Question: My wife is renting 1,200 square feet of space for her hair salon in a Gilbert shopping center. The lease for this 1,200 square feet is more than 45 pages long, including exhibits. We have a limited budget, and we cannot afford to have an attorney review this 45-page lease. Are there any key areas of this 45-page lease that my wife should review other than the amount of rent and the term of the lease?
Answer: In my opinion your wife should focus on the language in the lease relating to the following five areas: (1) default clause, e.g., if a tenant is late on rent, the tenant should only be in default after at least five days written notice, and any eviction only by court order, e.g., no “lockout” by the landlord; (2) common area maintenance (“CAM”) charges, and any annual increases, for the tenant’s percentage share of the costs of the landlord to operate the shopping center, e.g., costs for insurance and air conditioning/heating; (3) the amount of time and the cost for the “build out” of the hair salon, especially if a tenant’s existing lease is expiring; (4) an option to renew the lease, preferably at the “market rate” at the time of renewal; and (5) some type of exclusivity clause, e.g., your wife doesn’t want a hair salon next door.
Note: Shopping center leases are drafted by the owner of the shopping center and are the worst leases! Generally, these leases are very lengthy and “one size fits all,” whether a major tenant with a large amount of space or a small tenant such as your wife’s hair salon.