Office Lease Checklist

Key Items to Consider

1.10 Office Lease Forms
1.20 Negotiated Lease Terms
1.30 Delay in Possession
1.40 Operating Expenses
1.50 Security Deposit
1.60 Use
1.70 Building Services
1.80 Repairs and Maintenance
1.90 Alterations and improvements
1.10 Insurance
1.11 Indemnity and Hold Harmless
1.12 Damage and Destruction
1.13 Assignment and Subleasing
1.14 Defaults and Remedies
1.15 Brokers
1.16 Quiet Possession

1.17 Holdover
1.18 Tenant Improvements
1.19 Attorneys Fees
1.20 Force Majure
1.21 Percentage Rent
1.22 Right to Enter
1.23 Signage
1.24 Relocation
1.25 Parking
1.26 Reasonable Consent
1.27 Waivers
1.28 Hazardous Substances
1.29 Title
1.30 Office Lease Exhibits
1.31 Options and First Rights

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1.1  Office Lease Forms


The typical office lease or office rental form covers a multiple of issues never discussed by the parties.  Yet, within these never-discussed issues lurk, among other things, unreasonable risks, hidden costs, significant ambiguities, and the legal rights and obligations of the tenant. 

Commercial office lease or office rental forms produced by landlords or their attorneys are similar in format and content with each office lease containing approximately 50-100 provisions.  The essential difference among such leases lies in the treatment afforded those provisions: changing one or two words can be the difference between a fair or unfair provision and a good or bad deal for you.


The following areas need to be evaluated and negotiated, if necessary, before signing an office lease or office rental agreement.

a)      Are there any unreasonable or unfair provisions?

b)      Has the true cost of the office lease been calculated?

c)      Are there any ambiguous provisions?

d)      Have all rights and duties been sufficiently defined?

e)      Is the tenant entitled to the same protections as the landlord by making any unilateral clauses reciprocal in nature?


1.2  Negotiated Terms


a)      Is the office lease or rental agreement correctly dated for reference purposes?

b)      Are the parties accurately described with full legal names, correct states of incorporation, and principal business addresses?

c)      Are the Leased Premises fully and accurately described, including the floor or suite number, street address, municipality, state, and zip code?

d)     Are exhibits referred to and attached showing the legal description and the location of the Leased Premises and building?

e)      Is the square footage of the Leased Premises specifically stated and how it is measured?

f)       Is the square footage measured by the rentable square feet (includes portion of common area), by usable square feet (limited to space within four walls of Leased Premises), by referring to various points within the building (such as from the outer walls to the center of some point), or by referring to the Building Owners and Managers Association International (BOMA) standards?

g)      Is the term specified by the number of years including the commencement and termination dates?

h)      What triggers obligations to move in and pay rent: substantial completion (is substantial completion defined, for example, as the time when the tenant is able to use the Leased Premises for the intended purposes without material interference?); issuance of a certificate of occupancy; the time the premises are ready per specifications and plans; or the time when only minor details of construction, decoration, or mechanical adjustments remain to be completed?

i)        Is the agreed-upon rent specifically stated?

j)        If the rent is stated in more than one way—for example, monthly, annually, per square foot, for a full term—are the different amounts consistent?

k)      Is the monthly rent prorated for the first and last months if occupancy in those months is less than a full month?

l)        Is there a reasonable grace period, such as 10 days, before a penalty is charged for late rent?

m)    If there is my free rent, when does it start and how much is given?  Does it include triple net expenses?

n)      Does the free rent start during the construction period or upon occupancy?

o)      Can free rent be revoked if a default

p)      Does the rent increase periodically by the consumer price index (CPI), or by a fixed percentage?

q)      Does the increase start immediately, on the first day of the calendar year following the lease commencement year, on the first anniversary of the commencement date, or at some later point in the lease term?

r)       Is there a maximum cap on rent increases?


1.3  Delay In Possession


a)      If possession is delayed through no fault of the tenant, what remedies does the tenant have: rent abatement; money damages; cancellation; reimbursement for prepaid monies, such as the security deposit and the first month’s rent; or all of these remedies?

b)      Are the commencement and termination dates extended for a period of time equal to any delay?


1.4  Operating Expenses


a)      Does the tenant pay a pro rata share of the increase in operating expenses over a base figure (gross office lease) or a pro rata share of the total operating expenses for the operating year (net office lease)?

b)      Is the base the amount of operating expenses in a calendar year or is it an expense stop?

c)      If the base is a calendar year, is the base year specified?

d)     What was the prior lease year’s base expense amount?

e)      Are the base year expenses based on full tenant occupancy or are they properly adjusted for vacancies?

f)       Are operating expenses grossed up if the building has vacancies?  A gross up of 85% is less advantageous than a 95% gross up.

g)      Are the following expenses excluded: any payments (such as salaries or fees) to the landlord’s executive personnel; costs for items that, by standard accounting practice, should be capitalized (such as HVAC replacement), unless those costs reduce operating expenses and are amortized over the reasonable life of the capital item in accordance with generally accepted accounting principles and the yearly amortization does not exceed the actual cost reduction for the relevant year; depreciation or interest (unless it is related to allowable capital item); taxes on the landlord’s business (such as income, excess profits, franchise, capital stock, estate, inheritance); leasing commissions; legal fees;  costs to correct original construction defects; expenses paid directly by a tenant for any reason (such as excessive utility use); costs for improving any tenant’s space; greater than 5 percent increase in management fees or employees’ salaries or benefits or both; any repair or other work necessitated by condemnation, fire, or other casualty; costs exceeding those obtainable through competitive bidding; services or benefits, or both, provided to some tenants but not to this tenant; and any costs, fines, and the like due to the landlord’s violation of any governmental rule or authority?

h)      Is the landlord required to provide a reasonably detailed and itemized list of expenses?

i)        Does the tenant have the right to audit the landlord’s books and records?

j)        If the audit reveals a discrepancy of 2 percent or more, must the landlord pay for the audit?

k)      How are disputes over increased operating expenses settled: by negotiation; by mediation; by arbitration; by lawsuit; by the landlord’s list, which is conclusive and binding unless the tenant objects in x days; or by the landlord’s CPA’s certification, which is conclusive?

l)        Is the increase prorated for the first and last years of the term if occupancy in those years will be less than 12 months?

m)    Are there any limitations on operating expense increases?

n)      If a triple net office lease, have the amounts been stated in the lease?

o)      Does the tenant receive a credit if the operating expenses are reduced or if the paid estimated monthly amounts exceed the actual incurred expenses?

p)      Is the tenant required to contribute to the landlord’s Promotional Fund?


1.5  Security Deposit


a)      Under what circumstances and when is the security deposit returned?


1.6  Use


a)      Can the tenant use the Leased Premises for any lawful purpose?

b)      If not, do the restrictions on use limit in any way the type of business the tenant intends to conduct at the Leased Premises?

c)      Can the use be changed in the event of a sublease or assignment?


1.7  Office Building Services


a)      Which party provides and pays for such services as: heating, ventilating, and air conditioning (HVAC); electric lighting; water; janitorial services; and snow removal?

b)      Are the services provided during normal business hours only, during specified hours (such as from 6:00 A.M. to 7:00 P.M.), during weekends and holidays?  Are any excluded holidays specifically listed?

c)      What standard governs the landlord’s provision of HVAC: the standard for first-class office buildings in the area; the landlord’s sole discretion, as the weather warrants; sufficient (or reasonable) amounts and temperatures sufficient for the tenant’s comfortable occupancy?

d)     What standard governs the landlord’s provision of janitorial services: five days a week; during or after work hours; the standard for first-class office buildings in the area; a degree deemed sufficient by the landlord?

e)      Are the janitorial services specified, such as emptying waste baskets, vacuuming, and washing windows?

f)       What remedies does the tenant have if the services are interrupted?  Can these remedies include money damages, rent abatement, and lease cancellation?

g)      Is the tenant automatically entitled to its remedies or is it entitled to them only if one or more of the following occurs: the interruption is caused by the landlord’s negligence or intentional act; the causes were not beyond the landlord’s reasonable control; or the landlord failed to use its best efforts (or reasonable efforts, due diligence, reasonable diligence, diligence) to restore the services promptly (or with reasonable dispatch)?


1.8  Repairs and Maintenance


a)      Is the tenant’s liability for repair or maintenance, or both, any greater than keeping the Leased Office Premises—but not every part—in good order and condition, and to return the Leased Premises at lease termination in the same condition as received at the commencement, except for ordinary wear and tear, damage by the elements, fire, and other unavoidable casualty?

b)      If the tenant’s obligation is greater than that stated in question 72, does the obligation include responsibility for the structural portions of the building—roof, exterior walls, and systems (HVAC, electrical, mechanical, plumbing, and water)—even if the tenant does not have access to them?

c)      If the tenant’s obligation includes part or all of the items listed in question 73, has the landlord assigned any warranties to the tenant, and is that assignment legally effective?

d)     If the landlord has an obligation to repair, is the obligation to repair with reasonable promptness or within a reasonable time after receiving written notice?

e)      If required repairs require capital improvements, is the landlord required to amortize those costs over their useful life in accordance with GAAP (General Accepted Accounting Principals)?


1.9  Alterations and Improvements


a)      May alterations be made with the landlord’s consent if the alterations cost less than a particular amount as referenced in the office lease?  If the landlord’s consent is required, is the landlord’s decision conclusive?

b)      In addition to alterations, does the provision cover changes, improvements, additions, installations, and decorations?

c)      At the office lease’s termination, does the landlord have the option of keeping and owning the alterations and the like made by tenant or of having the tenant remove the alterations and repair the damage?

d)     Does the tenant have the right to remove trade fixtures, all alterations, or alterations owned or paid for by the tenant, such as improvements made at the commencement of the office lease and paid for by the landlord and tenant?


1.10          Insurance


a)      Do the office tenant’s policy coverage and limits meet the minimums required by the office Lease?

b)      May the tenant use a blanket or umbrella insurance policy that covers, in addition to the Leased Premises, other premises owned or leased by tenant?

c)      If the landlord is added as an insured, is the landlord’s interest under the insurance policy specifically limited to the landlord’s interest under the office lease?


1.11          Indemnity and Hold Harmless Provisions


a)      If the tenant must indemnify and hold the landlord harmless from claims, damages, or injuries arising out of the tenant’s occupancy of the Leased Premises, what is the degree of the tenant’s responsibility?  Is the tenant responsible for any and all claims; for any and all claims except those arising from the landlord’s intentional (willful acts, willful misconduct, wanton misconduct, and unlawful acts) or negligent (any negligence—primary, sole, or gross) acts or omissions; to the extent of the tenant’s fault; or except for consequential, special, and direct damages?

b)      Under what circumstances is the landlord not liable to the tenant?


1.12          Damage and Destruction


a)      If the Leased Premises are damaged by casualty, is the landlord obligated to repair and restore them as soon as reasonably possible or to use due diligence?

b)      Does the tenant’s rent obligation abate from the date the Leased Premises or access thereto are damaged or impaired and remain abated until the damage is repaired?

c)      Is the rent abated in proportion to the nature and extent of damages, the impairment of the use (diminution of value) that the tenant can reasonably make of the Leased Premises, or the amount of unusable square feet?

d)     May the tenant cancel the office lease if the landlord fails to repair and restore the Leased Premises within a reasonable time, such as 90 days?


1.13          Assignment and Sublease


a)      Is the tenant prohibited from assigning or subleasing the office lease without the prior written consent of the landlord?

b)      What standard governs the landlord’s decision to consent: the landlord’s sole discretion; the provision that consent shall not be unreasonably withheld or unduly delayed; or objective, reasonable criteria, such as the subtenant’s financial strength?

c)      Must the tenant obtain consent from the landlord for an assignment to an affiliated company, and is “affiliated” defined?

d)     Is the landlord entitled to profits derived from the sale of tenant’s business?

e)     What are the fees paid to the landlord for processing and approval?  Is there a limit on such fees?


1.14          Default and Remedies


a)      Is vacating or abandoning the premises a default even if the tenant continues paying the rent?

b)      Is the tenant’s failure to pay the rent a default only after the rent is more than 10 days overdue and the tenant receives written notice of the failure to pay?

c)      Is the tenant’s failure to comply with the other material terms in the office lease a default even if the tenant cures the material breach within 30 days of receiving written notice of the breach, or if, due to the nature of the breach, more than 30 days are needed to cure and the tenant began curing within 30 days and is diligently pursuing the cure to completion?

d)      Are the following events—bankruptcy, receivership, seizure of assets, assignment for the benefit of creditors—automatic defaults or defaults only if those events are not vacated, released, dismissed, or otherwise corrected within a reasonable time (60 days) after those events occur?

e)      Before exercising its remedies, must the landlord give the tenant notice or make a demand for cure?

f)       Is the landlord entitled to unreasonable remedies, such as “confession of judgment,” “acceleration of rent,” or “cumulation of damages that exceeds total rent payable, absent a default”?

g)      Must the landlord mitigate damages, such as by making reasonable efforts to re-let?


1.15          Brokers’


a)      Are the brokers properly identified as it relates to who is representing the tenant and the landlord?


1.16          Quiet Possession


a)      Does the landlord warrant the tenant’s “quiet possession” and the landlord’s right to execute the lease?

b)      Do the Lenders warrant the tenant’s “quiet possession” in order for this clause to be enforceable.


1.17          Holdover


a)      If the tenant holds over with or without the landlord’s consent, is the rent increased by an unreasonable amount?  Holdover rent is typically 150-200% of the rent currently being paid.


1.18          Tenant Improvements


a)      Are all of the proposed improvements itemized on the plans and specifications and attached as exhibits?

b)      If there is a construction allowance, how are the funds disbursed?

c)      If the premise is not in a finished state, (such as no ceiling, lights, or HVAC), does the landlord finish the space to an improved shell condition without including it in the construction allowance?

d)      Who is responsible for performing the construction?

e)      Is the bidding competitive for letting the contract?

f)       Are the timing perimeters for approvals from landlord reasonable?


1.19          Attorneys’ Fees


a)      Is each party entitled to have its attorneys’ fees paid by the other, if such party is the prevailing party in any litigation, or in a dispute settled short of litigation, to enforce the office lease?

b)      Is the prevailing party entitled to other reasonable expenses and court costs?


1.20          Force Majeure


a)      Is a general catchall phrase—for example, “any other cause beyond the landlord’s control” –or any specifically included item—for example, the inability to obtain fuel—a risk that the landlord ought to bear?

b)      Is the provision reciprocal between landlord and tenant? 


1.21          Percentage Rent


a)      If there is a percentage rent clause in the office lease, what is the breakpoint percentage?  For example: 6% (the lower the percentage, the less it will be).


1.22          Right to Enter


a)      Except for emergencies, must the landlord give the tenant reasonable advance notice of entry?

b)      Except for emergencies, can the landlord enter the Leased Premises at any time, at any reasonable time, or only during (or after) business hours?

c)      May the landlord enter to inspect, make repairs, construct improvements, or show the Leased Premises to prospective tenants (such as in the last three months of the office lease term only)?

d)     During the landlord’s entry, is the tenant entitled to damages or rent abatement for injury caused by the landlord’s negligence or unreasonable interference with the conduct of the tenant’s business?


1.23          Signage


a)      If the tenant has sign rights, are they specifically stated as to where it can be placed?

b)      Are there signage criteria attached to the office lease defining the size and look of the sign?


1.24          Relocation


a)      Does the landlord have the right to relocate the tenant to new office space?

b)      How many times during the term may the tenant be relocated?

c)      Are there restrictions on the area to which the tenant may be relocated, for example, the same building, same floor, near the elevators?

d)      May the tenant be relocated if it leases more than a specified number of square feet (say 2,500)?

e)      May the landlord relocate the tenant only if certain specified events occur, for example, another tenant wants more than a specified percentage (say 75%) of the whole floor, or the relocation is necessary to provide the landlord’s services more efficiently (so the landlord can’t use relocation to harass a tenant)?

f)       Must the “new” space be substantially the same in size, dimensions, and configuration?

g)      Must the effective usable space in the “new” space be equal to or greater than the “old” space?

h)      Must the landlord give the tenant at least 60 days’ advance written notice of any relocation?

i)       Will the rent and additional rent (percentage share) not be increased during the original term and any option periods, even if the “new” space contains more square feet than the “old” space?

j)       Will the “new” office space be built-out similar to the “old” space?

k)      Does the landlord pay all reasonable expenses incurred by the tenant in relocating, including the tenant’s salaries in administering the move, moving expenses, phone transfer, and changing the address on business stationery and any advertisement?

l)        Does the office lease change on the date the office space is ready for moving in, and are the terms and conditions the same (other than with respect to necessary changes—i.e., suite number of size of leased premises)?

m)      If the tenant agrees to move to a smaller space, are the rent and additional rent proportionally reduced?

n)      Does the tenant have the right to cancel if it does not want to relocate?

o)      Is the tenant entitled to a sign near its “old” space for several months, advising persons of the tenant’s new location?

p)      Is a dispute over whether the “new” space meets the relocation requirements submittable to arbitration?


1.25          Parking


a)      Is the tenant guaranteed free parking?

b)      Is the tenant guaranteed a minimum number of parking spots?

c)      If the tenant is not guaranteed a specific number of parking spots, is the tenant allocated spaces (and location) on the same basis as all other tenants (considering the tenant’s percentage share)?

d)      Can the landlord change the parking area?

e)      Can the landlord impose a fee for the use of the parking lot?

f)       Can the tenant’s invitees use the parking lot?

g)      Is there enough parking for the tenant’s needs?

h)      Is the parking area shown on an Exhibit attached to the office lease?


1.26          Reasonable Consent


a)     Where landlord’s consent is required, is there a reasonable standard, or is it arbitrary for the landlord?


1.27          Waivers


a)      If the failure to exercise any rights is not a waiver, is this provision applicable to both parties?

b)      Must any waiver be in writing and signed by the waiving party?


1.28          Hazardous Substances


a)      If the building was built before the mid-1970s, does the landlord agree to hold harmless and indemnify the tenant from any liability for asbestos claims?

b)      Does the landlord hold harmless and indemnify the tenant from any hazardous wastes claims (except those caused by the tenant’s negligence or misconduct)?

c)      If the premises becomes untenantable because of hazardous waste or asbestos not placed there by the tenant, may the tenant cancel the office lease?

d)     Is “untenantable” defined in light of federal OSHA standards?


1.29          Title


a)      What is the status of the ownership; investment group, private individual or bank owned?

b)      Can the landlord perform its obligations?

c)      Is the landlord current on their loan payments or is the property in default?


1.30          Office Lease Exhibits


a)      Is each exhibit marked, initialed, and dated, and does it refer to the landlord and tenant?

b)      If the exhibit is more than one page long, does each page show the number of pages in the exhibit?

c)      Are the exhibits referenced in the office lease?

d)     Does the rider control if the rider and the office lease are in conflict?


1.31          Option and First Rights


a)      Does the tenant have one or more options to extend the term for one or more years on the same terms and conditions as those found in the original office lease, except for rent?

b)      Is the tenant required to give notice of exercising the option too far in advance (for example, one year before the office lease ends)?

c)      Is the rent during the option term renegotiated or increased by a fixed percentage, the CPI increase, a fixed dollar amount, or the current market rate?

d)     Is the option rent specific enough so that the option is enforceable (avoiding vague terms such as “as agreed by the parties” or “to be negotiated”)?

e)      Is arbitration provided if the parties cannot agree on the option rent?

f)       If there is a first right of refusal for expansion, is the expansion space clearly defined physically and economically?

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