A commercial tenant views a lease negotiation quite differently than does the landlord. As most leases tend to be drafted by the landlord, a tenant must begin an uphill battle to gain as many concessions as possible. This is an arduous task made easier by a full understanding of what are the most important issues for a tenant in a commercial lease transaction. How does the financial profile of the tenant enter into the picture? Where can a tenant get hurt the most by hidden costs or unforeseen expenses? Why is “leverage” the most important concept to consider in this process? This webinar will help one understand how the tenant, generally the underdog in lease transactions, can turn the tables and become the most powerful player in the leasing game. Part of the webinar series: REAL ESTATE LAW DUMBED DOWN 2022 See more at https://www.financialpoise.com/webinars/

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4. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
legal, financial or other professional advice. You should consult with an attorney or other
appropriate professional to determine what may be best for your individual needs. While
Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
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5. Meet the Faculty
MODERATOR:
Eric Hampton – Rudolph Kaplan LLC
PANELISTS:
Howard Kline – The Law Offices of Howard F. Kline
Scott A. Weinstein – Field and Goldberg, LLC
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6. About This Webinar – Representing the Commercial
Tenant
A commercial tenant views a lease negotiation quite differently than does the landlord. As
most leases tend to be drafted by the landlord, a tenant must begin an uphill battle to gain as
many concessions as possible. This is an arduous task made easier by a full understanding
of what are the most important issues for a tenant in a commercial lease transaction.
How does the financial profile of the tenant enter into the picture? Where can a tenant get hurt
the most by hidden costs or unforeseen expenses? Why is “leverage” the most important
concept to consider in this process? This webinar will help one understand how the tenant,
generally the underdog in lease transactions, can turn the tables and become the most
powerful player in the leasing game.
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7. About This Series – Real Estate Law Dumbed Down – 101
2022
Commercial real estate is one of the most understandable of investments. We live and work within real estate. It is tangible. One can see it.
Yet, underneath this veneer of simplicity there are many legal and practical issues to consider. And these issues are impacted by the market
and the leverage of the parties, both of which are moving targets.
This webinar series is for the lawyer, broker, investor, syndicator, developer and others who seek a basic understanding of the essential
elements of real estate law. This series spans purchase through sale and covers all of the high points in between.
Purchasing real estate presents a number of threshold questions. Should a real estate investor use his or her own money, or seek
investors? What type of investment legal structure makes the most sense and why? When one is in the process of acquiring a property, what
are the most important items to inspect? What if the buyer finds a big problem? When one wishes to sell a real estate investment, how much
is the right price? What is the value and how is it determined? At its base, commercial real estate is all about cash flow. What makes this
possible is the commercial lease. Yet a lease creates a long-term relationship between a landlord and a tenant who have diametrically
opposing goals. How does one navigate through the minefield of legal issues in a lease and end up with a contract that both sides can live
with for years to come?
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and executives without much
background in these areas, yet is of primary value to attorneys, accountants, and other seasoned professionals. Each episode brings you
into engaging, sometimes humorous, conversations designed to entertain as it teaches. Each episode in the series is designed to be viewed
independently of the other episodes so that participants will enhance their knowledge of this area whether they attend one, some, or all
episodes.
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8. Episodes in this Series
#1: Representing the Commercial Landlord
Premiere date: 8/30/22
#2: Representing the Commercial Tenant
Premiere date: 9/27/22
#3: Basics of Real Estate Syndication
Premiere date: 10/25/22
#4: Due Diligence in Real Estate Deals
Premiere date: 12/6/22
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9. Episode #2
Representing the Commercial Tenant
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10. Commercial Leasing Overview
• General pillars for commercial tenants:
a. Maximize profit/value of the business
b. Reduce the cost of overhead
c. Shifting burden of risk as much as possible
d. Location, location
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11. Commercial Leasing Overview (cont’d)
• Important lease terms
a. Use
b. Base rent
c. Additional rent
d. Security deposits, letters of credit, and guarantees
e. Repairs/Alterations
f. Insurance
g. Casualty
h. Assignment/Subleasing
i. Surrender of premises
j. Bankruptcy/Insolvency
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12. Commercial Leasing Overview (cont’d)
• Drafting and Negotiating
a. Ensure that your lease protects you from likely and unlikely situations (e.g., default,
loss, recessions, even pandemics)
b. The Landlord likely drafted the lease, so make sure the lease is as balanced as
possible.
c. Term length(s), exercisable options, and “out” provisions can be used a leverage by
the tenant
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13. Commercial Leasing Overview (cont’d)
• Minimizing risk
a. Who holds most of the risk in the lease?
• Preserving your company
a. Do not let the lease impact your business model – litigation, evictions, or judgments
can impact the reputation and future of your business
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14. Types of Leases/Tenants
• Single tenant v. Multi-tenant
• Single Net, Double Net, and Triple Net Lease
• Gross lease
• Modified Gross lease
• Percentage Rent
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15. Types of Leases/Tenants (cont’d)
• Retail
o Exclusivity, co-tenancy, percentage rent, going dark. Larger tenants often have
leverage to impose on landlords.
• Office
o Relocation provisions are important to allow landlord flexibility; operating expenses,
must be sure that all such expenses are covered and uniform.
• Industrial
o Permits and use are often necessary and must be addressed; hazardous materials
and equipment must also be carefully considered.
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16. Lease Specifics
• Common Area Maintenance (CAM) Expenses
o Usually includes operating expenses, such as taxes, insurance, maintenance
o Should be proportional to the leased space
▪ Should not cover areas that are paid for by other tenants
▪ Review the landlord’s expenses to make sure everything is accounted for and not
double billed
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17. Lease Specifics (cont’d)
• Assignment/subletting
o Is the tenant considering subleasing a portion of the space? If so, make sure that is an
option and negotiate it in the lease.
▪ Who remains liable to the landlord under the assignment/sublease?
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18. Lease Specifics (cont’d)
• Exclusivity, permitted uses & use clauses
• Recapture rights
o Allows the landlord to terminate a lease and retain possession of the property.
• Insurance
o All parties need coverage
o Limits – can and should be specified in lease to ensure adequate protection
o Named insured v. Additional insured
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19. Lease Specifics (cont’d)
• Relocation
o In a larger building, the landlord may have the flexibility to move a tenant to another
comparable space in the building to utilize the rentable space in as efficiently as
possible.
• Surrender
o The terms of the surrender of possession after the lease term (e.g., condition of
property, equipment to take/leave, return of security deposit, etc.)
• Holdover
o Penalties for a tenant remaining in possession after lease term if not otherwise agreed
by both parties.
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20. Subordination, Non-Disturbance and Attornment
Agreement (SNDA)
• Agreement between tenant and lender of landlord
• 3 parts:
o Subordination
▪ Tenant agrees to subordinate its interest in the property to the lender.
o Non-Disturbance
▪ In the event the landlord defaults on a loan and the lender forecloses on the
property, they will still be able to operate in the leased premises for the remainder
of the lease term under the new landlord
o Attornment
▪ In the event of foreclosure, the tenant agrees that the lender will be its new
landlord.
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21. Subordination, Non-Disturbance and Attornment
Agreement (SNDA) (cont’d)
• Negotiating an SNDA
o Leverage typically shifts depending on if negotiated before or after lease execution.
• Issues
o 3 parties with competing interests in 1 asset
o New landlords generally do not like being responsible for previous landlord’s
obligations
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22. Lease Default
• Security Deposit
o Factors to consider: the tenant’s financials and projections, historical track record, type
of tenancy, length of lease, and type of guaranty
• Letter of credit
o Guaranteed payment to the landlord in the event the tenant does not make the lease
payments
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23. Lease Default (cont’d)
• Guaranty
o Straight Guaranty
▪ Personal guaranty – typically a manager or director of the company will
“guarantee” that it will pay the debts if the company cannot.
▪ Landlords will want to include in the guaranty that landlord has the option to sue or
collect against either the tenant or guarantee upon a delinquent debt before
pursuing the tenant first.
o Good Guy Guaranty
▪ Allows one or more guarantors to be held personally responsible for timely rent
and other payments to the landlord, as long as the tenant remains in possession
of the property.
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24. Remedies
• In the event of a default under the lease:
o Termination of the lease
o Acceleration
▪ Require the full amount of rent remaining on the lease due and owing upon an
event of default.
o Possession
• Eviction/Lawsuit
o It is best practice to include a landlord friendly attorney fee recovery provision, or at
the very least, a fee shifting provision in which the non-prevailing party has to pay the
reasonable attorneys’ fees of the prevailing party.
• Statutory remedies vary by state
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25. Tenant Considerations
• Tenant improvements
o What can tenant modify about the premises?
o Does landlord allow for an “allowance” for tenant to make improvements?
• Tenant concessions
o Usually identified in the LOI or term sheet
• Third Parties
o Lenders
o Associations (shopping malls, mixed-use buildings)
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26. Insolvency
• Awareness
o Bankruptcy is allows a possibility and one that frequently favors the tenant
• Prepare
o Where possible, negotiate protections before executing lease
▪ Is there Furniture, Fixtures, and Equipment (FF&E) for collateral?
▪ Does a lender already have a security interest in the tenant’s assets?
• Predict
o There is great value for the landlord to negotiate with the tenant if the tenant becomes
insolvent – bankruptcy favors the tenant and the landlord likely does not want to be
stuck in bankruptcy.
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27. Intangible Considerations
• Negotiate and act in good faith
o The landlord may not be require to agree to a tenant’s lease renewal.
o A tenant with an unfavorable reputation is not well received.
• A lease is a symbiotic relationship – be aware of who you are working with.
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28. Being the Tenant
• Commercial tenants are currently dealing with unprecedented issues
o Post-Covid-19 landlords, many of whom are low on cash
o Remote/hybrid workforce
▪ Less foot traffic for retail
o High inflation
o Fluctuating economy
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29. Being the Tenant (cont’d)
• Check your state law – some states (like Texas) provide for a landlord favorable lien on
property for unpaid rent.
o In Texas, a commercial landlord has a preference lien during each lease year on the
tenant’s property in the property for past and future rent due.
o If the tenant does not pay, the landlord can foreclose on that lien.
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30. Sale of the Property During Tenancy
• The Agreement of Purchase and Sale must discuss the lease/tenant
o Ensure the new owner will work with the tenant.
o Ensure the tenant is not breaching its obligations under the lease while in this process.
• Estoppel certificate:
o A statement from tenant that a commercial lease exists, that specific facts of the
agreement are valid, there are no current defaults, and that the tenant agrees to pay
rent to the landlord.
o In short, it outlines the nature of the relationship between the landlord and tenant and
future assurances.
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31. Bankruptcy Considerations and Situations
• The nuclear option is for a tenant to file bankruptcy
o Chapter 7 (liquidation) or Chapter 11 (restructuring)
▪ Recently Sub-Chapter V of Chapter 11 was passed into law that provides another
restructuring option for smaller businesses
o If the tenant cannot pay its debts (including rent) and negotiation is ineffective,
bankruptcy can be an option.
o As a prudent tenant, one should have, at a minimum, a basic understanding of the
bankruptcy process.
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32. The Power of Bankruptcy
• Not only does the tenant have substantial leverage in bankruptcy, but it can assume the
lease terms as part of its restructuring process.
o Assume or reject the lease
▪ Once under the protection of the bankruptcy court, the tenant is given the option to
reject or assume certain contracts, such as unexpired leases.
▪ If assumed, the lease remains effect, even if the tenant has defaulted under the
lease, as long as the default is cured, or adequate assurances is provided.
▪ If rejected, the tenant can walk away and is relieved from future obligations under
the lease.
• If the tenant assumes the lease, the landlord should monitor the tenant’s compliance with
the lease. If the tenant breaches the lease after filing for bankruptcy, the landlord may
want to seek relief from the automatic stay to terminate the lease.
• To avoid bankruptcy, out-of-court restructurings and work outs may be an alternative.
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33. About the Faculty
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34. About The Faculty
Eric Hampton – ehampton@rudolphkaplan.com
Eric Hampton is an associate attorney with Rudolph Kaplan, LLC and focuses his practice on
commercial and residential real estate litigation and related transactional matters. Eric has
experience representing a variety of entities and individuals in all stages of commercial
litigation and construction law cases. Eric received his Bachelor of Arts degree from Kansas
State University. Eric earned his Juris Doctorate degree from The University of Iowa College
of Law in 2018, where he was a writer on the Journal of Corporation Law and worked in the
Clinical Law Program. During the summer following his second year of law school, Eric
worked as a summer associate at a boutique corporate restructuring law firm in Chicago. Eric
is admitted to practice law in the State of Illinois and the Northern District of Illinois.
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35. About The Faculty
Howard Kline - howard@hfklaw.com
Howard has been involved in commercial real estate for over 39 years now as both an attorney,
broker, arbitrator and now radio show host and founder of CRE Radio & TV, since December 2010.
Over the years, I have worked in-house as General Counsel and Director of Real Estate for a
national user of office, R &D and retail space, utilizing both my legal and brokerage licenses, General
Counsel for a major regional supermarket chain that owned its own shopping centers. As an
attorney, I have also practiced law as outside counsel to many major commercial landlords doing
lease transactional work and lease litigation, including unlawful detainers and rent collections. As a
real estate salesperson, I have served as a tenant rep in New York City and as a broker for
numerous lease transactions throughout the United States.
While I continue to practice law on behalf of commercial landlord’s and tenants, my passion has
become the radio show. It is incredibly fulfilling to inspire others to improve themselves and reach for
the stars.
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36. About The Faculty
Scott A. Weinstein - sweinstein@fieldandgoldberg.com
Scott A. Weinstein comes to the Field and Goldberg, LLC having developed a broad-based background in
commercial real estate. Mr. Weinstein’s experience includes working with a fortune 500 company where he
handled transaction financing and deal structures. Having served as president, counsel and co-owner of a
successful real estate title company, Mr. Weinstein brings a unique perspective and understanding of the daily
and ongoing business issues clients face and is able to provide practical and proactive counsel.
Mr. Weinstein regularly represents commercial real estate clients in all aspects of commercial transactions
including lease negotiations for landlords and tenants (including franchisees) nationwide on retail, office and
industrial leases; acquisitions and sales of office, industrial and multi-family apartment buildings, and shopping
centers; financing; and condominium deconversions.
Admitted to practice in the State of Illinois and the U.S. District, Northern District of Illinois, Florida and New
York, Mr. Weinstein received his Juris Doctor degree from Temple University Beasley School of Law and his
Bachelor’s degree from the University of Maryland at College Park.
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37. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
at info@financialpoise.com with any questions or comments you may have. Please include
the name of the webinar in your email and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
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