Remember, Time Costs Money

Using a simple lease will probably increase the net worth of both landlord and tenant by saving time with lease negotiations. This can easily be demonstrated with two scenarios:

Scenario 1: The tenant and the landlord have finally agreed to essential business terms through a month long back and forth negotiation. So, the terms of the final LOI are incorporated into the actual lease by the Landlord, which is 50 pages long of dense legalese, and another 40 pages of exhibits. The tenant's attorney marks up this extremely pro-landlord lease and sends it back to the landlord's attorney. Only a couple of changes are accepted in this go around. The attorneys keep negotiating, while undoubtedly telling their clients that the other side isbeing completely unreasonable and that that the lease, as the other side wants, gives their own side to much liability. All of this back and forth takes an additional 8 weeks until the final lease is signed, if at all. It took three entire months to negotiate the final LOI and lease, with thousands of dollars being paid to the attorneys.

While these negotiations are going on, the landlord suffers the opportunity cost of lost rent, and the real costs of not having their triple net expenses covered. As for the tenant, they are delayed in opening their business. Maybe so much time has passed, the tenant decides to just wait 9 more months because they have already missed the big holiday shopping season, in which case, that's zero rental income to the landlord. But if the lease is signed, the tenant and landlord may very well start off a five year lease with a poor working relationship. Dreadful.

Scenario 2: The tenant and the landlord have finally agreed to essential business terms through a month long back and forth negotiation. The landlord incorporates the final LOI into a straight forward 15 page lease written in plain, easy to understand language. The lease, while favorable to the landlord, already includes reasonable changes that every tenant would ask for, such as caps on common area maintenance, a mutual indemnity provision, and the like. The tenant's attorney only makes a few minor changes that the landlord promptly agrees too. This back and forth takes a single week. The landlord gets a signed lease (and rent money!) 2 months sooner and the tenant gets to open for business sooner well before the holiday shopping season kicks off. And both the landlord and tenant are happier as well, since they didn't have to spend an additional 2 months arguing over dry, boring contract provisions, constantly requesting updates, and to clarify items of negotiation. Remarkable.

So remember, time is money. Time spent negotiating details, especially when those details are unreasonable, cost real money and have real opportunity costs. Whether it is lost rent, lost opportunity or more attorney or marketing costs, time is money. Don't let the details in a deal kill a profitable deal from going forward.

Make sure to check back later. Coming soon, I will have a post on how details matter.

I hope the discussion above has made it clear why it is worth your wild to have a professional advocate on your behalf. As both a commercial real estate agent and attorney, I can make sure your interests are protected.

If you have any questions or comments, send me an email to bdalton@tigusa.com. Also, if you know anyone looking to buy, sell or lease space in Dallas or the surrounding areas, I do appreciate referrals.