Three important and sometimes complicated parts of your office lease negotiation are insurance coverage, casualty section and the subordination clause. These tend to get overlooked as the lease document is being reviewed and yet this is an area that could surprise you with hidden costs.
I always tell my clients to copy at least these three sections from their lease document and immediately send it over to their insurance agent or risk management department. Risk Management departments typically want to see the entire document. Why do you need to get your insurance agent involved in your office lease? To make sure that your current coverage is sufficient. I have been on both the landlord and tenant side when the tenant gets the startlingly news that their insurance premium is going to increase due to the new landlord’s insurance requirements. Fortunately my clients get this news BEFORE the lease is signed so they can take appropriate action.
Why do you care about the aftermath of a casualty/fire? The lease clearly says the landlord has to fix the building, but there are so many what if’s. For example, what if you are in the final year of the lease and the landlord has six months to determine their course of action – you are stuck in limbo. What about temporary space if the landlord owns a bunch of buildings? Or your worst nightmare, what if your landlord wasn’t required to carry insurance?
All is not lost if we are still in the lease draft stage, that’s why it is key to involve the insurance experts sooner rather than later. It is far easier (and I am not saying this is a piece of cake) to negotiate changes to the insurance requirements before the lease is signed. Once the lease is signed, the property manager becomes your insurance contact and they are unwavering in their mindset that what’s done is done when it comes to the insurance clause.
These are just a few of the issues that need to be understood, examined and negotiated in your lease. While I am not an expert on these clauses, I do understand them and incorporate appropriate strategies in my lease negotiations. So take 15 minutes and save some money on your office insurance by calling your insurance agent before you sign your lease – this includes your renewal as well.