• Careful Drafting Saves Money and Avoids Surprises
  • July 20, 2012 | Author: John H. Sokul
  • Law Firm: Hinckley, Allen & Snyder LLP - Concord Office
  • When construing commercial leases, New Hampshire courts attempt to give effect to the parties’ intentions at the time of the contract by using a reasonable person standard. This is an objective analysis of what a reasonable person would have intended or expected under similar circumstances. Using an objective standard, however, can sometimes operate to defeat one or both of the parties’ actual expectations. To avoid this risk, parties to a lease should make sure the document is drafted clearly and accurately. Using seasoned professionals is money well spent.

    The following are examples of lease provisions that merit special attention because careless drafting can result in significant, unintended economic consequences to one or both of the parties.

    Leased Premises
    An overly broad definition can result in greater maintenance responsibilities than anticipated. (Exterior walls? Roof? HVAC system? Windows?)

    Rent Commencement Date
    In a build-out scenario, the lease should clearly specify when the tenant must begin to pay rent. (Occupancy? C/O? After a specified fit up period?)

    Free Rent Periods
    What is free and what must be paid. (Taxes? Insurance? Operating expenses?)

    Rent Escalators
    Watch out for compounding!

    Tenant Improvement Allowances
    How and when paid or credited. (Must the $$ be used for actual building improvements? Equipment? Furniture? Other?)

    Early Termination Rights
    Calculation of termination fee, if any, and timing of notice and payment.

    End of Lease Term
    What can stay and what must be moved (i.e., wiring, fixtures, etc.).

    Major Capital Improvements During Lease Term
    Who is responsible under what circumstances. Amortized?

    Operating Expenses
    The lease should specify in detail what is included and what is excluded.

    Tenant’s Percentage Interest
    Is it fixed or can it change based on occupancy levels or other variables?