2015.02

Commercial Leasing Series - Offers to Lease and Standard Form Documents

By: Laila Parvez

Because Offers to Lease are generally binding (and consequently contain terms that will be carried over into the Lease itself), by signing an Offer to Lease, the tenant usually commits itself to various terms and obligations.  Most Offers to Lease include a statement that the parties will subsequently enter into a more fulsome lease agreement on the landlord’s standard form which will incorporate the agreed upon terms of the Offer to Lease.  At a minimum, the tenant should insert a clause in the Offer to Lease that the lease will also be modified to incorporate any amendments agreed to by the parties, acting reasonably. 

Leases are generally lengthy, complex and detailed documents, often comprising 35 to 45 pages of small font type.  Many commercial landlords have their own standard form of leases which they present to the tenant to sign.  While the standard form of lease is amended to include the items that have been negotiated in the Offer to Lease, the remainder of the lease, as expected, contains covenant and provision that are favourable to the landlord and unless the tenant carefully reads, understands and negotiates the terms of the Lease, it may end up taking on significant liabilities.   The extent to which landlords are agreeable to amending their standard form, other than to incorporate the agreed upon terms of the offer to Lease, varies with each landlord and each tenant.  However, in our experience, it is well worth the effort and time to carefully review the form of lease prior to signing an Offer to Lease and attempt to remove clauses that are particularly onerous or unfair because in most cases, even if the landlord will not fully delete a particular clause requested by the tenant, it may amend it so that the tenant’s exposure, if not completely eliminated, is at least reduced.

Because Offers to Lease are generally only a few pages, the tenant may be tempted to only summarily scan its Offer to Lease with the expectation that it will thoroughly review the actual Lease document.  However, it is vitally important that the tenant carefully review and negotiate the Offer to Lease and ensure that it includes all of the tenant’s “must have” items.  If these items are not included in the Offer to Lease and the tenant has agreed to sign the landlord’s standard form of lease, the landlord will have no obligation to include these items in the final lease. The tenant should have an experienced commercial leasing lawyer review the Offer to Lease before it is signed to ensure that the tenant does not become bound to terms with which it is not comfortable.

For a discussion of additional items relating to commercial leasing from the tenant’s perspective, please click here.

For more information on commercial leasing matters, please contact Laila Parvez at (416) 368-0491 or by email at lparvez@businesslawyers.com.

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