The offer to lease is typically a short document between the
landlord and tenant that sets out the key terms and conditions
governing their relationship. The parties and their respective real
estate agents often negotiate the offer to lease. However, legal
advice at this stage may reduce costs in negotiating the formal
lease and in dealing with matters that arise following offer to
lease execution even if it creates greater upfront time and
expense. This may be particularly true in the
not-for-profit sector where there may be unique Board approval
requirements, or alterations to the premises due to an atypical
Timing issues are often not well planned in the offer to lease.
Many events following execution of the offer to lease will have
dates attached to them. Some typical examples include:
Delivery of tenant's financial information;
Tenant's condition to obtain senior management
Landlord's condition to review the tenant's financial
information and/or obtain senior management approval;
Approval of head landlord if the premises are being
Tenant's requirements to provide evidence of insurance to
the landlord; and
Delivery by landlord, and ultimate execution by both parties,
of a formal lease document.
Very often, the obligations of the landlord to commence
landlord's work, the tenant's right to commence
tenant's work and/or the tenant's right to commence
business from the premises are conditional upon items such as those
noted above being completed or satisfied. Creating a table of
critical dates is therefore highly recommended.
Be aware of dates being based on days versus business days, and
the ramifications of using these terms. Also, be aware of certain
obligations on either party that do not have any time frames
attached to them. For example, if the parties are obligated to
complete the formal lease within 15 days of delivery of the form of
lease by the landlord, there must be a corresponding obligation on
the landlord to deliver such form within a certain number of days
following execution of the offer to lease.
Failure to appreciate timing intricacies can cause numerous
problems for both parties. Consider a situation
where the tenant wants to begin its fixturing work on the premises
within a few weeks of execution of the offer to lease. However,
under the terms of the offer to lease, the tenant is not permitted
to begin fixturing until a formal lease has been signed.
A problem will arise if the offer
to lease allows for a period of time for the formal lease to be
finalized that runs significantly past the tenant's target date
for starting its fixturing. If this potential problem is identified
during negotiation of the offer to lease, the parties may attempt
to resolve it by shortening the time frames for finalizing the
formal lease and/or no longer making fixturing conditional upon
getting the formal lease executed.
Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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