March 31 2016 Hugues Boisvert Founder & CEO, Business Lawyer
When leasing a space for your commercial endeavours, the term “lease” is often mistakenly understood to mean all agreements that have to do with the lease. However, there are three main agreements that you should take into consideration that play a role during different stages from the initial lease negotiation to the final lease.
Letters of Intent
A Letter of Intent is a document used in the early stages of negotiations. It contains information such as the financial terms of the lease to facilitate the negotiation of the final terms of the lease. Although a Letter of Intent is generally non-binding, you should pay special attention to its wording, since there is a chance that a court might find it otherwise. It might also prohibit the parties from negotiating with outside parties for the same space for a certain amount of time.
Offers to Lease
An Offer to Lease is an agreement similar to but is not identical to a Letter of Intent. It contains much more details with respect to the terms of the lease as well as warranties and covenants. An Offer to Lease that sets out essential elements such as the rent to be paid and agreed upon by the parties involved are deemed to be binding. If you want the Offer to Lease to be non-binding, you should express that intent clearly in a provision and through actions and you should not include the essential elements in the agreement. It is important to note that an Offer to Lease sometimes contains a provision that can be detrimental to you as a potential tenant if you don’t take proper care to amend or remove it from the agreement. The standard Form of Lease provision as it is often called, provides that if you sign the Offer to Lease, you agree to sign the landlord’s standard Form of Lease by a certain date. This can be problematic since you are essentially agreeing to sign an agreement you have yet to see.
This is the final Lease agreement that is signed after the negotiations are done and all the particularities are sorted out. It contains the terms of lease as agreed by the parties and the agreement is legally binding.
Knowledge is power and knowing these differences can help you when you are involved in the leasing of a commercial space. However, once you have signed the agreements and they become legally binding, not much can be done to correct your mistakes. Make sure you contact a lawyer to draft and/or review the agreements before you sign them.
This article is for informational purposes only and does not constitute legal advice. If you wish to discuss your issue with a lawyer, contact Hugues today. 613-747-2459 ext.304, [email protected].