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Danger with Exhibits

Danger with Exhibits

Exhibits are an important but often overlooked part of the lease.  It may seem obvious, but the point of this blog entry is: prior to finalizing a commercial lease for execution, carefully review and attach all exhibits.

The most common oversight that I observe in my practice is leaving exhibits “to be attached at lease execution.”  Occasionally the parties forget to attach the exhibit.  More often, the exhibits are attached at the last minute in the rush to the finish line and not appropriately reviewed and negotiated.  Most parties will review the exhibits to confirm the accuracy of such things as the depiction of the premises on a space plan or location of the parking spaces on a site plan.  However, the exhibits are integrated as a part of the lease (assuming a proper integration clause) and should be reviewed with the same diligence as the rest of the lease.

It is common for the following form documents to be attached as exhibits to a commercial lease: personal guaranty; subordination, non-disturbance and attornment (SNDA) agreement; tenant estoppel certificate; and commencement date amendment or memorandum.  Other exhibits may include critical terms such as a renewal option rider, defined terms, building or shopping center rules, and terms for tenant improvements.  In some cases, the exhibits may be more important than the lease itself.

Also, I have seen instances where provisions typically found in the lease are slipped into the exhibits.  For example, I have seen a relocation provision added to a site plan (i.e., “the premises will be initially as shown above, however landlord shall have the right to relocate the premises to another space in the Building…”).  Other examples I have seen are a parking exhibit that provides for parking fees and a sign exhibit that provides for signage fees.  In the construction context, I have seen contractors include all types of legal provisions in allowances and assumptions exhibits that completely negate portions of the construction contract (e.g., force majeure provisions that trump the delay language in the contract).

As a practice pointer, brokers and attorneys should constantly remind the parties that the lease will not be complete until all exhibits are attached for review.  In my practice, I usually include a running checklist in my cover emails indicating open issues that must be resolved, and I include omitted exhibits on that list.

Though the inclination is to rush at the end, especially after extended lease negotiations, the parties, brokers and attorneys should all remain diligent through the completion and finalization of the exhibits.

Prior to using any language or concepts from this blog entry, consult with an attorney.

Ryan Rosensteel is a real estate and construction attorney licensed in Arizona.  You can contact him at rrosensteel@rrlawaz.com.

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