Office Leasing Toolkit (CA)

Resources to assist companies in understanding and effectively negotiating office leases in California. This Toolkit includes commonly used forms, such as leases, term sheets, guaranties, estoppels, and consents. This Toolkit also provides analysis of common leasing concerns, including tenant rights, landlord remedies, operating expenses, expansion options, assignments, and security deposits.   

Practical Law Real Estate

All companies need office space to house their employees and run their businesses. Leasing space is often an efficient way to meet this need. Companies invest a lot of time and money in finding the right space and finalizing the lease agreement. Most office leases are long term commitments, often five years or more, with ongoing obligations and risks. When negotiating leases, companies should:

  • Identify short and long term business goals. The clearer the business goals, the more likely the finalized lease agreement will be an effective and useful tool for the company and its business vision. For example, if the company believes it will encounter growth in the near future, the company should ensure that additional space options are negotiated during the letter of intent ( www.practicallaw.com/0-382-3575) and lease negotiations.

  • Effectively negotiate the business terms and lease provisions. The company should understand the specific issues and lease provisions that affect the company's ongoing obligations. For example, negotiating the provisions specifying a tenant's obligation to pay its proportionate share ( www.practicallaw.com/2-503-3631) of the building's operating costs may create a more fair and balanced clause that effectively saves money for the tenant each lease year.

  • Obtain appropriate protections. The company should consider the time and money it invests in the space and whether it should negotiate certain protections to ensure the lease is not prematurely terminated by intervening interests. For example, in many instances a landlord's lender has priority over a tenant's lease and may be able to terminate the tenant's lease if there is a foreclosure action. A tenant may want to obtain a subordination, non-disturbance and attornment agreement ( www.practicallaw.com/3-502-9775) from the landlord's lender, to ensure that the landlord's default under its loan, and the subsequent foreclosure by the lender, would not permit the lender to prematurely terminate the company's lease.

The continuing costs of an office lease can affect a company's bottom line. A company planning to lease office space should use the general practice tips and negotiating techniques discussed in the resources in this Toolkit to better assess and allocate the costs and other risks associated with an office lease.

This Office Leasing Toolkit provides resources designed to assist companies entering the California market to:

  • Negotiate and understand their office leases.

  • Achieve cost-savings over the lease term.

  • Create flexibility that suits the company's particular business needs.

  • Protect the tenant from unwarranted risks and intervening third party interests.

  • Understand possible landlord remedies, up to and including eviction.

This Office Leasing Toolkit contains continuously maintained Practice Notes, Standard Documents, Standard Clauses, State Q&As, and Checklists to help companies manage a office leasing transactions in California. In addition to the California specific resources and guidance, this Toolkit also includes several jurisdictionally neutral office leasing resources. These resources include forms and discuss issues that are useful and relevant to landlords and tenants in every state, including California. For a non-jurisdictional Toolkit on office leases, see Office Leasing Toolkit ( www.practicallaw.com/5-506-2518) .

 

Practice Notes

 

Standard Documents and Clauses

 

Checklists

 

State Q&As

 
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