This article will tell you how to sign a real estate lease agreement to a tenant and not lose a lot of money, nerves and time.
We very often encounter situations when a tenant comes to us and says that the landlord:
- He was cheated at the conclusion of the contract and now he has to pay 2 times more than he “negotiated” at the conclusion of the lease
- Doesn’t return the security deposit.
- Won’t let him into the premises and won’t give the property back.
- Turns off the electricity.
- Makes me pay for some extra work.
- Refuses to accept early termination of the lease.
- Raised the rent by 50%.
- Constantly fines me for something.
These are the main problems a tenant suddenly encounters after signing a lease agreement. But, of course, it is far from complete. I often get the impression that many tenants have no sense of self-preservation. Even a spark of simple common sense is sometimes more than enough to avoid many problems. But no, why read the contract, it is just a formality! The main thing is to get the space and start the business as quickly as possible.
And when problems begin, the tenant makes round eyes and says, and I thought that …
You can think what you want, but the first thing to understand is that:
The contract is an agreement of mutual rights and obligations, not just a piece of paper that confirms your right to be in the room and need only the accounting department as the basis for the transfer of money.
Once the contract is signed, the parties can build their relationship solely on the basis of what is written in the lease agreement.
Take your time
Haste is only good if you are late for your flight. When you sign the document on the basis of which you will have to pay, you should never rush. No matter what your reasons for urgency are.
Not only that, but you could easily miss something important. The advice sounds trivial, but it is one of the main reasons for subsequent problems and losses!
Don’t rush to spend your money, don’t rush to sign a lease!
Don’t give in to pressure
The owner and dishonest realtor will foam at the mouth to convince you that they have a line of those wishing to rent the premises. Some of the suffering are even willing to pay 10, let’s not bother to pay 20% more than you. But the owner and the realtor, they are not like that! They only want to see you as a tenant!
Sound familiar? Doesn’t that sound like nonsense to you? The person is offered to pay 10-20% more, which is a lot of money for real estate, and they refuse. They don’t have anyone in mind, or they do, but they just can’t make up their minds. And this whole circus is just to get you to sign a lease as soon as possible. Oh, I forgot. Even can alternative offer (commercial offer) from another tenant to wave at the earliest conviction doubters.
Do not be fooled! That is, do not believe it. This market was last time in 2006-2007, when the room could actually be simultaneously up to 5 tenants. Now there is no such thing.
Do what you need to do, get the information you ask for, carefully prepare the contract.
Do not trust the landlord or his representatives
It is not that they will cheat you, because all landlords are like that. On the contrary, there are many decent people among them. And the representatives of owners – they are employees and will do what is beneficial to their employer. So don’t forget that the landlord has his goals and you have yours.
Case study: At the conclusion of the lease agreement, the parties agreed to install a promotional stele in the parking lot of the shopping center, but did not include it in the agreement on the grounds that the stele is outside the premises, so it must be a separate contract. And after signing the lease agreement the landlord, without refusing directly, delayed on various pretexts coordination of the placement of the stele.
So what? Contract for the premises is signed, the lease is dripping, and with the stele tenant himself to blame, no way to make a normal design, although he has already paid several hundred rubles for the development and numerous changes in the design.
Our advice is to make all the arrangements in the lease agreement.
Read the contract
Signing a contract without reading it is the height of folly. Do not step on the same rake, which borrowers constantly come across at the registration of loans in unscrupulous financial institutions, when they say the rate on the loan of 5% per annum, but after signing the contract it turns out that they have to pay more for insurance, processing credit, request the Bureau of Credit Information, printing and God knows what else, resulting in a rate rises in ten or hundred times!
Our advice – do not sign anything without reading.
Don’t rely on lawyers
You should not rely on lawyers to negotiate your lease. Keep in mind that there are very few good lawyers who specialize in real estate transactions. If your lawyer does not work with real estate, he will check the contract solely for compliance with its provisions of the Civil Code. And unless the contract says something exceptionally nonsensical like “the tenant must sit upside down in the unit,” they simply won’t pay attention if the provision doesn’t violate the Civil Code.
Case study. We specifically did a little test with a lease agreement that had this provision “The landlord has the right to increase the rent twice a year by no more than 50%.”
Result. Everything! The lawyers pointed out to the customer that you can’t increase the rent twice a year, but only 10% of the lawyers pointed out the likelihood of a significant increase in rent.
Why? Because for a lawyer, it’s not a legal issue, it’s a commercial one. The same goes for repairs, fire safety, access to the premises, etc., etc.
Don’t assume that a lawyer is a jack-of-all-trades.
Our advice is not to limit your contract review to a lawyer.
Involve specialists in negotiating the contract
Ideally, real estate managers who specialize in rental transactions and who will then work on the contract should negotiate:
- The point-of-sale director or other representative responsible for sales, especially if it’s a mall location.
- The operations engineer, the ahosh, the locksmith, the electrician. That is, someone who will then operate what you signed.
- A fire safety specialist. Especially when it comes to the placement of a large number of workplaces or rooms in which a large number of people are expected to stay.
- A structural engineer or contractor who will be building your point of sale, so they understand their capabilities and limitations.
Our advice is to involve specialized experts in the verification of the contract, especially if we are talking about large-scale investments.
Feel free to ask questions
If, of course, you have one. This advice echoes the previous one. When you read the contract, constantly ask yourself if everything is clear to you. Remember, the landlord is initially in a better position. He knows his space much better than you. So he will try to move all or part of the problems on you. Large owners, such as shopping malls, just hang all the costs on you, but the problems with the building will solve themselves. But the others may give you… er… a surprise.
Our advice is, if you don’t understand something, ask. Otherwise you’ll be paying for the cities water supply.
Don’t forget the appendices to the lease agreement
Many professionals who carefully study the text of the lease agreement itself, often just run their eyes over the appendices. I have even noticed this peculiarity for myself. Sometimes the most interesting things are contained there.
For some tenants, especially professional rentiers, the agreements themselves contain only general points, and the most important things are hidden in the appendices.
Advice – if you want to understand how to conclude a lease, read the appendices to the contract. Even if the landlord refuses to make changes to them under the pretext that they are the same for everyone, you will clearly understand what awaits you and make a reasonable and informed decision about the advisability of the lease.
Do not sign the lease for the premises first
Probably many people will criticize me now for blowing on water, because the practice of the tenant signing first is very common. It’s all true. I’m not going to argue. This is advice from the section of reinsurance. If the parties were going all the way to signing, then the landlord has no reason not to sign.
But in our practice, there have been cases where the tenant signed the contract and the Acceptance Act of the premises first and gave these documents to the landlord. Landlords due to various reasons, mainly because a more interesting potential tenant appeared on the horizon, did not sign the documents. When a new deal fell through, they would sign and demand payment from the tenant for all the time since the signing of the deed. Although in some cases, the period was up to a month. And once the landlord tried to demand a year’s rent even though the tenant never showed up at the premises.
Advice – try not to sign real estate leases first. Let the landlord do it.
Summary
- Take your time.
- Don’t give in to pressure.
- Don’t trust the landlord or his representatives
- Read the agreement.
- Don’t rely on a lawyer
- Involve specialists in contract negotiation
- Don’t hesitate to ask questions
- Don’t forget about the addendums to the lease
- Don’t sign the lease first