As a new client you will no doubt be curious as to how the process works when dealing with a professional negotiator. This article is meant to both outline how we will work with you and your landlord, as well as define and explain some of the key documents and processes involved in a commercial lease negotiation.
First Steps
Once you officially become a client, our administrative team will touch base with you to ensure that we have all of the necessary documents to begin our prep work. We will then assign your file to a member of our negotiation team who has the skill best suited to deal with your individual circumstances. That team member will then do a thorough review of all documents and notes from the business development team. Once they have a solid base from which to work you can expect them to contact you to begin further and more detailed discussions regarding your renewal/lease negotiation. From signing our agreement to your first call with your negotiator, you can expect it to take approximately 3-5 business days.
Your Main Contact
Your negotiator will be your main point of contact regarding your lease, however we at Cirrus work as a team. Should a situation arise that is either new to your rep or out of the ordinary your negotiator can rely on other members of our staff including internal legal counsel and executives with a combined 100 years in commercial real estate experience.
You Are In Control
At all phases in a negotiation, you will have final approval of official documents, requests and changes to your lease that your negotiator suggests. You will be contacted regularly with updates and are welcome to initiate contact should you have any questions or concerns.
The whole process was professional, efficient, and successful and now I am in possession of a very fair document.
Dr. G. Kassis Ottawa, ON
Expedition and Unexpected Delays
Our goal is to get you the best deal possible in an expedient manner. Our team will stay on top of your negotiation at all times, however there are occasions when we may encounter unexpected delays. At many key stages we require a response from your landlord. Most landlords enjoy dealing with other real estate professionals and do their best to respond to us in a timely manner, some landlords may be experiencing internal difficulties and are slow to respond and some use stalling tactics to attempt to gain an advantage in negotiations. We have dealt with landlords of all types and although we cannot predict or control how quickly your landlord will respond to us, we have strategies in place to ensure that it has minimal effect on the outcome of your negotiation.
At times, we have also experienced difficulty in reaching our clients. We work with doctors and dentists extensively and appreciate the busy schedule you keep. When we call, you can be sure it is for an important reason and we encourage you to return our calls as quickly as you can to keep your file moving along.
In all phases of this process, it is important for you to stay in contact with your Cirrus representative. There may be times where there are lulls in the life of your file and it is important that you are willing and feel comfortable to call us for updates if we have not contacted you. Generally, if we have not contacted you we are waiting for the landlord to send us information or provide us with documentation.
The Leasing Process
The Leasing Process - Offers to Lease (Letter of Intent)
The Letter Of Intent (LOI) is a document of two pages or less that outlines the basic business terms of the tenancy. Rent, number of years (term), fixturing periods, tenant improvement allowances, landlord’s work and tenant’s work are some of the items covered in this letter. The amount of time it takes to complete an LOI (by complete we mean both you and your LL come to an agreement and execute with a signature) is anywhere between a few days to a few months, depending on factors discussed in the first few sections of this article.
The LOI is usually subject to conditions known as Conditions Precedent. A Condition Precedent is a term that specifies that before the letter can be binding, certain events have to transpire. For example:
The tenant is able to obtain permits for the space in question;
The tenant’s approval of the final form of the final lease.
Both the tenant and landlord may have conditions and both must make reasonable efforts to fulfill them. Please note that upon full execution of the LOI there is often a requirement for a deposit to the landlord that is refundable if all conditions are not waived.
The LOI is generated in our office and is given to you for your approval before being sent to the landlord. Once sent to your landlord, they will likely make some revisions to clarify the deal from their side. This back and forth process may occur several times over a short span of time with both sides required to initial final changes to make the deal binding. The transfer of documents between parties may occur via fax, email or courier. Once the LOI has been fully executed by both parties, the process moves to either a full offer or a lease document (more common).
The Leasing Process - The Lease Agreement
A lease is a legal agreement between the Landlord and Tenant, setting forth the rules and conditions for occupancy by the Tenant and limitations of the Landlord. They range in size from between 4 and 120 pages and are very intricate, difficult to read documents. The lease is where every issue relating to your tenancy will be spelled out in writing and is considered the governing document of your tenancy.
When a lease enters our office it goes through a very structured process to determine what changes need to be made. While every lease we receive has some similarities, we need to check each on clause for clause.
Once we have reviewed the landlord’s proposed lease, we will write a letter to request changes to the document. This letter is called a “Memorandum of Review” (MOR). Once the MOR is complete, it will be sent to you along with a copy of the proposed lease for your review. Please note, if you intend to also have a lawyer review the lease and comment, we will be unable to negotiate on their suggestions.
We recommend that you read the lease and review the MOR. Leases are best read in one sitting with a pad of paper and a pen ready for note taking. We will set up a follow up meeting with you to discuss any outstanding issues that are of importance to you. Once you approve the MOR, it is submitted to the landlord. The reaction to MORs from landlords are varied, however we are very good at dealing with their concerns. It is at this time that the pace of the process can slow down.
This is probably the most frustrating time for our clients. They want a lease but don’t understand why it takes so long when everything appears to be finished. Lease negotiations can ‘drag on’ for months at a time. It takes so long because we start the game with the cards stacked heavily against us. We are on the landlord’s turf (it is their lease) and they are not used to making changes, never mind the detailed ones we request. Over time we work with the landlord to understand their side and to and to present our case, but rarely do we get every term/clause we ask for, nor do we expect to. You should expect some risks to remain in your lease, as our goal is to ‘level the playing field’ with the landlord and not to bury them underneath it.
In some cases, we may be able to incorporate requested changes into your lease via a Lease Amendment, which is usually a 1-3 page rider to the document. While amendments do not require a thorough re-write of the lease document, the process leading up to it still requires thorough preparation and negotiations with your landlord. Whether your lease gets re-written or an amendment drafted, you can be sure that we’ve achieved the best deal possible for you from your landlord.
Once all parties have agreed, we present the final lease to you, showing what changes have and have not been accepted. We have very good relationships with the landlords who typically respect the work we do. There are times when we are just not able to get the lease to the point we would like. We will be upfront with you and inform you of the risks so that you make an informed decision with respect to signing the document.
When you are satisfied with the document, you or your company will be required to sign the lease, usually with a witness present. The documents are then forwarded to the landlord for their execution. Depending on the landlord, it could take up to a month for them to sign.
Congratulations - Your Lease is Done!
Sit back and enjoy. You are finally finished and likely will not have to go through this process for years to come. Once things have settled down, we will be coordinating with the landlord and yourself to make sure we get a final copy of the executed lease for our records, should you have any questions in future, we’d like to have the final document here to refer to.
A good thing to remember is that it pays to be a good tenant. Always pay your rent on time, follow the terms of your lease and be cooperative. This will make your landlord more willing to cooperate during the next lease negotiations.
Finally, we advise our clients to cal us 18 months prior to the expiry of their lease term. The more time we have, the better the job we can do for you!
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