Office Lease Agreement: How Do I Get a Good One?

by -

An office lease agreement is a contract between the landlord and tenant to rent space. The tenant pays the rent and uses the space to conduct business ,and benefits because there is no capital expenditure to purchase the property. The landlord benefits because there is a steady stream of income.

About the Office Lease Agreement

A standard multi-tenant office lease agreement will either be a triple net (NNN) lease or a gross (all -inclusive) lease. If there are lots of smaller tenants in the office building and there is only one rental payment, it’s probably a gross lease. 

All of the operating costs of the building, like taxes, insurance, and common area costs, are included in the rental payment. If there are additional payments beyond rent and utilities, it’s probably a triple net lease. The tenant will pay its proportionate share of the costs of operating and maintaining the property in addition to the lease cost.

The office lease agreement draft is usually provided by the landlord and contains language that favors the landlord. It may be a standard office lease agreement or a boilerplate contract, but it still needs to be read and understood. It’s important that all of the negotiated changes are in the document and that the tenant understands what he/she is agreeing to. 

The landlord may state that the lease contains common or standard language, but that doesn’t mean the tenant has to accept it as-is. The landlord has a team representing his/her interests, so the tenant should have a team in place, too. A good commercial real estate attorney with experience can read the lease document and make sure the negotiated items are there, that you are protected both financially and legally, and that you understand the rights and obligations you are taking on when you sign the lease.

Single-Tenant vs. Multi-Tenant Locations

One thing to consider is if there are many tenants in the building or just one. If the tenant is the only occupant, then there is only one source of income for the landlord. The landlord will want to protect against the tenant’s default because mortgage, tax and insurance obligations don’t go away just because the building is vacant. 

A multi-tenant building means the risk is spread out, so there’s a diversification of income sources. The landlord might be willing to make concessions about the creditworthiness of the tenant, but that will probably mean a higher rental rate for the tenant.

You’ve got your team in place and they’ve got your best interest at heart. Your commercial real estate attorney should understand the tenant’s side and have experience dealing with the landlord, meaning they know what to push on and how to get the best deal without tanking the deal. Your attorney should also economize on legal fees and protect the relationship, too.

Getting a Good Office Lease Agreement

It can seem like there’s a lot of lease document for a simple office transaction. A simple transaction usually doesn’t mean a short lease, however!  Your commercial real estate attorney will help you understand the risk, rights and responsibilities of each party, and negotiate to protect your interests.

Disclaimer
The transmission and receipt of information contained on this website does not constitute an attorney-client relationship. Persons should not act upon information found on this website without first seeking professional legal counsel.

Operating cost exclusions in your commercial real estate lease

by -

  1. General Exclusions

The tenant needs to understand what he or she is paying for to ensure that he/she is not being overcharged by a landlord who is trying to turn operating expenses into a profit center. Landlords might put language into the lease allowing for: 

  • Charging the cost of capital expenses and improvements when they occur
  • Including charges specific to one tenant through to all tenants
  • Charging a management fee or administrative fee (or both!) that are not market rate

Here are some areas where a reasonable landlord will negotiate in a commercial real estate lease:

  • Leasing commissions, legal fees, promotional costs, etc.
  • Charges relating to sewer or water connections
  • Entertainment or travel expenses
  • Cost of repairs, replacements, etc. covered by insurance
  • The cost of any alterations or improvements due to construction defects or compliance reasons
  • Repairs due to condemnation or casualty
  • Costs related to lease negotiations or disputes
  • Correcting a tenant violation of a lease
  • Depreciation 
  • Costs of renovating, redecorating or improving a space
  • Amounts paid to landlord-related parties for services that are above the market rate
  • Salaries of landlord employees that are mangers
  • Landlord’s general overhead and administrative expenses
  • New or additional structures
  • Capital expenses
  • Income, excess profits, franchise, transfer, estate or inheritance taxes 
  1. Capital Expenditures

Capital expenses are not capital improvements.  A new roof or air conditioner are not repair or maintenance items, but are capital improvements that benefit the project. These capital expenses often have a useful life beyond a tenant’s commercial lease term. Landlords like them because they are needed and it may increase operating expenses on a go-forward basis. Tenants don’t want to pay for more than their share of these expenses. A typical example is a replacement HVAC unit. 

The best way to resolve this is to compromise.  The tenant will pay for capital expenditures that reduce overall operating expenses, but those costs are amortized over the useful life of the improvement. 

  1. Management Fees

Another potentially expensive section is the issue of the management fee for the project. Landlords may hire an affiliated party to manage the property. There’s no guarantee that the rate being paid to the property manager is market rate, or that the landlord isn’t padding operating expenses and keeping the difference.

There are a couple of different ways to address this.  One solution is to specifically state that whoever the landlord hires as the property management company, that entity will not be paid more than the market rate.  Another solution is to simply to cap the cost of the management fee, usually as a percentage of the gross rent for the building. 

 

NEGOTIATION TIP: Watch out for a commercial real estate lease that charges an administrative fee AND a management fee!  It doesn’t matter how it’s calculated, it’s usually a landlord attempt to collect twice on the same charge. A good commercial real estate attorney can help the tenant negotiate to control this cost.

 

  1. Controllable Operating Expenses

Finally, another way to avoid overcharging for operating expenses is to cap the increase for “controllable” operating expenses. Controllable expenses typically excluded insurance, real estate taxes, and specific other items that are beyond the landlord’s control.

How do you know what other controllable expenses are?  Need help understanding the different fees and how to negotiate them?  Hire a commercial real estate attorney, who knows what to look for and will advocate for your best interests.

Disclaimer
The transmission and receipt of information contained on this website does not constitute an attorney-client relationship. Persons should not act upon information found on this website without first seeking professional legal counsel.

What’s in a Good Commercial Real Estate Building Lease Agreement?

by -

A commercial building lease agreement formalizes the leasing relationship between a landlord and a tenant to rent business property in order to conduct business operations thereon. When operating a business, a formal legal agreement that recognizes and codifies the relationship between the landlord and tenant is necessary and will prevent confusion and unnecessary costs at a later time. 

In commercial real estate, a building lease is used for business purposes, not residential. The premises is the location the tenant is leasing. If the premises part of a larger building or project, and there are additional tenants in the building, then there are additional rights to consider. Everyone in the building will need to have access to common areas and parking lots, for example. 

The tenants will typically sign a triple net lease form which will include information about maintaining the common areas. If the tenant’s business has explicit needs such as climate control or special delivery times, these restrictions will also need to be negotiated and specified in the building lease agreement. 

When creating or signing the commercial real estate lease, these items should be explicitly stated:

  • Who is the landlord
  • Who is the tenant
  • Term (the amount of time the tenant will possess the premises)
  • Start and end dates
  • Automatic renewal

A commercial real estate lease tries to anticipate problems and address them before they happen. The tenant and the landlord will know who is responsible for what, and the associated costs.  It’s important to be aware of what is in the building lease. What’s even more important is what might be left out of the lease, so it’s important to know what to look for before you sign.

A prepared tenant will ask these questions and make sure the building lease answers them:

  • Who pays for utilities?
  • Who handles maintenance and repairs?
  • Who pays for substantial or partial damage to the premises? 
  • How are disputes resolved between landlord and tenant? Between tenants? 
  • What’s the jurisdiction and laws governing the resolution to the dispute?
  • How are problems handled? Arbitration, mediation (ADR) or in court?
  • When can the landlord enter and inspect the premises? When can other people enter?

When you’re working with your commercial real estate attorney to negotiate your building lease, you want as much clarity as possible regarding the obligations and liabilities of each part; who has to do what, and who has to pay for what? A savvy tenant will understand the rights and responsibilities of each party to the building agreement, and will make sure that the building lease gives the tenant the ability to enter the space and operate the business.

 

An important thing to note is that a lease agreement triumphs over default laws. It’s vital to ensure your signed lease goes into great detail to protect you. If it’s not in writing, it doesn’t exist. If the landlord breaks a promise (accidentally or deliberately) or simply changes his/her mind, your lease will enforce your agreement.  

If you want to make sure your building lease has all of the rights and responsibilities, obligations and liabilities set forth, then make sure you get an experienced commercial real estate attorney to review your lease before you sign it.  Schedule a time to speak with me today to protect yourself!

Disclaimer
The transmission and receipt of information contained on this website does not constitute an attorney-client relationship. Persons should not act upon information found on this website without first seeking professional legal counsel.

Why Should I Hire A Commercial Property Attorney? I Have a Real Estate Broker!

by -

A broker gets paid when the deal is done, and their job is to locate space and negotiate some of the economics of the deal.  An attorney’s compensation isn’t contingent on finishing the deal, so a good commercial real estate attorney will provide an understanding of the entire structure of the deal, beyond just the economic terms.

Brokers are not Attorneys

Only an attorney can provide legal advice – not a real estate broker or an accountant. A commercial property attorney knows about the specific laws that apply to commercial property transactions. An attorney with relevant commercial property experience can protect your legal rights and has a unique understanding of property law. He/she will know what to look for in a commercial property transaction, whether it is a purchase, a sale or a lease. 

An experienced commercial real estate attorney can help you understand your rights and obligations and tell you what is in your documents and what is missing from them.  A free online forum or a general attorney without a specific focus on commercial property will miss these nuances, and the tenant is usually the one who will suffer the economic and legal consequences. A broker can’t help you once the deal is done.

What Issues Can a Commercial Property Attorney Help With?

Commercial property, like office, retail, industrial or multi-family housing, are governed under different laws than single-family or residential housing.  An attorney who specializes in residential property will not have the same experience and understanding of the commercial real estate laws. A commercial property attorney can provide tailored legal guidance based on your situation.

Here are some of the practice areas for a commercial property attorney:

  • Zoning and land use
  • Property taxation
  • Commercial property insurance
  • Ownership and title issues
  • Leasing negotiations and disputes
  • Condo declarations
  • Purchase and sale transactions
  • Property contract breaches and business disputes

Commercial properties have a different design, function and type of occupancy as compared to residential properties. The commercial property industry typically has separate, state-specific laws that apply. The consumer protections in residential real estate don’t apply to these types of transactions

When working with commercial properties, there is a lot of documentation and paperwork tied up with business use and contracts.  Each transaction is different, and your online search won’t know the nuances of your transaction- that is why most articles say “be sure to consult with a commercial real estate attorney.” What about corporate ownership, leasehold, tenant claims or environmental issues? Those might not be in that form you downloaded online, but how will you know?

The great thing about having a commercial property attorney on your team is that there is a very specific subset of laws that the attorney knows very, very well. Your attorney should understand the laws, clarify issues, represent you and your interests.

By choosing to work with a commercial property attorney, you have someone who will help you reduce risk, protect your business financially, spot anything weird on the deal, and negotiate in your best interest.

Ready to protect your business assets and negotiate for the best deal possible?  Let’s discus how to do that!

Disclaimer
The transmission and receipt of information contained on this website does not constitute an attorney-client relationship. Persons should not act upon information found on this website without first seeking professional legal counsel.

Landlord Wants From A Tenant

by -

A landlord wants tenants if they meet this criteria:

1) A personal guarantee means that YOU are personally responsible, and the landlord or franchisor entity can go after your personal assets and bank account. Try a larger security deposit, or sharing the entity financials (after an NDA is signed, of course!). If there is a default, only the legal entity should suffer, not you personally.

2) If you sign a personal guarantee, and you are married, remove the partner. The landlord or franchisor may have access the legal entity and those of the guarantor, but joint marital assets (or separate property assets) that belong to a spouse might not have to be attached.

3) If you’re going to sign a guarantee, try to limit the time period. Set the guarantee to expire after a certain amount of time has passed or upon certain conditions (such as proof of the assets of the legal entity).

4) Alternatively, limit the personal guarantee. A capped amount will indicate the maximum amount of exposure for which the guarantor is personally liable.

A guarantee is a very personal thing. Let’s discuss how to minimize your personal exposure and protect your assets.

Security Deposit

But while most owners of smaller office buildings tend to prefer cash deposits, he notes that a cash security deposit does not protect against bankruptcy because it becomes part of the bankrupt estate.

He, therefore, recommends that a security deposit be in the form of a letter of credit, which is an agreement between the bank issuing it and the landlord and so does not become part of a bankrupt estate.

Disclaimer:

This article does not create an attorney-client relationship. This article is for general education purposes only and is not legal advice. You should consult with a qualified attorney before you rely on this information.

Why Would You Sign A Triple Net Lease Agreement?

by -

Triple Net Lease Form- Why Would You Sign One?

A “net” is an expense related to the lease. A “triple net” lease will refer to the three “nets” of commercial real estate leasing- real estate taxes, property insurance, and common area maintenance, or CAM (sometimes referred to as OpEx, or operating expenses). The triple net lease form is not a completely hands-off experience for Landlord, and it’s not owning the property in all but name for Tenant, either. Both parties must negotiate the triple net lease form carefully to set expectations, and downloading and signing a triple net lease form that isn’t tailored to your situation can create disastrous results.

Attraction of a Triple Net Lease Form

The triple net lease form (or NNN lease form) is attractive to Landlord- it’s guaranteed rental income while Tenant pays the NNN expenses.  It’s attractive to Tenant, too- a long-term lease, lower rent and flexibility with the building, since there’s no capital investment to purchase the land.

It Can Get a Little Tricky

A triple net lease is easier if there is a single tenant occupying an entire building.  If Landlord has multiple tenants and shared facilities or common areas, then the accounting and applicability gets more involved.  Tenant should contribute Tenant’s Proportionate Share of the NNN expenses to Landlord, and Landlord is responsible for using that money to make the payments for the insurance, tax, and operating expenses. Tenant’s Proportionate Share is based on how much space is occupied in relation to the property as a whole.

When you’re negotiating your triple net lease form (or, rather, you’re working with your professional team to protect your interests and mitigate your risk), focus on these three triple net expenses and how each party will approach them in negotiations:

Insurance

Tenant pays for all or a portion of the insurance cost on Landlord’s property. Negotiate this section carefully:

  • Coverage should be adequate
  • Insurance company should be properly qualified, not just the lease expensive
  • Make sure Landlord is informed of coverage changes/lapses
  • Tenant should have to report/file a claim with a claimworthy event occurs

If Tenant doesn’t meet the insurance requirements, Landlord can default Tenant under the lease, but meanwhile, and pursue remedies that way, but meanwhile, there’s damage and no money to fix it. Also, if Tenant violates the insurance (like arson), then there’s no coverage, even if Landlord is listed as additional insured.

CAM/OpEx

This section should be highly negotiated in your triple net lease form, especially if this is a multi-tenant location.  Be very specific about what expenses are included, and excluded, from CAM or OpEx. Negotiation tip: watch for capital expenditures, insurance charges as part of CAM if already paid as a separate charge, and maintenance contract requirements.

Landlord should be very clear on the maintenance requirements and quality of work that Tenant is responsible during the Lease term.

Taxes

Who can protest the tax bill?  If no one protests it, and taxes increase more than those of comparable properties, Tenant is stuck with a higher bill, and Landlord may have difficulty finding a new tenant at the end of the lease term.

A triple net lease form involves a lot of negotiation and understanding the long-term consequence of those negotiations. Getting a form online won’t provided the customized solution necessary in this complex Landlord-Tenant relationship.  It’s important to have an experienced team in place to guide you through the process of negotiating a triple net lease form.

Disclaimer:

This article does not create an attorney-client relationship. This article is for general education purposes only and is not legal advice. You should consult with a qualified attorney before you rely on this information.

Commercial Sublease Ins and Outs

by -

Commercial Sublease

A commercial real estate lease agreement is a lease between Landlord and Tenant.  But Tenant might have too much space, and want to bring in an additional tenant to share the space, and the costs.  Alternatively, the space might become too big or too small for Tenant, and it makes sense to have someone else take over the entire area.  That’s a situation where you need a commercial sublease.

Definitions

Landlord (lessor)- owner of the space

Tenant (lessee)- the renter of the space from the Landlord, may also be referred to as Prime Tenant

Subtenant (sublessee)- renter of the space from the Prime Tenant.

Lease- original agreement between Landlord and Tenant, may also be referred to as Master Lease

Sublease- agreement between Prime Tenant and Subtenant

Landlord’s Consent

The Master Lease will usually require Landlord’s consent to any Subtenant that Prime Tenant may propose.  Negotiation tip: Don’t rely on Landlord’s absolute discretion as a consent standard. Landlord may also charge a fee to review Subtenant for consideration.

The consent should either be a neutral standard or it should state exactly what criteria Landlord will accept for a subtenant.  Common factors include: the creditworthiness of the subtenant, if the use of the subtenant will compete with existing tenants or place an undue burden on the building (such as utilities or parking) and signage requirements.

Subleasing without Landlord’s consent, if it is required, can result in a whole host of financial and legal penalties.

Liability

Landlord may also require that Prime Tenant remain liable under the Prime Lease during the term of the commercial sublease.  This basically means Prime Tenant is acting as a guarantor for Subtenant, so if rent isn’t paid in a timely fashion, or there is damage to the space, Landlord can look to Tenant for remedy, even if Subtenant is at fault.

The Master Lease agreement will control over the commercial sublease. Everyone still has to abide by the conditions of the Prime Lease.  Subtenant should make sure it receives a copy of the Master Lease and any amendments or modifications.  Some of the information may be confidential (maybe they don’t want to share the name of the Landlord or the primary rent amount), but it’s important to know what Subtenant is being legally bound to. If Prime Tenant won’t share a copy of the Prime Lease, that is a big warning sign.

Subtenant should be aware of Prime Tenant’s financial situation.  If Subtenant pays rent to Prime Tenant, but Prime Tenant doesn’t send that payment to Landlord, there may be a lease default, and Prime Tenant and Subtenant could be terminated from the space.  Negotiation tip: make sure that Landlord can require Subtenant to pay Landlord directly in the event that Prime Tenant defaults.  That way, Subtenant has a better chance of staying in the space!

A commercial sublease can be a great arrangement if Tenant grows too big for the space or doesn’t need the entire space.  A Subtenant can help offset Tenant’s costs, and Landlord can get paid in a timely fashion.

Disclaimer:

This article does not create an attorney-client relationship. This article is for general education purposes only and is not legal advice. You should consult with a qualified attorney before you rely on this information.

 

Buying Online And Picking Up In Store

by -

The relationship between online traffic and physical locations is still being understood, but data suggests the relationship is not mutually exclusive, but rather mutually beneficial. A 2017 study found that for each dollar that is generated in online sales from reviews, another $4 to $6 is generated in sales at a brick-and-mortar counterpart. This reveals a significant motivator for online sales: information and transparency. Consumers will spend days, weeks or even months researching a product, and will often opt to purchase the item in-store. Web-based sales channels are not taking retail sales from brick-and-mortar locations; the information they provide online is driving new sales to the brick-and-mortar counterparts. Savvy retailers with a knack for creating an inviting destination for consumers can see a positive future for retail.

Its online web traffic essentially acts as a funnel to the physical location and translates into sales of over $3,000 per square foot, according to one analysis. That is higher than even Tiffany’s. Today’s retailers use the information they gather about their customers to make more informed real estate decisions.

Landlords are more open to on-line concepts, investors are slower to follow, and prefer national names on rent roll; smaller retailers sometimes outperform national competitors.

National concepts are notoriously difficult to work with, especially those with low margins. Some use their collective set of negative landlord experiences to push for tenant-friendly leases. Landlords have, in the past, given up key negotiating points because the increased value with a national tenant offset most negatives or financial loss. Online-only retailers opening their first locations do not have the experiences with landlords, economic downturns and so on to know what to push for, nor do they provide owners with the same increase in value to the property. On the other hand, this is a reason why many investors, tired of being pushed around by major tenants, are inviting new players to the table, and why we are seeing local tenants obtain locations that historically they would not have been presented with.

Consumers are spending their time researching online but walking into stores in search of an experience. The data collected from consumers online can be used to create exactly what shoppers are looking for and retailers must be prepared to meet that need.

Disclaimer:

This article does not create an attorney-client relationship. This article is for general education purposes only and is not legal advice. You should consult with a qualified attorney before you rely on this information.

Building Lease Agreement: Step-By-Step

by -

What’s Important Financially in a Building Lease Agreement?

When negotiating a building lease agreement, whether it is a retail, office, industrial or another type of commercial real estate, the Landlord will usually provide the first draft of the lease agreement.  It’s probably Landlord’s standard lease document, but the terms of a building lease agreement can (and should) be negotiated.

Landlord’s lease agreement is a draft, a first offer.  An experienced, ethical Landlord will expect some changes and negotiation to the document.  The document should evolve from a landlord-drafted standard lease form to a customized, negotiated document that is a mutual agreement between both of the parties.

Rent may not be the only charge Tenant pays to Landlord. Tenant should understand what legal and financial obligations it is taking on by signing on the dotted line. The best time to negotiate and to ask questions and to clarify obligations is before the lease is signed and legally binding.  When Tenant reviewing the building lease agreement, here are a few financial items to look for and negotiate:

Additional Charges

  • Utilities- billed directly to Tenant or Landlord will bill Tenant for its share, or some combination thereof.
  • Percentage Rent- if Tenant sell a certain amount of product (usually not services) from the location, Tenant pays a percentage of those sales to Landlord. This is most common in a retail situation.
  • Penalties- late fees or interest charges if payments aren’t made on time.
  • Maintenance contracts- Tenant may be required to pay for inspections or maintenance on the HVAC (heating, ventilation, air conditioning) or other systems
  • Construction costs- who pays for what, including construction related to the Americans with Disabilities Act of 1996 (ADA)

 

Security Deposit

  • The total amount of the security deposit
  • How it can be used- damages, late rent, for late fees and penalties, etc.
  • How do you get it back at the end of the lease? Negotiation tip: put a time limit on when the security deposit, or balance, is returned to Tenant.
  • If the security deposit is used, is there a replenishment requirement?
  • The rent may increase during the term- it could apply to the security deposit as well.

NNN (Triple Net Expenses)

  • Taxes- tax due on the real and personal property
  • Insurance- Tenant should carry its own and may contribute to Landlord’s cost as well if there is a common area
  • CAM/OpEx- common area maintenance or operation expenses are contributions to make sure the areas everyone shares are maintained.

 

Contingent Expenses

  • If the space becomes too big, too small, or too expensive, Tenant might have the ability to sublease or assign all or part of the space. Landlord may charge a review fee or may require Tenant to guarantee the remainder of the building lease agreement term.
  • Tenant could negotiate a buyout or early termination right, but there’s usually a financial penalty attached.
  • If Tenant defaults, and Landlord cures the default at its own expense, determine what charges Landlord can collect. Negotiation tip: Landlord might accelerate damages to get them all at once, instead of waiting as they come due.  Watch out for the present-day cash value!

 

The building lease agreement is an expensive obligation, and Tenant should be prepared, legally and fiscally, before signing the lease document.  It’s important for Tenant to have a team in place, and to make sure to review and understand its financial obligations under the building lease agreement.

Disclaimer:

This article does not create an attorney-client relationship. This article is for general education purposes only and is not legal advice. You should consult with a qualified attorney before you rely on this information.

Why Contracts Are A Necessity!

by -

Contracts exist for the protection of all parties so that the price, terms and conditions can be agreed to in writing without misunderstanding. The best contracts are those that are written in plain English where nothing is left to ambiguity or misinterpretation.

Often problems arise when one party misses a deadline and fails to inform the other side as to the reason for their tardiness. A lack of communication can lead to conflict and sometimes even litigation if the matter is serious enough.

It behooves everyone involved with any type of contract to maintain good communication with the other parties and meet every deadline.

The two most commonly used contracts are the listing agreement and the purchase agreement. Listing agreements are usually exclusive arrangements between the seller and the listing broker. Agents represent a broker but agents themselves do not own the listing per se. The terms of the listing agreement include the beginning and ending dates, price, showing instructions, whether furnishings are included, etc.

Purchase agreements are extremely lengthy documents that contain very detailed terms and conditions along with several pages of disclosure forms. There are deadlines for the performance of specific terms such as the earnest money deposit, inspections, contingency removals, etc.

In the event that one party is unable to meet a deadline they should always notify the other party in advance and try to work out an extension so the deal can move forward in good faith.

Leases are another very common form of real estate contract where having everything in writing is critical to avoid misunderstandings.

We still occasionally see people renting a property to a tenant without any written agreement. This can be a roadmap to disaster. No matter how well you know someone, it is absolutely critical to have a written lease when it comes to renting a piece of property. It makes no difference if we are talking residential or commercial real estate.

Only by having a well-crafted lease agreement can all parties ensure there will be no disagreements over the length, utilities costs, condition of the building or any other important matters.

From time to time we see various types of option agreements involving real estate. In commercial real estate sometimes a business person will purchase an option to lease a desirable space for a property that is under construction or going to be vacant in the future. The reason for doing this is that you are risking far less money than if you just signed a long-term lease.

What if something happened to your business prior to signing the option agreement and the occupancy date? With an option agreement you are limited to the cost of the option whereas if you had signed a five-year lease you would be obligated for 60 months of continuous payments.

The lease with option to purchase is something we see with residential property, especially when someone is renting a higher-priced home that they are contemplating buying. The prospective buyer gets a feel for the property and a portion of their monthly rent is sometimes credited toward the purchase price.

The buyer generally puts up a nonrefundable deposit which may or may not get credited towards the purchase price depending on the amount of money involved and the terms the deal.

Regardless of the type of contract, all parties need to adhere to deadlines and fulfill the terms and conditions of the agreement. The whole purpose of reducing everything to writing in the first place is to ensure that everyone is in agreement in regards to price, terms and conditions.

When someone breaches or defaults on a contract it’s up to the parties involved to try and work things out as quickly and amicably as possible before you wind up with an out-of-control conflict.

Disclaimer:

This article does not create an attorney-client relationship. This article is for general education purposes only and is not legal advice. You should consult with a qualified attorney before you rely on this information.