Peter Morris just sent to me a blog post, Advanced Lease Negotiations: Changed Conditions Clause, that he posted in his blog, Advance Beyond The Building. In this post, he talks about inserting a clause that would allow or perhaps require the parties to the lease to change the terms depending upon the occurrence of pre-defined conditions, including but not limited to:
- Renovation or rehab
- Expansion of the property
- Addition of a major or anchor tenant
- A significant increase in the average sales of the property, indicating a stronger property
- Attainment of LEED or other sustainable certification (this is particularly useful in office buildings)
- Addition of infrastructure positively affecting the property, such as a major transit stop or road realignment
- Or a combination of any or all of these.
It is common for landlord's and tenants to try to hedge their bets by putting in some provisions that allow for changes to the terms based upon a change in circumstances, such as a CPI increase or option language, I have seen all kinds of language that is relatively easy to define as to CPI increases and options.
Now to be truthful, I consider Peter to be one of the more intelligent and articulate real estate professionals that I know. However, the thought of having to try to define these pre-defined circumstances gives me the "willies". You are just asking for trouble here. I am confident that no matter how hard you try to define your language, you are likely going to run into trouble and disagreement.
Recent Comments