One thing every architect needs is an office, and getting one is likely to involve negotiating with a landlord. Michael E. Meyer, an attorney in the Los Angeles office of DLA Piper, says that once you find a space you like, “You'll always save money if you hire an experienced real estate leasing lawyer.” That may sound like an ad for Meyer's services, but in a recent interview he more than proved his point, raising issue after issue that nonlawyers—and even lawyers without his specialized knowledge—might never think of when examining a lease.
Named one of the 100 most influential attorneys in California, Meyer has spent more than 25 years representing companies looking to lease as little as 2,000, or as much as 800,000, square feet. As for anyone tempted to lease space without expert help, Meyer paraphrases Yogi Berra's admonition: “You don't know what you don't know.”
You might not stay for the full term of your lease ...
Which is why a good lawyer will focus on your exit strategy even while negotiating your entrance strategy, says Meyer. For an architect who doesn't have a crystal ball, the best thing may be a three-year lease with successive one-year options to renew, he says. But beware: The building owner will likely want a longer lease, which increases the value of the property if he wants to sell or borrow against it.... and even if you do ... Your firm may expand or contract. Says Meyer, “You want to have a realistic expansion option. That means a right of first offer—if space in the building comes open, the landlord has to give it to you at the market price.” You also want to have a contraction right (the right to give back space with a certain number of months' notice). “There will be a penalty,” says Meyer, “but it will be a penalty worth paying.”
Sent packing? Many leases give the landlord the right to relocate you to equivalent space, says Meyer. “If you love the space you're renting,” he advises, “you either have to eliminate the relocation right or qualify it by requiring, for example, that the landlord has to give you space with the same layout and improvements and views and has to cover all your costs. That means the packing and unpacking and even changing the stationery.”
Beware of hazard pay. The lease will say that the tenant is responsible for removing hazardous materials. But, Meyer says, “the last thing you want to do, by signing a three-year lease for 5,000 square feet, is become responsible for hazardous materials that some midnight dumper put there or were there before you got there.” That danger can be eliminated by inserting contractual language that limits your liability to situations in which you—and no one else—created the hazard.
Be code-compliant, not complacent. Space in an older building may not be ADA-compliant. “If you're going to make significant changes, you may have to bring your space, and even other parts of the building, up to code,” says Meyer. “The question is, who is going to pay to make those changes to the restrooms, drinking fountains, and elevator buttons?” Spell it out.
What is the meaning of “as is”? Says Meyer, “You will be asked to accept the premises ‘as is.' Don't. Instead, ask the landlord to deliver the space with mechanical, electrical, plumbing, and HVAC systems in good operating order and to ensure that the building is structurally sound.” And it's not just old buildings that have problems. In a new building, it's possible that the floors will need to be leveled, Meyer says, “or else you'll have file cabinet drawers opening by themselves.” He adds, “It can cost tens of thousands of dollars to level a concrete slab—and it may come out of your budget, if there's no provision for it in the lease.”
Small is no excuse. Even if the space you're looking at is small, you need a leasing lawyer to represent you, Meyer says. You'll have less leverage than a larger tenant, which means you won't be able to negotiate every provision of the lease. But luckily, “a good lawyer can zero in on what's important and obtainable,” he says.
