The importance of having leases and riders prepared by experienced real estate attorneys

I cannot emphasize how important it is that leases and riders be prepared by experienced real estate attorneys. That was highlighted recently while reviewing a collection matter where the guarantor was sued for rent and pass alongs after the corporate tenant was evicted. The owner made modifications to the lease, drafted by legal counsel, changing several sections. As a result, it appears that the guarantor is no longer liable for all the debt and a legal fee provision, was reworded until it lost its intended meaning. A corporate tenant's asset is primarily the business itself (and lease). Upon lease expiration or breach, once the business closes, rarely does the corporation have other assets. Hence, the lease language must be exact and clear. New York law states that any ambiguities in a contract or agreement (i.e. lease) are to be strictly construed against the drafter. Experienced legal counsel can negate that legal inference. In the case noted above, the owner's extensions resulted in an ambiguity jeopardizing the guarantor's liability for those items because of bad language and drafting skills. Why not make modifications and ask your legal counsel to review? Remember the commercial? "You can pay me now or pay me (more) later?" Yes, various websites have interactive form leases for your needs which, by themselves, are adequate but form leases by themselves do not cover all contingencies. You need riders for further protection. Riders run from the simple (several pages) to 40-50 page riders. Stern's law: "Shortcuts or rushing in real estate always result in problems." While modifying or changing leases or drafting extensions, owners cut and paste the rider incorrectly or they just plain forget to add sentences, paragraphs, clauses and entire pages. Due to the use of improper language or drafting skills, owners unwittingly change the meanings of clauses. I have seen owners improvise or rework rider language resulting in the owner losing the right to recoup some or all of a new or existing tax increase such as, Business Improvement District (BID) taxes in New York. Owners neglect to set precise rent increase formulas which result in totally negating any increases at all. How? Because it is a well settled law that an agreement to agree in the future is no agreement at all! Other major mistakes include: Providing for double late fees/penalties to forgetting to provide for a late fee; neglecting adequate provisions for pest control and drain cleanings, most especially important with food establishments; failing to have employee parking rules; and neglecting owner access to the premises for potential new tenants six months prior to lease expiration. It also is common to see owners neglect or botch the language on requiring adequate insurance coverage for the tenant (compare the risks between a coffee shop, clothing store and office). Owners often neglect to require indemnification or additional insured language for the premises' managing agent in the tenant's insurance coverage. Owners routinely neglect to address mechanic's liens as well as fail to address the issue of proper insurances for contractors. Owners forget to include or improperly word rent acceleration clauses so that there is no acceleration of future rents on breach or default. Once, a client insisted I prepare a boiler plate lease and rider. I refused given the many variables and potential language mistakes. So, they had another lawyer prepare one. Over time, the client made change after change to its own lease and rider. Eventually, the client asked me to sue a tenant for unpaid rent after eviction and on the purported personal guaranty. As the lease and personal guaranty had been modified and reworded so poorly, I informed the client that they were not entitled to recover what they thought they were. The corporate tenant was without assets and the personal guaranty had been reworded so, at best, it could only be read as a "Good Guy Clause." As such, I thought that it was very hard to assert that it was a valid guaranty of any kind. In the end, the guarantor could not be sued for the tenant's breach and the owner could not recover the unpaid rent and pass alongs. Howard Stern, Esq., is the owner and an attorney at Law Offices of Howard Stern, White Plains, N.Y.