It’s the Law: With leases, the questions you don’t ask will trip you up
By Signal Contributor
Wednesday, April 19th, 2017

By Carl Kanowsky

This is the second installment of a three-part series. The Signal published part one on March 22, and part three will appear May 17.

In last month’s column, I introduced you to Jim, owner of a traffic school called “Fun While Drinking and Driving.” Jim came to see me about signing a lease on new office space.

Jim was skeptical about the need to pay an attorney to review the lease document. So I challenged him with eight issues that he had not considered. Here are seven of the eight in more detail.

1. Does the lease contain renewal periods? In Jim’s case, yes, is does, but he’s hazy on the specifics. We examined the lease and learned a few things. There is one option to renew. It’s silent as to what the renewal rate would be other than to say he would pay “Market Rate.”

If Jim has a great rate now, the landlord could make some of that money back on the renewal even though the current rent is comparatively cheap. I recommended that he ask for a definite amount. At the very least, he should negotiate a cap on the increase as a percentage of the current rent. “Market rate” should be left for buying lobster tails, not leasing commercial space.

2. Under what circumstances can the landlord evict Jim? He was shocked to learn that the landlord reserved the right to force him to move.

“You mean my landlord could force me to relocate to a completely new location at his whim?” I confirmed that the landlord retained that right under the lease. And while the landlord might help pick up the costs of any move, he most definitely would not pay Jim for any lost profits. That surprised Jim.

3. I asked Jim if he was going to get any Tenant Improvement (or TI) allowance for the work he had to do to improve the new space. No, and he didn’t even know he could ask for it.

4. Speaking of TI work, did Jim have any concept about how long the work would take? Had he asked a general contractor to inspect the location and give him a cost estimate? Was his anticipated use of the premises even permitted under the current zoning laws? Did he know if there was adequate parking?

His answers: no, no, no, and no.

I strongly advise Jim to get those questions answered before signing the lease. Because, if he signed and then learned that there were problems with how he used the space, or found out the TI work would take several months, it was too late to back out of the lease.

5. An obvious question is when did he have to start paying rent? Was it when he signed the lease? Or did the landlord give him a few weeks to finish his TI work before sending invoices for rent? What happens if the TI work takes much longer than anticipated? Will he be in a position where he’s paying rent before he’s even open for business?

6. Did he get an agreement that no other traffic schools would be allowed in the shopping center? In other words, did the landlord grant him an exclusive use right? And, how exclusive is that right? Does it prohibit all traffic schools or just comedy ones?

How about a driver’s training business – did that violate the exclusivity clause? Did the exclusivity apply to tenants already in the shopping center? And, what were the consequences if the landlord screwed up and rented to another school? Could Jim force the landlord to disown the new lease or did Jim just receive some payment for his damages?

7. I alerted Jim that he was going to have to give a personal guarantee. That means that the landlord could sue Jim personally if Jim’s business ever fails. So, all of Jim’s personal assets were at risk for the full term of the lease, as well as any extension.

8. The eighth item, charges for common area maintenance, make up an entire can of worms unto itself.  More on CAM charges next month.

Carl J. Kanowsky of Kanowsky & Associates is an attorney in the Santa Clarita Valley. He may be reached by email at cjk@kanowskylaw.com. Mr. Kanowsky’s column represents his own views, not necessarily those of The Signal. Nothing contained herein shall be or intended to be construed as providing legal advice.

About the author

Signal Contributor

Signal Contributor

It’s the Law: With leases, the questions you don’t ask will trip you up

By Carl Kanowsky

This is the second installment of a three-part series. The Signal published part one on March 22, and part three will appear May 17.

In last month’s column, I introduced you to Jim, owner of a traffic school called “Fun While Drinking and Driving.” Jim came to see me about signing a lease on new office space.

Jim was skeptical about the need to pay an attorney to review the lease document. So I challenged him with eight issues that he had not considered. Here are seven of the eight in more detail.

1. Does the lease contain renewal periods? In Jim’s case, yes, is does, but he’s hazy on the specifics. We examined the lease and learned a few things. There is one option to renew. It’s silent as to what the renewal rate would be other than to say he would pay “Market Rate.”

If Jim has a great rate now, the landlord could make some of that money back on the renewal even though the current rent is comparatively cheap. I recommended that he ask for a definite amount. At the very least, he should negotiate a cap on the increase as a percentage of the current rent. “Market rate” should be left for buying lobster tails, not leasing commercial space.

2. Under what circumstances can the landlord evict Jim? He was shocked to learn that the landlord reserved the right to force him to move.

“You mean my landlord could force me to relocate to a completely new location at his whim?” I confirmed that the landlord retained that right under the lease. And while the landlord might help pick up the costs of any move, he most definitely would not pay Jim for any lost profits. That surprised Jim.

3. I asked Jim if he was going to get any Tenant Improvement (or TI) allowance for the work he had to do to improve the new space. No, and he didn’t even know he could ask for it.

4. Speaking of TI work, did Jim have any concept about how long the work would take? Had he asked a general contractor to inspect the location and give him a cost estimate? Was his anticipated use of the premises even permitted under the current zoning laws? Did he know if there was adequate parking?

His answers: no, no, no, and no.

I strongly advise Jim to get those questions answered before signing the lease. Because, if he signed and then learned that there were problems with how he used the space, or found out the TI work would take several months, it was too late to back out of the lease.

5. An obvious question is when did he have to start paying rent? Was it when he signed the lease? Or did the landlord give him a few weeks to finish his TI work before sending invoices for rent? What happens if the TI work takes much longer than anticipated? Will he be in a position where he’s paying rent before he’s even open for business?

6. Did he get an agreement that no other traffic schools would be allowed in the shopping center? In other words, did the landlord grant him an exclusive use right? And, how exclusive is that right? Does it prohibit all traffic schools or just comedy ones?

How about a driver’s training business – did that violate the exclusivity clause? Did the exclusivity apply to tenants already in the shopping center? And, what were the consequences if the landlord screwed up and rented to another school? Could Jim force the landlord to disown the new lease or did Jim just receive some payment for his damages?

7. I alerted Jim that he was going to have to give a personal guarantee. That means that the landlord could sue Jim personally if Jim’s business ever fails. So, all of Jim’s personal assets were at risk for the full term of the lease, as well as any extension.

8. The eighth item, charges for common area maintenance, make up an entire can of worms unto itself.  More on CAM charges next month.

Carl J. Kanowsky of Kanowsky & Associates is an attorney in the Santa Clarita Valley. He may be reached by email at cjk@kanowskylaw.com. Mr. Kanowsky’s column represents his own views, not necessarily those of The Signal. Nothing contained herein shall be or intended to be construed as providing legal advice.

Upcoming Events

Jan
12
Fri
all-day Domes – Art Exhibit @ Old Town Newhall Library
Domes – Art Exhibit @ Old Town Newhall Library
Jan 12 – May 11 all-day
Domes - Art Exhibit @ Old Town Newhall Library | Santa Clarita | California | United States
Local resident Naomi Young, is the artist featured in the latest exhibit at the Old Town Newhall Library. The exhibit features original paintings and multimedia by Young, an artist born and raised in Jerusalem, Israel,[...]
Feb
1
Thu
all-day “The Golden Oaks of Santa Clarit... @ Valencia Library
“The Golden Oaks of Santa Clarit... @ Valencia Library
Feb 1 – Jun 1 all-day
“The Golden Oaks of Santa Clarita,” Art Exhibit @ Valencia Library  | Santa Clarita | California | United States
“THE GOLDEN OAKS OF SANTA CLARITA” ART EXHIBIT BY BRAD SERGI ON DISPLAY AT THE VALENCIA LIBRARY Library hours: Mon-Thu 10 a.m. – 9 p.m., Fri 10 a.m. – 6 p.m., Sat 10 a.m. – 5[...]
Feb
14
Wed
all-day Tickets Available Now for 41st A... @ Dodger Stadium
Tickets Available Now for 41st A... @ Dodger Stadium
Feb 14 – May 12 all-day
Tickets Available Now for 41st Annual SCV Dodger Day @ Dodger Stadium | Los Angeles | California | United States
SANTA CLARITA DODGER DAY TICKETS ON SALE NOW! Tickets Start at $25 and Benefit Local Schools and Non-Profits It’s time to step up to the plate! The Santa Clarita City Council invites residents to purchase[...]
Apr
19
Thu
all-day Santa Clarita Cowboy Festival Co... @ Event Locations Vary
Santa Clarita Cowboy Festival Co... @ Event Locations Vary
Apr 19 – Apr 22 all-day
BUY YOUR TICKETS NOW FOR COWBOY FESTIVAL CONCERTS – Locations, Times & Prices Vary 25th Annual Santa Clarita Cowboy Festival offers ticketed performances and special events Get ready for some toe-tapping, two-stepping, guitar-picking musical performances![...]
7:00 pm Hart High School Presents ‘Bye, ... @ Hart High school Auditorium
Hart High School Presents ‘Bye, ... @ Hart High school Auditorium
Apr 19 @ 7:00 pm
Hart High School Presents 'Bye, Bye Birdie' @ Hart High school Auditorium | Santa Clarita | California | United States
Spring Musical Coming April 2018! Hart High Theatre is proud to present Bye Bye Birdie! April 19, 20, 27 & 28 @ 7pm April 28 & 29 @ 1pm When the draft selects rock star[...]
Apr
20
Fri
all-day Santa Clarita Cowboy Festival Co... @ Event Locations Vary
Santa Clarita Cowboy Festival Co... @ Event Locations Vary
Apr 20 – Apr 23 all-day
BUY YOUR TICKETS NOW FOR COWBOY FESTIVAL CONCERTS – Locations, Times & Prices Vary 25th Annual Santa Clarita Cowboy Festival offers ticketed performances and special events Get ready for some toe-tapping, two-stepping, guitar-picking musical performances![...]
7:00 pm Hart High School Presents ‘Bye, ... @ Hart High school Auditorium
Hart High School Presents ‘Bye, ... @ Hart High school Auditorium
Apr 20 @ 7:00 pm
Hart High School Presents 'Bye, Bye Birdie' @ Hart High school Auditorium | Santa Clarita | California | United States
Spring Musical Coming April 2018! Hart High Theatre is proud to present Bye Bye Birdie! April 19, 20, 27 & 28 @ 7pm April 28 & 29 @ 1pm When the draft selects rock star[...]
Apr
21
Sat
all-day Santa Clarita Cowboy Festival Co... @ Event Locations Vary
Santa Clarita Cowboy Festival Co... @ Event Locations Vary
Apr 21 – Apr 24 all-day
BUY YOUR TICKETS NOW FOR COWBOY FESTIVAL CONCERTS – Locations, Times & Prices Vary 25th Annual Santa Clarita Cowboy Festival offers ticketed performances and special events Get ready for some toe-tapping, two-stepping, guitar-picking musical performances![...]
10:00 am Astronomy Day @ Valencia Library
Astronomy Day @ Valencia Library
Apr 21 @ 10:00 am – 10:00 pm
The Local Group Astronomy Club and The Santa Clarita Public Library present our free annual Astronomy Day Celebration. We will be at the Valencia branch of the Santa Clarita Public Library from 10am to 3pm.[...]
10:00 am Resource Parents Needed to Foste... @ College of the Canyons, Dr. Dianne G. Van Hook University Center, Room 222
Resource Parents Needed to Foste... @ College of the Canyons, Dr. Dianne G. Van Hook University Center, Room 222
Apr 21 @ 10:00 am – 12:00 pm
Resource Parents Needed to Foster or Foster-Adopt a Child @ College of the Canyons, Dr. Dianne G. Van Hook University Center, Room 222 | Santa Clarita | California | United States
Adoption is a meaningful way for individuals and couples to fulfill their dream of parenting.  There are approximately 64,000 children in foster care in California.  Los Angeles County’s foster care population exceeds 21,000 children with[...]