Tuesday, April 22, 2008

Net, gross, modified, gross...huh?

Someone near and dear to me asked me to draft an office lease for some property that person owns. I received a hand written, one page term sheet with a base rent figure.

What freaked me out until I read it more carefully was the treatment of gross and net items in the lease. Those of you in the know (probably all of you if you are bothering to read this far) are aware of leases such as bond leases, net or triple net leases, gross leases, modified gross or plus-E leases, and the like. (You can find what I think is a good recent summary written by Michael Mandel here. New York is a whole ballgame of its own sometimes, especially dealing with the form Manhattan leases with their crazy long riders.)

All I was reminded of was this: you cannot just draft blindly and assume every deal is the same. And the terms I mentioned above, while very, very helpful, are not always precise. (It reminds me of my first plus-E lease in Texas.) For instance, I am drafting a so-called "gross" lease here, but the tenant will have separately metered premises and will pay for half of the trash removal. The landlord is apparently covering everything else. (We'll see once I finish the first draft and discuss it with the client.)

And for you clients: don't get annoyed when we ask what you think might be crazy or dumb questions. It is for your protection, not to run up the bill.

1 comments:

Michael A. Mandel said...

David - thanks for link! I'll be adding a link to your blog shortly, and I really enjoy the content.

- Michael

 
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