ISSUE #1: Purpose of a Fictitious Outside Date Six certainties of - - PowerPoint PPT Presentation

ISSUE #1: Purpose of a “Fictitious Outside Date”

• Six certainties of leases:

– parties – premises – commencement date – term – rent – material terms not incidental to Landlord and Tenant relationship

• Exact commencement date may not be known when lease

is executed (e.g. when premises are under construction)

• Fixed outside date (“not later than…”) ensures legal certainty
• Requires agreement on appropriate date

ISSUE #2: Gross- Ups

• Amount of square footage upon which tenant pays rent, over and

above its actual useable space

• Part of BOMA definition of “Rentable Area”
• $ per sq. ft. is artificially reduced

Issue # 3: Why Do Some Leases Allow Landlords To Terminate In Lieu Of Consenting To A Sublease While Others Do Not?

• Landlord's Leasing Plan
• Needs of other tenants
• Financial Considerations

ISSUE #4: What is the Covenant of Quiet Enjoyment?

• Implied covenant that Tenant can possess and use the premises

without interference from Landlord

• May be restricted or qualified by express terms (e.g. subject to other

terms of the lease and to Tenant’s performance)

• Includes protection against interference by parties claiming by,

through or under the Landlord. Exception: Prior registered encumbrances

• Examples of breach by Landlord:

– failure to maintain premises in habitable condition (if required by lease) – intimidation / threatening conduct

ISSUE #5: Subordination, Attornment & Non-Disturbance

• Subordination – tenant’s leasehold interest does not have priority
• ver mortgage
• Attornment – tenant agrees to recognize foreclosing lender as its

Landlord

• Non-Disturbance – lender contractually agrees to honour tenant’s

lease

Issue #6: Why Or When Does A Default Cause Three Months Rent to Accelerate

• Bankruptcy and Insolvency Act

ISSUE #7: Role of Brokers and Lawyers

• Yin and yang (opposing yet complementary)
• Different skill set
• Brokers have

– detailed market knowledge – property and cost comparisons

• Lawyers can address myriad of legal and risk related issues
• Major lease transactions can involve lawyers and brokers from start

to finish

ISSUE #8: Demolition Clauses

• Landlord uses where project could be torn down or substantially

renovated

• Dangerous provisions for tenant where location is critical
• What is the trigger point?

Issue #9: Why Do Some Leases Have Security Interests And Others Do Not?

• Tenant Balance Sheet
• Tenant Improvement Allowance
• Exclusions: Inventory

Issue #10: When Can A Clause Stipulate A Penalty For Non- Performance?

• Genuine pre-estimate of damages
• Impossible to determine otherwise
• Relief from forfeiture/penalty

ISSUE #11: Forfeiture and Waiver of Forfeiture

• Forfeiture: deprivation of a right in consequence of non-performance
• f some obligation (i.e. right to terminate lease for Tenant’s default)
• Waiver of Forfeiture: unequivocal act of Landlord confirming

existence of lease after Landlord has knowledge of breach

• Examples: acceptance of rent by Landlord which accrues after it

becomes aware of breach, or exercise of power of distress for such rent

: Negotiation of resolution with Tenant

• Not limited to acts occurring after notice of default issued by

Landlord

• Solution: settlement discussions to take place on a formal “without

prejudice” basis

: Elect to terminate, then discuss new lease terms

ISSUE #12: Fixtures, Chattels and Tenant Improvements

• Fixtures – high degree of affixation – intent is that they remain with

building

• Chattels – affixation is minor – can be removed without damaging

building – tenant wants to retain

• Tenant Improvements – generally benefits building and can not be

removed

• Trade Fixtures – significant benefit only to Tenant – usually

removable with obligation to repair damage

Issue #13: What Is The Difference Between Bankruptcy And Insolvency And Default? Don’t They All Mean The Same Thing, i.e. a Tenant In Trouble?

• Financial/monetary default
• Covenant default

Issue #14: What Does Reasonable Wear And Tear Mean?

• Office Lease:

Paint and Carpet

• Retail Lease:

Merchandising Plan/Consumer Demands

• Residential Leases: Carpet Cleaning