease and the Rent shall be abated during the unexpired portion of this Lease, effective when the physical taking of said Leased Premises shall occur.  In the event this Lease is not terminated, the Rent for any portion of the Leased Premises so taken or condemned shall be abated during the unexpired Term of this Lease, effective when the physical taking of said portion of the Leased Premises shall occur.  All compensation awarded for any such taking or condemnation or sale proceeds in lieu thereof, shall be the property of Landlord, and Tenant shall have no claim thereto, the same being hereby expressly waived by Tenant, except for any portions of such award or proceeds which are specifically allocated by the condemning or purchasing party for the taking of or damage to trade fixtures of Tenant, which Tenant specifically reserves to itself.  In the event all or a portion of the Rent is abated pursuant to the provisions of this Paragraph, the Rent shall be apportioned for such monthly period(s) of which abatement begins as reasonably determined by Landlord.

Suppose the government condemns, seizes, or otherwise takes control of the building for any reason, such as eminent domain. In that case, the landlord will stop charging the tenant rent once the physical taking of the property has occurred.  This is also true if the landlord sells the building instead of it being taken by the government.  The tenant has no rights to sue the landlord over this process and has no claims to any compensation awarded to the landlord unless the government specifically earmarked the compensation for the tenants’ damages or trade fixtures.    

16. FIRE AND CASUALTY

(a) Notice by Tenant.  If the Leased Premises should be damaged or destroyed by fire, tornado, or other casualty, Tenant shall give immediate verbal and written notice thereof to Landlord.

Notify the landlord if you have a fire or other damage to the building.  

(b) Destruction of Building.  If the Leased Premises should be totally destroyed by fire, tornado, or other casualty, or if it should be so damaged thereby that rebuilding or repairs cannot reasonably be completed within one hundred eighty (180) days after the date on which Landlord is notified by Tenant of such damage, at the option of either Landlord or Tenant, this Lease shall terminate, and the Rent shall be abated during the unexpired portion of this Lease effective upon the date of occurrence of such damage.

If the leased space of your business is destroyed by fire or other casualty, and it can be repaired or rebuilt within 180 days, the lease will stay in effect.  If it takes more than 180 days, both the landlord and the tenant can terminate the lease, and you won’t have to pay rent for the rest of the lease terms.  

(c) Restoration of Building.  If the Leased Premises should be damaged by any peril that will be wholly compensated (subject to deductibles) by the insurance maintained by Landlord or if Landlord, in its sole discretion, so chooses notwithstanding a deficiency in such proceeds, and if rebuilding or repairs can reasonably be completed within one hundred eighty (180) days after the date on which Landlord is notified by Tenant of such damage, this Lease shall not terminate, and Landlord shall then proceed with reasonable diligence to rebuild and repair the Leased Premises to substantially the same condition in which it existed prior to such damage.  Landlord shall not be required, however, to rebuild, repair, or replace Tenant’s furniture, fixtures, Alterations, inventory, or other personal property.  If the Leased Premises are untenantable in whole or in part during restoration, the Rent payable hereunder during the period in which they are untenantable shall be reduced by the amount of business or rent interruption insurance proceeds actually received by Landlord with respect to the Leased Premises.  If Landlord should fail to complete such repairs and rebuilding within one hundred eighty (180) days (exclusive of delays due to Force Majeure) after the date on which Landlord is notified by Tenant of such damage, Tenant may terminate this Lease by delivering written notice of termination to Landlord.  Such termination shall be Tenant’s exclusive remedy, and all rights and obligations of the parties under the Lease shall then cease.  If Landlord does not receive insurance proceeds sufficient for restoration (such as when its mortgagee does not allow the proceeds to be used for such purposes) and if restoration is economically reasonably feasible, Tenant will have the option of supplementing available proceeds to allow restoration, and Tenant’s actual costs will be reimbursed through a monthly pro rata credit against rent beginning after Landlord’s mortgage has been paid in full.

If the leased space or building is destroyed by fire or other casualty covered by the landlord’s insurance, the lease stays in effect if it can be repaired or rebuilt within 180 days.  The landlord will rebuild the shell of the building only.  The tenant must have their own insurance and will be responsible for replacing all alterations, inventory, furniture, and fixtures in their own leased space.

If the leased space cannot be used for business after the fire and during the repair process, the tenant’s rent will be reduced only by the amount the landlord receives from their insurance company for business interruption coverage.  

If the landlord cannot repair the building within 180 days (excluding delays due to Force Majeure (“acts of God”)), the tenant can terminate the lease.  However, the tenant cannot sue for damages.  

(d) Tenant Responsibility.  Notwithstanding the foregoing provisions of this Section 16, Tenant agrees that if the Leased Premises, the Building, and/or Shopping Center are damaged by fire or other casualty caused by the fault or negligence of Tenant or Tenant’s Representatives, Tenant shall have no option to terminate this Lease even if the damage cannot be repaired within one hundred eighty (180) days, and the Rent shall not be abated or reduced before or during the repair period.  Tenant shall pay to Landlord, as Additional Rent, within ten (10) days of Landlord’s demand therefore, the Landlord’s deductible under the Landlord’s insurance of the Leased Premises, Building, and/or the Shopping Center.

If the fire or other damage was caused by the tenant’s negligence, you can’t terminate the lease even if the building isn’t repaired within 180 days, and the rent will not be reduced during the repair period.  Additionally, the tenant must pay the landlord’s insurance deductible as additional rent.  

(e) Landlord Termination Option.  Notwithstanding anything herein to the contrary, if Landlord or its lender requires that the insurance proceeds be applied to such indebtedness, then Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within fifteen (15) days after such requirement is imposed.  All rights and obligations under this Lease shall then cease.

If the landlord’s insurance proceeds won’t cover the cost of replacing/repairing the building because of other indebtedness, the landlord can terminate the lease.  

17. WAIVER OF SUBROGATION

To the extent that Landlord or Tenant receives casualty insurance proceeds, such recipient hereby waives and releases any and all rights, claims, demands and causes of action such recipient may have against the other on account of any loss or damage occasioned to such recipient or its businesses, real and personal properties, the Leased Premises, the Shopping Center, or its contents, arising from any risk or peril covered by any insurance policy carried by either party and for which such proceeds are actually received.  Inasmuch as the above mutual waivers will preclude the assignment of any such claim by way of subrogation (or otherwise) to an insurance company (or any other person), each party hereto agrees immediately to give to its respective insurance companies written notice of the terms of such mutual waivers and to have their respective insurance policies properly endorsed, if necessary, to prevent the invalidation of such insurance coverages by reason of such waivers.  This provision shall be cumulative of Section 18 below.

Subrogation means “the substitution of one person or group by another in respect of a debt or insurance claim, accompanied by the transfer of any associated rights and duties.”  This section states that if the tenant and/or landlord receive any money from their insurance company, they each waive the ability to seek damages against the other.  Basically, you can’t go after each other’s insurance proceeds, and if a fire happens, you need to send this section and the next to your insurance company so they don’t try.   

18. WAIVER

To the fullest extent permitted by law, Tenant, on its behalf and on behalf of its officers, directors, owners, contractors, subcontractors, employees, agents, and invitees (the “Tenant Parties”), waives all fines, suits, losses, costs, liabilities, claims, demands, actions, and judgments of every kind and character, whether at law or in equity (collectively, the “Claims”) against Landlord, its authorized representatives, and their respective officers, directors, owners, agents, employees, and contractors (the “Landlord Parties”), and knowingly and voluntarily assumes the risk of, and agrees that Landlord Parties are not liable to any Tenant Parties for any of the following:

You, as the tenant, and all your representatives waive the right to sue the landlord and all of their representatives for any of the following:

• (i) any injury or damage to person or property (including the resulting loss of use, economic losses, and consequential or resulting damages of any kind from any cause) due to the condition or design of, or any defect in, the Leased Premises or the Shopping Center that exists now or occurs in the future;
• (ii) any injury or damage to person or property (including the resulting loss of use, economic losses, and consequential or resulting damages of any kind from any cause) due to the Leased Premises or the Shopping Center or related improvements or appurtenances being out of repair, or defects in or failure of pipes or wiring, or backing up of drains, or the bursting or leaking of pipes, faucets, and plumbing fixtures, or gas, water, steam, electricity, or oil leaking, escaping, or flowing into the Leased Premises;
• (iii) any loss or damage caused by the acts or omissions of other lessees in the Shopping Center or of any other persons; or
• (iv) any loss or damage to property or person occasioned by theft, fire, act of God, public enemy, injunction, riot, insurrection, war, court order, requisition, order of governmental authority, and any other cause.

You agree that you can’t sue the landlord even if damages occur because there is a defect in the building, there are electrical, water, or sewer issues, if damage occurs because of something another tenant does (or doesn’t do), and because of theft, fire, war, etc.   Basically, you agree not to sue the landlord for anything, no matter what happens or who is at fault.  

19. INDEMNITY AND EXCULPATION

EXCEPT TO THE EXTENT LIABILITY OF TENANT MAY BE WAIVED UNDER SECTION 17, TENANT SHALL INDEMNIFY, DEFEND, AND HOLD ALL LANDLORD PARTIES HARMLESS (AND WAIVES ANY CLAIM AGAINST ANY LANDLORD PARTY WITH RESPECT THERETO) FROM ALL CLAIMS, (INCLUDING THOSE CLAIMS RESULTING IN PART FROM THE NEGLIGENCE OF ANY LANDLORD PARTY BUT NOT INCLUDING THOSE CLAIMS RESULTING SOLELY FROM THE NEGLIGENCE OF ANY LANDLORD PARTY OR RESULTING FROM THE GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT OF ANY LANDLORD PARTY), ARISING OUT OF OR RELATING (DIRECTLY OR INDIRECTLY) TO THIS LEASE, THE TENANCY CREATED UNDER THIS LEASE, OR THE LEASED PREMISES, INCLUDING, WITHOUT LIMITATION: (I) ANY BODILY INJURY, DEATH AND/OR PROPERTY DAMAGE OCCURRING IN OR RESULTING FROM AN OCCURRENCE IN THE LEASED PREMISES DURING THE TERM; (II) ANY BREACH OR DEFAULT IN PERFORMANCE OF ANY OBLIGATION ON TENANT’S PART TO BE PERFORMED UNDER THIS LEASE, WHETHER BEFORE OR DURING THE TERM OR AFTER ITS EXPIRATION OR EARLIER TERMINATION; (III) ANY ACT, OMISSION, NEGLIGENCE, OR MISCONDUCT OF ANY TENANT PARTY, OR OF ANY OTHER PERSON ENTERING UPON THE LEASED PREMISES; (IV) ANY ALTERATIONS, ACTIVITIES, WORK, OR THINGS DONE, PERMITTED, ALLOWED, OR SUFFERED BY TENANT PARTIES IN, AT, OR ABOUT THE LEASED PREMISES OR THE SHOPPING CENTER, INCLUDING THE VIOLATION BY ANY TENANT PARTY OF ANY APPLICABLE LAW; AND (V) THE OCCUPANCY OR USE BY ANY TENANT PARTY OF THE LEASED PREMISES OR THE SHOPPING CENTER.

Remember my warning about ALL CAPITAL LETTERS from part one of this series?  This section reiterates that you can’t sue the landlord for anything that happens unless it is from gross negligence or intentional misconduct of the landlord (or their representatives).  This is a blanket statement, no matter what happens.  For example, if someone walks into your business and kills your employee, you cannot sue the landlord because the building isn’t safe—stuff like that.  

20. ASSIGNMENT OF LANDLORD’S INTEREST IN LEASE 

Landlord shall have the right to transfer and assign, in whole or in part, its rights and obligations with respect to the Shopping Center, the Leased Premises, and this Lease, including Tenant’s Security Deposit.  Upon and after such transfer, Landlord shall be released from any further obligation under this Lease; provided such successor agrees in writing to assume all of the obligations and responsibilities of Landlord under the Lease and Tenant agrees to look solely to Landlord’s successor for the performance of such obligations.

The landlord can sell the building, and your lease will go with it.  This releases the current landlord from all obligations and transfers them to the new one.  

21. LANDLORD’S LIEN

In addition to any statutory lien for Rent in Landlord’s favor, Landlord shall have, and Tenant hereby grants to Landlord, a continuing security interest for all Rent and other sums of money becoming due under this Lease from Tenant upon all personal property of Tenant (including, but not limited to Tenant’s furniture, trade fixtures, equipment and inventory) situated on or arising from the Leased Premises.  Such property shall not be removed without the consent of Landlord, which consent may be withheld by Landlord until all of Tenant’s duties and obligations have been performed in full.  In the event of a default under this Lease, Landlord shall have, in addition to any other remedies provided in this Lease or by law, all rights and remedies under the Texas Uniform Commercial Code, including without limitation the right to sell the property described in this Section at public or private sale upon five (5) days’ notice to Tenant.  Tenant hereby authorizes Landlord to file such financing statements and other instruments necessary or desirable in Landlord’s discretion to perfect the security interest hereby created.  

The landlord has a right to your business’s property, which you keep within the leased space as collateral for rent.  If you fail to pay rent, the landlord can seize and sell your property.

22. MERCHANT’S ASSOCIATION 

Intentionally omitted.

23. DEFAULT BY TENANT  

The following shall be “Events of Default” by Tenant under this Lease:

This section will outline the ways you can default on the lease – these are the things that you don’t want to do!  The following section discusses what happens if you don’t live up to your end of the bargain and default on the lease.  

(a) Any failure by Tenant to pay Rent or make any other payment required to be made by Tenant hereunder;  

You don’t pay rent or any other payment that is due.  This one should be pretty obvious.  

(b) A failure by Tenant to observe and perform any other provision of this Lease to be observed or performed by the Tenant, where such failure continues for fifteen (15) days after written notice thereof by Landlord to Tenant, except that this fifteen (15) day period shall be extended for a reasonable period of time if the alleged default is not reasonably capable of cure within such fifteen (15) day period and Tenant proceeds to diligently cure the default; provided that Landlord shall not be required to provide Tenant notice of, and an opportunity to cure, a default under this subsection on more than one (1) occasion during any consecutive twelve (12) month period or more than four (4) occasions total throughout the Term of this Lease;

If you don’t follow the conditions of the lease, the landlord must give you a written notice.  You have 15 days to comply, or you will be in default.  If it is unreasonable to comply within 15 days, a reasonable extension will be given.  However, the landlord must only provide you with one notice per year and no more than 4 during the entire lease period.  

(c) Tenant shall file a petition or be adjudged bankrupt or insolvent under the Federal Bankruptcy Act, as amended, or any similar law or statute of the United States or any state or a receiver or trustee shall be appointed for all or substantially all of the assets of Tenant, and such bankruptcy or receivership shall not be dismissed within thirty (30) days; or Tenant shall make a transfer in fraud of creditors or shall make an assignment for the benefit of creditors or shall be unable to pay its debts to third parties as same become due;

You file for bankruptcy or are declared bankrupt by a court.  

(d) Tenant assigning or subletting this Lease, or any estate or interest therein, in violation of this Lease; 

If you assign or sublet the lease without permission.

(e) Tenant’s abandonment, desertion, or vacation of any part of the Leased Premises, whether or not Tenant is in default of the Rent payments due under this Lease or Tenant’s removal or attempted removal of all or a substantial amount of Tenant’s goods, equipment, or other personal property; or

The landlord does not want a “dark space  .”Shopping centers are more attractive to current and prospective tenants and customers if all the spaces are actively in use.  So, you can’t abandon your space, even if you are making the lease payments.  You are in default even if you remove or attempt to remove all or most of your business’s possessions in the leased space.  

(f) Tenant’s guarantor, if any, becomes insolvent.

If your business needs a guarantor for the lease (including yourself), and that guarantor becomes insolvent.  

24. REMEDIES FOR TENANT’S DEFAULT  

Upon the occurrence of any Event of Default by Tenant, Landlord shall have the option to pursue any one or more of the following remedies without any prior notice or demand:

If you default on the lease, the landlord may pursue any or all the following remedies.

(a) Landlord may terminate this Lease, in which event Tenant shall, immediately surrender the Leased Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have, enter upon and take possession of the Leased Premises, and expel or remove Tenant and any other person who may be occupying all or any part of the Leased Premises.  Landlord shall not be liable for prosecution or any claim for damages as a result of such actions.  Tenant agrees to pay on demand the amount of all losses, costs, expenses, deficiencies, and damages, including, without limitation, reasonable reconfiguration expenses, rental concessions and other inducements to new tenants, advertising expenses, and broker’s commissions, which Landlord may incur or suffer by reason of Tenant’s default or the termination of this Lease under this subsection, whether through inability to rent the Leased Premises on satisfactory terms or otherwise.  Tenant acknowledges that its obligation to pay Base Rent and all Additional Rent hereunder is not only compensation for use of the Leased Premises but also compensation for sums already expended and/or being expended by Landlord with respect to its obligations hereunder and with respect to the Leased Premises, and Tenant acknowledges that Tenant’s default in timely payment of all sums due hereunder shall constitute significant financial loss to Landlord.  If Landlord elects to terminate the Lease by reason of an Event of Default, then, notwithstanding such termination, Tenant shall be liable for and shall pay to Landlord the sum of all Rent and other indebtedness accrued to the date of such termination, plus, as liquidated damages for such default and not as a penalty, an amount equal to the present value of the Rent for the remaining portion of the Term (had such Term not been terminated by Landlord prior to the date of expiration) using a five percent (5%) present value discount factor less the present value of the fair market rental value of the Leased Premises during such period using a five percent (5%) present value discount factor.  Alternatively, if Landlord elects to terminate the Lease by reason of an event of default, in lieu of exercising the rights of Landlord described in the preceding sentence, Landlord may instead hold Tenant liable for all Rent and other indebtedness accrued to the date of such termination, plus such Rent and other indebtedness that would otherwise have been due by Tenant to Landlord during the period following termination of the Term measured from the date of the termination by Landlord until the Termination Date (had Landlord not elected to terminate the Lease due to the Event of Default) diminished by any net sums thereafter received by Landlord through reletting the Leased Premises during that period (after deducting expenses incurred by Landlord).  Actions to collect amounts due by Tenant pursuant to this subsection may be brought from time to time by Landlord, on one or more occasions, without the necessity of Landlord waiting until expiration of the Term.  Tenant will never be entitled to any excess of Rent (or Rent plus other sums) obtained by reletting over and above the Rent provided for in this Lease.

The landlord can terminate the lease, and the tenant must immediately vacate the leased space.  If they don’t, the landlord can remove the tenant’s belongings and assume control of the space.  If there has been an unapproved sublet, the subtenant may be removed, and the tenant is responsible for the cost of transforming the space back to its original condition at the time of the original lease.  The tenant is responsible for paying all back and future rent that would have been due under the lease (less any future value of money adjustments).  

(b) Without termination of this Lease, Landlord may enter upon and take possession of the Leased Premises and expel or remove Tenant and any other person who may be occupying all or any part of the Leased Premises (without being liable for prosecution or any claim for damages therefor) and relet the Leased Premises on behalf of Tenant and receive directly the rent from the reletting.  Tenant agrees to pay Landlord on demand any deficiency that may arise by reason of any reletting of the Leased Premises and to reimburse Landlord on demand for any losses, costs, and expenses, including without limitation, reconfiguration expenses, rental concessions and other inducements to new tenants, advertising costs or broker’s commissions, which Landlord may incur or suffer as a result of Tenant’s default or in reletting the Leased Premises.  In the event Landlord is successful in reletting the Leased Premises at a rental in excess of that agreed to be paid by Tenant pursuant to this Lease, Tenant agrees that Tenant shall not be entitled, under any circumstances, to such excess rental, and Tenant does hereby specifically waive any claim to such excess rental.

Without terminating the lease, the landlord can simply take over the space and relet it (find another tenant).  You (the original tenant) are liable for any deficiencies in rent (if the new rent is less than your rent) and for any costs associated with finding and securing a new tenant.  

(c) Without terminating this Lease, Landlord may enter upon the Leased Premises (without being liable for prosecution or any claim for damages therefor) and do whatever Tenant is obligated to do under the terms of this Lease.  Upon receipt of a demand therefor from Landlord, Tenant shall reimburse Landlord for all costs and expenses incurred by Landlord in performing such obligations and a reasonable profit and overhead of ten percent (10%) of such costs and expenses.  Further, Tenant agrees to reimburse Landlord on demand for any losses incurred by Landlord as a result of Tenant’s failure.  Tenant further agrees that Landlord shall not be liable for any damages resulting to Tenant from effecting compliance with Tenant’s obligations under this subsection, unless caused by the gross negligence or intentional misconduct of Landlord.

Without terminating the lease, the landlord can enter your space and make any repairs or adjustments that the tenant is obligated to due under the lease but hasn’t done.  The tenant must then reimburse the landlord for the cost plus 10%, plus any damages the landlord suffered due to the tenant’s noncompliance.  

(d) Landlord may pursue any remedy provided at law or in equity.

A catch-all statement – the landlord can pursue any legal remedy against the tenant. 

(e) Landlord shall use a good faith effort to mitigate its damages and Landlord’s duty to mitigate shall be limited to using good faith efforts to relet the Leased Premises; provided, however, that in no event shall Landlord be required to: (i) give priority to the Leased Premises over other premises owned or managed by Landlord or any of its affiliates, (ii) agree to any lease terms that it deems to be unacceptable, (iii) relet the Leased Premises for less than the prevailing market rate, (iv) relet to a tenant or for a use, which is not in keeping Landlord’s desired character of the Shopping Center or Landlord’s desired tenant mix for the Shopping Center, (v) expend any monies for finish-out requested by a prospective tenant unless Landlord, in its sole and absolute discretion approves both the lease terms and the creditworthiness of such prospective tenant, or (vi) accept a prospective tenant for the Leased Premises or any portion thereof which is an existing or prospective tenant elsewhere in the Shopping Center. 

The landlord must attempt to limit his damages caused by the tenant’s default, but not if it causes them economic or business damage.  This means that the landlord must try to re-rent the space to another tenant so as to limit the amount the old tenant must pay after default.  However, the landlord does not have to give the leased space priority over other vacancies, rent to someone under unacceptable lease terms, rent for less than the market rate, accept a business they don’t want, pay a new TI, or allow an existing tenant to move to the leased space.  

(f) No re-entry or reletting of the Leased Premises or any filing or service of an unlawful detainer action or similar action shall be construed as an election by Landlord to terminate this Lease unless a written notice of such intention is given by Landlord to Tenant.  Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease and Tenant’s right to possession hereunder.  

If the landlord re-lets the space, it doesn’t necessarily terminate the lease with the tenant in default.  However, the landlord may choose to terminate the lease at any time.  

(g) Tenant agrees that the provisions of this Lease will override and control any conflicting provisions of Sections 93.002 and 93.003 of the Texas Property Code, as well as any successor statute.

You agree as the tenant that the conditions of this lease will override the Texas Property Code.  

25. WAIVER OF DEFAULT OR REMEDY

 

Failure of Landlord to declare a default immediately upon its occurrence, or delay in taking any action in connection with an Event of Default, shall not be a waiver of the default.  Landlord shall have the right to declare the default at any time and take such action as is lawful or authorized under this Lease.  Pursuit of any one or more of the remedies set forth in Section 24 above shall not preclude pursuit of any one or more of the other remedies provided therein or elsewhere in this Lease or as provided by law, nor shall pursuit of any remedy be a forfeiture or waiver of any Rent or damages accruing to Landlord by reason of the violation of any of the terms of this Lease.  Failure by Landlord to enforce one or more of its remedies upon an Event of Default shall not be construed as a waiver of the default or of any other violation or breach of any of the terms contained in this Lease.

The landlord doesn’t have to claim that you defaulted on your lease immediately when it occurs.  If you default, the landlord can make this claim at any time and take action under section 24 of the lease.  The landlord may pursue one or many of the cures of default outlined in section 24 or elsewhere in the lease.  Additionally, if the landlord chooses not to pursue a particular remedy, it doesn’t mean they are giving up their rights to seek another.  

26. CHOICE OF LAW; VENUE; ATTORNEYS’ FEES 

It is specifically stipulated that this Lease shall be interpreted and construed according to the laws of the State of Texas, and any suit brought on this Lease shall be maintained in Anytown County.  In the event either party files a lawsuit in connection with this Lease or any provisions contained herein, then the party that prevails in such action shall be entitled to recover from the non-prevailing party, in addition to all other remedies or damages as limited herein, reasonable attorneys’ fees and costs of court incurred in such lawsuit.  The provisions of this Section 26 shall survive the expiration or termination of this Lease.

If you sue the landlord, or the landlord sues you, it must be in the specified County in the State of Texas.  Whoever wins the lawsuit will have their attorney’s fees and other costs paid for by the loser.  Section 26 survives the lease – even after the lease is terminated, if you want to sue, it has to be in this county under these rules.  

Thanks for reading the second installment of Business Basics: Commercial Leases.  If you’ve made it this far, you must enjoy reading legal documents, or you’re really interested in commercial leases!  Either way, I’m impressed, so why don’t you subscribe to the blog below.  The third and final installment of this series will be released here shortly.  Stay tuned for further Business Basics releases covering other topics about opening your medical practice.  Thanks.

[/et_pb_text][/et_pb_column]
[/et_pb_row]
[/et_pb_section]