Commercial Leasing: The Offer to Lease, Take it Seriously

A landlord eager to secure a tenant will often provide the prospective tenant with an offer to lease, also known as an agreement to lease, before having their lawyer draft and provide a final lease on the landlords standard form. While this document is not the final lease it can be binding. An offer to lease is a simpler document containing the five elements of a binding lease: the location of the premises, the term, the price for basic rent, the parties to the lease, and other terms. If a prospective tenant signs the offer to lease, they may not have an opportunity to negotiate important terms in the final form lease and can be bound to the offer to lease.

A prospective tenant should never sign a document without knowing what they are getting into. For example, the landlord’s standard form lease will probably contain very liberal landlord rights while very onerous tenant’s rights. A tenant should seriously negotiate the offer to lease to ensure that terms important to the tenant are incorporated in the the final form lease.

The problem in commercial leasing relationships is equal bargaining power. A landlord with a desirable location offering a lease to a relatively unsophisticated tenant will probably take a “take it or leave” approach. On the other hand, if the tenant is a desirable one, the tenant may have more say in negotiating more favourable terms, and may even command the landlord to sign the tenant’s form lease. It is always a good idea to contact a lawyer with commercial leasing experience to review any agreements to lease and to discuss your options before you are bound into a contractual term of usually not less than five years.