Some Basics for Negotiating an NYC Commercial Real Estate Lease  

Every lease negotiation is different because every commercial space and potential tenant’s needs are unique. However, there are quite a few “basics” to commercial lease negotiations daily, even though each solution will be unique. An NYC Commercial Real Estate lease is complex. You need to retain a New York attorney with experience in negotiating one. Trying to do it yourself is a bad idea. Not fully understanding a term or provision could be problematic later on, or you might omit something important.

The key terms to negotiate are the rent and rent escalations as the lease progresses. “Rent” includes not just the rent for using the square footage but all the other charges, fees, expenses, and BID fees the landlord/owner expects the tenant to pay. Typically, the “rent” for using the space is called the “base rent.”

There are many potential expenses and costs that landlords/owners expect commercial tenants to pay. These include real estate and other taxes, general liability (and special liability) insurance, utilities (of all sorts), common area maintenance costs and expenses, the cost of repairs (up to and including replacement of non-functioning equipment and capital improvements like a new roof), and more. But, of course, a potential tenant does not have to agree to assume responsibility for paying these costs. Some potential tenants willingly agree to pay such expenses because they want to control how and how repairs are made. The landlord/owner typically accepts a lower base rent in that case. A good portion of a commercial lease negotiation involves which party will be expected to pay these expenses.

There are terms of three broad general types of leases:

  • Gross lease: The landlord/owner pays most or all of the expenses; the base rent is usually quite a bit higher
  • Double net lease: The tenant pays the base rent and covers the cost directly or by paying the landlord/owner for two expenses: insurance and property taxes.
  • Triple net lease: The tenant pays the base rent amount and pretty much everything else (although often repairs to capital equipment and structures are excluded)

Base Rent Escalation Clauses

Generally, both parties want to know when and by how much the base rent will increase yearly. As such, a commercial real estate lease always includes an escalation clause. Typically, any expenses the tenant has agreed to pay will be the same over the years of the lease. Regardless, the tenant should negotiate these.

Term of the Commercial Lease

It is common for New York commercial leases to have a term of ten years with possibly a five-year renewal term. But that is negotiable. Generally, the longer a lease term, the more concessions a landlord/owner will make.

There is a long list of negotiable lease provisions. But some of the other more critical provisions include these:

Other NYC Commercial Real Estate Lease Provisions

  • Default provisions: What happens if the tenant is in default? What if the landlord is in default?
  • Cure provisions: If there is a default, is there time to cure or fix the default?
  • Build-outs and improvements: Who is responsible for paying for build-outs and improvements desired by the tenant?
  • Restoration to original condition: If there is a build-out and some improvements, is the tenant responsible for returning the space to its original condition?
  • Subleasing and assignments: Can either party assign the lease? Can the tenant sublet the entire space or a smaller portion of the space?

Contact Wright Law Firm NYC Today

For more information or assistance negotiating a New York commercial lease, call the experienced commercial lease attorneys at the Wright Law Firm. We provide top-tier commercial real estate legal services. Our goal is to build long-term relationships with our clients. We can focus the commercial lease negotiation on what matters most by gaining insight into their objectives. To schedule a consultation, call (212) 619-1500