Protecting Your Assets With A Strong Lease, Curated By Partner Matthew Kertz, Esq. Of Genova Burns LLC

Genova Burns has been servicing our corporate clients' needs for the last 35 years. John Quincy Adams said it best, whoever tells the best story wins. My name is Matthew Kertz, and I'm a partner in commercial real estate. I head the commercial leasing group.

What is one thing that New Jersey tenants and landlords should know before entering into a lease? Something has changed New Jersey law in the last couple of years. There is a new requirement providing that if the landlord's premises, if the premises are in a flood plain, they have to disclose that. There is a clause that has to go in every lease relating to this issue. If it's not in the lease and you're affected by flooding then you will have the opportunity not only to recover if you're a tenant, recover damages from the landlord with respect to damaged property.

You can terminate your lease. This is an issue that hasn't made it into a lot of landlord-tenant negotiations or even form landlord leases because it's only come up in the last couple of years. So, if you're a tenant and a flooding issue comes up, check your lease to see if that issue is in there, to see if that provision is there. If you're a landlord, make sure it is in your lease. This law that I've just spoken about is addressing global warming and climate change. And it is New Jersey's way of addressing the issue.

What constitutes wear and tear in a property? That is an issue that often comes up at the end of the lease. It often comes up if the landlord does a property inspection and sees that parts of the property have deteriorated. There are issues that can happen with the roof. In the end of a 20-year lease, the roof could be leaking. It could have a roofing report that says, this roof needs to be replaced. Is it the tenant's responsibility or the landlord's responsibility? The condition of the parking lot. Allergy alligator ink all over the lot. There are cracks. There are problems. It needs to be resurfaced and repainted whose responsibility is it? The HVAC equipment Some parts of it are deteriorating, but it's the tenants responsibility ability under the lease.

Does that mean that it's the tenants that has to pay for a new HVAC equipment? All of these are issues that are going to be very specific to what maintenance occurred during the term of the lease. If you're a tenant, you're going to want to keep all of the maintenance that you've done. If you're a landlord, you want to make sure that you have the condition of the premises thoroughly inspected and memorialized before a tenant goes into it. So you can show that at the beginning of the lease, this is the condition turned over to the tenant.

If you're a tenant, you want to make sure that to the extent you've cleaned up the premises and it's turned over in good condition, you document that because if you're hit with a lawsuit three, six, twelve months later, who knows what damage the property has occurred in that intervening time period. So it's a question of documentation.

We've been talking about large national tenants and large national landlords and big problems. But some small landlords that have one or two or three or four or five corporate properties and a handful of commercial tenants, these properties are critical for these landlords and disruptions can be absolutely devastating.

So it's key that your lease functions smoothly. You don't have any issues with the lease itself, and you can pass on costs that you incur to the tenants. If you are negotiating with a large national tenant, you may be presented with a form national lease. That form national lease should be scrutinized to make sure costs that you typically pass on to your tenants are passed on to the tenants that's the large national tenant. Because it could very much, at least, could be different from what you're used to.

If you're a small tenant and you're dealing with a landlord, maybe you have one, two locations, you need to be aware of the costs that the landlord will be passing on to you. Some of them are typical. Your percentage share of operating costs. Your percentage share of taxes. Your share of these things over a base year. All of that's very standard. But what constitutes operating costs?

There are many operating costs that are typically excluded. So for example, costs relating to other tenants. A management fee is typically capped. Costs relating to capital expenditures, large expenditures that affect the property, and might not relate directly to you. These things are often negotiated and when you're entering into a lease you should consider negotiating them. I get a call on Sunday where the client was in a state of you know all hands-on deck. The store, its store, it was a tenant in a lease, had been shut down and they were prohibited from operating at the store. Now, this is the tenant's worst nightmare. And this was because the fire escape, the fire exit, in the back of the store had been blocked by the neighboring landowner. And not only had it been blocked, it -- It, this was a, there was a development next door, and there was an excavated hole for the foundation where there had been a path to the street.

All of a sudden, our client couldn't operate at the facility, and there was no obvious way to the client as to how this was going to be resolved. Because not only was the fire exit blocked, it seemed to be permanently blocked. We scrambled. We got an injunction against the neighboring property owner and required him to build a means of egress and express over his constructed excavated hole. After doing a little bit of research, we found an easement that had been unreported in the last deed exchange that provided for our clients entry from the door to the street in the back. And we wound up entering into an agreements and settlement that covered all of our clients' expenses and solved the issue.

All because we did the legwork, we got the injunctions, and we followed through to get the client what it needed.

My name is Matthew Kertz. If you're in need of a lease agreement, drafting, if there's a lease issue that comes up. If you have any questions about your current lease, please reach out by clicking here or give me a call at 973.230.2087.