Commercial property case study

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 Read Sally’s Case Study 

Case Study 

It’s 3 A.M., and Sally is Face-Timing you. Fortunately, you were up slugging away at your course work and tying up some loose ends for the project, so you didn’t mind the break. She instantly jumps in, saying, “Look! I found a whole bunch of stuff that we need to review. After receiving the Marketing study for that property in Boca Raton (PDF), (which is located in the attachment section), Sally asks if you could review the market study immediately because it looks like a hot property and will probably not be on the market for long.

Sally specifies that she has read the material and has a better idea of how to analyze our ROI. The luxury building is in a great location and seven years ago went through an extensive renovation. The current restaurant tenant operates 24 hours a day, seven days a week. Sally points out that it’s a free-standing building with a total of 7615 square feet, with 6,000 square feet having air conditioning. Also, there is a 1,615 square foot outdoor covered patio and deck for outside dining. The property can seat 259 combined inside and outside, 93 parking spaces and covered patio seating with a full bar and wine case set up.

There is even a dining room kitchen with hood, separate chef’s kitchen with hood, and Main Line kitchen with an on-demand hood. The hood is critical because it contains the fire suppressant equipment. Sally states that the three kitchen locations are an added benefit that will permit high-end customer special cratering for her inner circle dining parties on the dining room floor. Having the hoods already installed saves a lot of money and may avoid major inspections by the city. You inject that if the fire hoods are not functioning correctly, the startup costs could skyrocket and also delay our opening. We should add that issue to the list to discuss with the owner. Sally agrees and suggests we may want to determine the effect of the current tenant decides to holdover beyond the term. The broker was, after all, not too definite about the move out date. He only stated that the building was under lease by the restaurant tenant until July or August of this year.

She also points out that the market study specifies that the purchase price is $5,995, 000. Sally states that there is also an option to lease the building under a NNN lease arrangement at $35,000 monthly rent plus $4,200 in property taxes monthly. Sally, wonders out loud if there was a potential of incurring other charges.

Assignment

Analyze the property options available to you and Sally in establishing the location and type of agreement that best fits your long-term goals. Sally received the transaction documentation from the Broker to facilitate a review of the offered terms and proposed agreements that the Broker would use to complete the deal.

Review and complete the following agreements using all of the facts available and your understanding of the three transactions presented in this case study.

You are required to complete:

  1. Contract for Sale of Commercial Property.
  2. Commercial Lease Agreement.
  3. Triple Net (NNN) Lease Agreement.

Each one of these forms are in the attachments section. Fill out all information.

Redraft clauses, fill in missing information, change terms, or add clauses to match the terms and conditions of your deal. Make a list of issues that you will discuss with the broker to argue more favorable terms in all the revisions you have made. You will need this list in the next Assignment.

To analyze the property options available, you request documentation from the broker to review the terms offered. The broker provides you with the following for information and general reference: 

Considerations for the Terms Needed in the Sale of a Commercial Property (DOCX) which is also located in the attachment section along with additional resources to assist in giving a better understanding. 

This article should also help you understand Contract paragraphs and types of revisions available. (https://www.cwilson.com/agreement/

worldwide.erau.edu

All rights are reserved. The material contained herein is the copyright property of Embry-Riddle Aeronautical University, Daytona Beach, Florida, 32114. No part of this material may be reproduced, stored in a retrieval system or transmitted in any form, electronic, mechanical, photocopying, recording or otherwise without the prior written consent of the University.

CONTRACT FOR SALE OF COMMERCIAL PROPERTY

This Contract of Sale of Commercial Property (the “Agreement”) is made and effective [DATE],

BETWEEN: [YOUR COMPANY NAME] (the “Seller”), a corporation organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at:

[YOUR COMPLETE ADDRESS]

AND: [PURCHASER NAME] (the “Purchaser”), an individual with his main address located at OR a corporation organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at:

[COMPLETE ADDRESS]

RECITALS

In consideration of the covenants and agreements of the respective parties, as set forth below, Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase and take from Seller, the real property situated in [CITY], [STATE], and particularly described as follows:

[SET FORTH LEGAL DESCRIPTION]

together with all improvements on the property and appurtenances to it, and the articles of equipment and other personal property listed in Exhibit A, which is attached and incorporated by reference. The real and personal property described above is referred to as property.

Transfer to Purchaser shall include all right, title, and interest of Seller in and to all streets, alleys, roads, and avenues adjoining the real property, and shall further include any award for damaging or taking by eminent domain by public or quasi-public authority, of the real property or any part of it.

1. PRICE

The purchase price for property is [AMOUNT], payable as follows:

[DESCRIBE TERMS].

2. TITLE; TENANCIES

A. Conveyance of title to property shall be by warranty deed with full covenants, executed by Seller [IF APPROPRIATE, ADD: ACCOMPANIED BY A DULY CERTIFIED RESOLUTION OF THE BOARD OF DIRECTORS OF SELLER, AUTHORIZING THE CONVEYANCE], to Purchaser or Purchaser’s nominees. Title to be conveyed shall be good and marketable, subject only to [SPECIFY ACCEPTABLE LIENS, ENCUMBRANCES, RESTRICTIONS, EASEMENTS AND OTHER BURDENS].

B. Property is presently occupied by [NUMBER] tenants under month-to-month tenancies or leases, as set forth in Exhibit B, which is attached and made a part of this agreement. Transfer of title and possession to property shall be subject to those tenancies, but all right, title and interest of Seller in property shall be transferred to Purchaser or its nominees at the time of conveyance of title.

C. Conveyance of title shall be made and sale closed within [NUMBER] days after the date of this agreement. Title shall be evidenced by a standard form title insurance policy issued by [NAME OF TITLE COMPANY], insuring title to property to be in Purchaser or its nominees, subject only to the matters set forth in this agreement

3. ASSESSMENTS

If, at the time of transfer of title, property or any part of property is subject to an assessment or assessments payable in installments, all such installments not due or delinquent at the time of transfer shall nevertheless be deemed to be due and payable at such time and as liens on the real property described above, and all such assessments shall be paid and discharged by Seller.

4. ESCROW; PRO-RATION

A. Escrow shall be opened with [NAME OF ESCROW COMPANY]. Such instructions as the escrow company may require, not inconsistent with the provisions of this agreement, shall be signed and filed by the parties.

B. The following items shall be prorated as of the close of escrow: rentals, real estate taxes due but not delinquent, prepaid insurance premiums [ADD OTHER ITEMS, AS APPROPRIATE].

C. Escrow shall close when the escrow company is in a position to record all documents required under this agreement, make all disbursements, and [ISSUE OR SECURE] a title insurance policy.

5. RISK OF LOSS; MAINTENANCE; TRANSFER OF POSSESSION

A. Risk of loss or damage by fire or other casualty to property or any part of property prior to close of escrow shall be the risk of Seller. In the event of such loss or damage prior to closing, this agreement shall not be affected but Seller shall assign to Purchaser all rights under any insurance policy or policies applicable to the loss. If action is necessary to recover under any casualty policy, Seller shall grant permission to bring the action in Seller’s name.

B. Improvements and personal property described above shall be maintained in their present condition prior to the close of escrow by Seller, wear from normal and reasonable use and deterioration excepted.

C. Possession of property, subject to the leases and tenancies referred to above, shall be transferred at close of escrow.

6. COMMERCIAL ZONING

Seller warrants that property is zoned for commercial purposes and that all existing uses are lawful and within such zoning. Purchaser plans the use of property for [DESCRIBE PURPOSES]. Purchaser intends to apply for a [BUILDING PERMIT OR AS THE CASE MAY BE] for such additional use, and for appropriate amendments to the existing zoning plan for the area in which property is located. Seller will cooperate fully with Purchaser with respect to the contemplated plans. If Purchaser is unable to proceed with the described project because of any adverse decision of [CITY], or any board, commission, or officer of [CITY], Purchaser shall [STATE AGREED REMEDY, SUCH AS: REMIT [AMOUNT OF THE PURCHASE PRICE BY CREDITING THAT AMOUNT ON THE PURCHASE-MONEY MORTGAGE TO BE EXECUTED BY PURCHASER IN FAVOR OF SELLER].

7. BROKER’S COMMISSION

A commission of [AMOUNT] has become due from Seller to [NAME OF BROKER] by reason of the sale provided for in this agreement. That amount shall be paid to broker at close of escrow directly, from cash payable on close to Seller.

8. SURVEY

Within [NUMBER] days after the date of acceptance of this contract, the Seller will provide and deliver to Buyer or Buyer’s Attorney, a new spotted certified survey having all corners staked and showing all improvements upon the Property.

9. EXAMINATION OF TITLE AND TIME OF CLOSING

If the title evidence and survey as specified above disclose that Seller is vested with fee simple title to the Property (subject only to the permitted exceptions set forth above acceptable to Buyer), this sale shall be closed and Buyer shall perform the agreements made in this contract, at the office of Buyer’s Attorney, on or before [NUMBER] days after acceptance of this contract. If title evidence or survey reveal any defect or condition which is not acceptable to Buyer, the Buyer shall, within [NUMBER] days, notify the Seller of such title defects and Seller agrees to use reasonable efforts to remedy such defects and shall have [NUMBER] days to do so, in which case this sale shall be closed within [NUMBER] days after delivery of acceptable evidence to Buyer and Buyer’s Attorney that such defects have been cured. Seller agrees to pay for and clear all delinquent taxes, liens, and other encumbrances, unless the parties otherwise agree. If Seller is unable to convey to Buyer a good and insurable title to the Property, the Buyer shall have the right to demand all sums deposited by Buyer and held by or for the Seller. At the same time, Buyer shall return to Seller all items, if any, received from Seller, whereupon all rights and liabilities of the parties to this contract shall cease. However, the Buyer shall have the right to accept such title as Seller may be able to convey and to close this sale upon the other terms as set forth in this contract.

10. DEFAULT BY BUYER

If Buyer fails to perform the agreements of this contract within the time set forth herein, Seller may retain, as liquidated damages and not as a penalty, all of the initial deposit, it is being agreed that this is Seller’s exclusive remedy.

11. DEFAULT BY SELLER

If Seller fails to perform any of the agreements of this contract, all deposits made by Buyer shall be returned to Buyer on demand, or the Buyer may bring suit against Seller for damages resulting from the breach of contract, or the Buyer may bring an action for specific performance. Buyer’s remedies are cumulative and not exclusive of one another, and all other remedies shall be available in either law or equity to Buyer for Seller’s breach hereof.

12.
ATTORNEY FEES AND COSTS

If any litigation is instituted with respect to enforcement of the terms of this contract, the prevailing party shall be entitled to recover all costs incurred, including, but not limited to, reasonable attorney’s fees and court costs.

13. CONDITION OF THE PROPERTY

Seller agrees to deliver the Property to Buyer in its present condition, ordinary wear and tear excepted, and further certifies and represents that Seller knows of no latent defect in the Property. All heating, cooling, plumbing, electrical, sanitary systems, and appliances shall be in good working order at the time of closing. Seller represents and warrants that the personal property conveyed with the premises shall be the same property inspected by Buyer and that no substitutions will be made without the Buyer’s written consent. Buyer may also inspect or cause to be inspected the foundation, roof supports, or structural member of all improvements located upon the Property. If any such system, appliance, roof, foundation, or structural member shall be found defective, Buyer shall notify Seller at or before closing and Seller shall thereupon remedy the defect forthwith at its sole expense (in which case the time for closing shall be reasonably extended as necessary). If the costs of such repairs shall exceed [%] of the total purchase price, Seller may elect not to make such repairs and the Buyer may elect to take the Property in such defective condition and deduct [%] from the purchase price or Buyer may, at his/her option, elect to terminate this contract and receive the full refund of all deposits and other sums tendered hereunder. In addition, Seller agrees to remove all debris from the Property by date of possession.

14. OCCUPANCY

Seller shall deliver possession to Buyer no later than the closing date unless otherwise stated herein. Seller represents that there are no persons occupying the Property. Seller agrees to provide true and accurate copies of all written leases to Buyer within [NUMBER] days after the date of acceptance of this contract. Said leases are subject to Buyer’s approval. Seller shall provide such letters notifying tenants to pay rent to the buyer after closing as Buyer may reasonably request. Seller warrants that any rent rolls and other income and expense data provided to Buyer are complete and accurate, all of which must be acceptable to Buyer.

15. NOTICES

Any notices required to be given herein shall be sent to the parties listed below at their respective addresses either by personal delivery or by certified mail – return receipt requested. Such notice shall be effective upon delivery or mailing.

16. BINDING EFFECT OF AGREEMENT

This agreement and the covenants and agreements of it shall bind and inure to the benefit of the parties, and their respective heirs, personal representatives, successors and assigns. Unless the agreement otherwise requires, the covenants of this agreement shall survive the transfer of title.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. [NUMBER] duplicate originals of the agreement have been signed.

SELLER PURCHASER

													

Authorized Signature Authorized Signature

Print Name and Title Print Name and Title


EXHIBIT A


IMPROVEMENTS, APPURTENANCES AND EQUIPMENT

TRIPLE NET LEASE AGREEMENT

THIS LEASE is made as of ____________________, by and between ____________________

(“Lessor”), whose address is ____________________, ____________________ ,

____________________ , ____________________ and ____________________, whose address

is ____________________, ____________________, ____________________.

WITNESSETH, THAT FOR AND IN CONSIDERATION of the covenants and agreements

herein contained to be observed, kept and performed by the aforementioned respective parties

hereto, the Lessor does hereby lease, let and demise unto the Lessee and the Lessee does hereby

lease and hire for the Lessor the premises located and situated at ____________________,

____________________, ____________________ (the “Premises”) in the County of

____________________, County Tax Map #____________________ ,

Parcel#____________________ containing approximately acre parcel of real estate being the

same real estate by deed dated____________________ and recorded in the office of the Clerk of

the County of ____________________, in the State of ____________________, in the Deed Book

____________________, on page ____________________. The description of the premises is as

follows:

____________________________________________________________

USE OF PREMISES

The premises shall be used only as or for the purpose of:

____________________.

LEASE TERM

The term of this lease shall begin on ____________________and will end on at

____________________11:59 PM (the “Term”). If the Lessee vacated the premises prior to the

end of the lease term, the Lessee shall be liable for the balance amount of the lease for the

remainder of the lease term.

In the event that the Lessee desires to vacate the premises, the Lessee shall provide the Lessor with

____________________days advance written notice of intent to vacate. Advance notice shall be

provided to ensure termination ensues at the end of the month. Prior to vacating the premises, the

Lessee shall make sure that the premises are clean and free and clear of any dirt, trash, waste and/or

debris, with the exception of normal wear and tear. The Lessor shall have the right to perform a

walk through prior to the Lessee vacating to ensure premise complies with the aforementioned

requirements.

RENT/LEASE PAYMENT

The Lessee agrees to and shall pay monthly installment payments to the Lessor at

____________________, ____________________, ____________________, or at such other

address that the Lessor shall designate in writing, as rent or lease payment for the leased premises.

Lessee shall pay to the Lessor the annual base amount of $0.00 payable in twelve (12) equal

monthly installment payments of ____________________, due and payable on the

____________________of each month.

Any payments received after the aforementioned day shall be deemed late and delinquent.

HOLDING OVER

Failure of the Lessee to surrender the leased premises at expiration of the lease constitutes a

holding over which shall be construed as a “tenancy-at-will” or a month to month lease at the rate

of ____________________ per month, until such time as the Lessee completes a renewal or

provides notice of intent to vacate.

TRIPLE NET LEASE

This Lease is what is generally referred to as a “net net net lease” (“triple net lease”), and it is

understood that the Lessor shall receive all rent or lease payments free and clear of any and all

impositions, encumbrances, charges, obligations or expenses of any nature whatsoever in

connection with the ownership and operation of the Premises. In addition, the Lessee shall pay to

the parties respectively entitled thereto all impositions, insurance premiums, operating charges,

maintenance charges, construction costs and any other charges, cost, and expenses which arise or

may be contemplated under any provisions of this Lease during the Term hereof. All of the said

charges, costs and expenses shall constitute Rent or Lease payment, and upon the failure of the

Lessee to pay any such costs, charges or expenses, the Lessor shall have the same rights and

remedies as otherwise provided in this Lease for the failure of Lessee to pay rent or make lease

payments. The Lessee shall at no time be entitled to any abatement or reduction in Rent or Lease

payments that are payable under this Lease except as otherwise expressly provided. Any present

or future law to the contrary shall not alter this agreement of the parties.

SECURITY DEPOST

Concurrently with the execution of this Lease, the Lessee shall deliver to the Lessor the amount of

____________________ as security for the performance of the Lessee of every covenant and

conditions of this Lease (the “Security Deposit”). Said Security Deposit ____________________.

In the event that the Lessee defaults with respect to any covenant or condition of this Lease,

including, but not limited to the payment of rent, the Lessor reserves the option and right to apply

some or all of the paid Security Deposit to the payment of any sum in default or any sum which

the Lessor may be required to spend by reason of ‘Lessee’s’ damage or default. If any portion of

the Security Deposit is so applied, the Lessee, upon demand by the Lessor, shall deposit cash with

the Lessor in an amount sufficient to restore the Security Deposit to its original amount.

Lessee’s compliance with all the covenants and conditions of this Lease shall ensure the return of

the Security Deposit, or any balance thereof, to the Lessee promptly after expiration of the term of

the Lease Agreement.

POSSESSION

The Lessee shall take possession of the premises on ____________________, unless otherwise

stipulated. The Lessor shall use due diligence to ensure Lessee is provided possession of the

premises at the beginning of the Term of this Lease Agreement. The first month’s rent shall be

prorated for the period of any delay in providing or turning over possession of the premises to the

Lessee; however, the length of the term of this Agreement shall not be extended as a result of any

such delay. The Lessee shall bring no claim against the Lessor for any delay in obtaining

possession.

In the event that the Lessee fails to take possession of the premises within ____________________

days after the beginning of this Lease, then the Lessor retains the right to terminate this Agreement.

INSURANCE ON PREMISE

The Lessee shall obtain and pay for, at his/her own cost and expense, fire and extended coverage

casualty insurance for the building and other improvements on the leased premises, with such

comprehensive or so called “all-risk” endorsements and in such amounts as the Lessor may, from

time to time, deem reasonably necessary, and showing the Lessee, the Lessor and the Lessor’s

Lender or Lien Holder, if any, as the insured parties. Lessee shall also obtain and pay for loss of

rent coverage. The Lessee shall at all times keep said insurance in force and effect and shall provide

to the Lessor copies of said policies or certificates evidencing said coverage. The policies shall be

in form and content reasonably required by the Lessor, shall be issued by an insurance company

approved by the Lessor and shall contain a clause that the Lessee will not cancel, materially modify

or fail to renew said insurance in effect without first providing to the Lessor days advance written

notice. If the Lessee fails to keep said insurance in effect, the Lessee shall be in default hereunder,

and the Lessor may, at his/her option, immediately obtain insurance coverage as provided for

herein and charge the Lessee for the cost thereof.

LESSEE INDEMNITY & LIABILITY INSURANCE

The Lessee shall at all times indemnify, defend and hold the Lessor harmless from all loss, liability,

costs, damage and expenses that may occur or be claimed with respect to any person or persons,

property on or about the Premises or to the Premises resulting from any act done or omission by

or through the Lessee, the Lessee’s agents, employees, staff, invitees or any person on the Premises

by reason of the Lessee’s use or occupancy or resulting from the Lessee’s non-use or possession of

said property and any and all loss, cost, liability or expense resulting therefrom. Lessee shall

maintain at all times during the lease term comprehensive general liability insurance with an

insurance company that is licensed to do business in the state in which the Premises are located

and is satisfactory to Lessor, properly protecting and indemnifying Lessor with single limit

coverage of not less than ____________________ for injury or for death of persons and

____________________ for property damage. During the lease term, Lessee shall furnish the

Lessor with a certificate or certificates of insurance, in a form acceptable to the Lessor, covering

such insurance so maintained by the Lessee and naming the Lessor and Lessor’s mortgagees, if

any, as additional insureds.

LESSOR INDEMNITY & LIABILITY INSURANCE

Lessor shall at all times indemnify, defend and hold the Lessee harmless from all loss, liability,

costs, damages and expenses that may occur or be claimed with respect to any person or persons,

property on, about or to any Common Areas resulting from any act done or omission by or through

the Lessor, Lessor’s agents, employees, staff, invitees or any person in or on the Common Areas.

The Lessor shall maintain at all time during the lease term comprehensive general liability

insurance with an insurance company satisfactory to the Lessee, properly protecting and

indemnifying the Lessee with single limit coverage of not less than ____________________ for

any injury or ____________________ for death of persons and ____________________ for

property damage.

TAXES

____________________ shall pay during the term of this Lease the real estate taxes and special

taxes and assessments (collectively, the “taxes”) attributable to the premises and accruing during

such term. Lessee, at Lessor’s option, shall pay to the Lessor said taxes on a monthly basis, based

on one-twelfth (1/12) of the estimated annual amount for taxes. Taxes for any fractional calendar

year during the term hereof shall be prorated. In the event the Lessee does not make any tax

payment required hereunder, Lessee shall be in default of this Lease.

TAXES ON LEASEHOLD

____________________ shall be responsible for and shall pay before delinquency all municipal,

county, or state taxes assessed during the term of this Lease against any leasehold interest or

personal property of any kind owned by or placed in, upon, or about the premises by the Lessee.

OPERATING EXPENSES

It is the intention of the parties, and they hereby agree, that this shall be a triple net Lease, and the

Lessor shall have no obligation to provide any services, perform any acts or pay any expenses,

charges, obligations or costs of any kind whatsoever with respect to the Premises, and Lessee

hereby agrees to pay one hundred percent (100%) of any and all Operating Expenses as hereafter

defined for the entire term of the Lease and any thereof in accordance with specific provisions

hereinafter set forth. The term Operating Expenses shall include all costs to Lessee of operating

and maintaining the Premises and related parking areas, and shall include, without limitation, real

estate and personal property taxes and assessments, management fee, heating, electricity, water,

waste disposal, sewage, operating materials and supplies, service agreements and charges, lawn

care, snow removal, restriping, repairs, repaving, cleaning and custodial, security, insurance, the

cost of contesting the validity or applicability of any governmental acts which may affect operating

expenses, and all other direct operating costs of operating and maintaining the Premises and related

parking areas, unless expressly excluded from the operating expenses.

Notwithstanding the foregoing operating costs, and Lessee’s obligations in relation thereto, shall

not include (i) any expense chargeable to a capital account or capital improvement, ground leases;

principal or interest payments on any mortgage or deed of trust on the premises; (ii) any amount

for which Lessor is reimbursed through insurance, or by third persons, (iii) repair costs occasioned

by fire, windstorm or other casualty, (iv) any construction, repair or maintenance expenses or

obligations that are the sole responsibility of the Lessor (not to be reimbursed by the Lessee), (v)

leasing commissions and other expenses incurred in connection with leasing any other area located

on the premises to any other party, (vi) any expense representing an amount paid to an affiliate or

subsidiary of the Lessor which is in excess of the amount which would be paid in the absence of

such relationship, and (vii) costs of items and services for which the Lessee reimburses or pay any

third persons directly.

ASSIGNMENT AND SUBLETTING

The Lessee shall not assign, transfer or encumber this Lease and shall not sublease the Premises

or any part thereof or allow any other person to be in possession thereof without prior written

consent of the Lessor, in each and every instance. Said consent shall not be unreasonably withheld

by the Lessor. For the purpose of this provision, any transfer of a majority or controlling interest

in Lessee (whether in one or more related or unrelated transactions), whether by transfer of stock,

consolidation, merger, transfer of a partnership interest or transfer of any or all of Lessee’s assets

or otherwise, or by operation of law, shall be deemed an assignment of this lease. Notwithstanding

any permitted assignment or subletting, Lessee shall at all times remain directly, primarily and

fully responsible and liable for the payment of the rent herein specified and for compliance with

all of its other obligations under the terms and provisions of this Lease.

CONDITION OF PREMISES

Lessee acknowledges that it has had the opportunity to inspect the Premises and, with the exception

of any notations or provisions herein provided otherwise in this Lease, the Lessee accepts the

Premises in its present condition. At the end of the lease term, except for any damages caused by

fire or other perils, Lessee, at its expense shall (i) surrender the Premises in the same or similar

condition as existed at the time the Premises were accepted and possession taken by the Lessee,

subject to reasonable wear resulting from uses permitted hereunder, and further subject to Lessee’s

obligations; (ii) have removed all of the Lessee’s property from the Premises; (iii) have repaired

any damages to the Premises caused by the removal of the Lessee’s Property; and (iv) leave the

Premises free of trash, waste, dirty and debris and the Premises in good and reasonable condition.

LESSOR’S RIGHT OF ENTRY

The Lessor or Lessor’s agent shall have the right of entry at reasonable hours to inspect or show

the Premises to prospective Lender or Lien Holders and purchasers, and to perform or provide

anything that the Lessor may be required to perform or provide hereunder, or which the Lessor

may deem necessary for the good or benefit of the Premises or any building of which they are a

part. As of and during the last ninety (90) days of this Lease, the Lessor shall have the right to post

and/or display a “For Rent” sign on the Premises.

EXCLUSION OF LESSEE

Lessor may not intentionally prevent the Lessee from entering the leased Premises except by

judicial process unless the exclusion results from: (i) bona fide repairs, construction, or an

emergency; (ii) removing the contents of Premises abandoned by Lessee; or (iii) changing door

locks of Lessee in the event the Lessee is delinquent in paying rent; Lessor or Lessor’s agent must

then place a written notice on Lessee’s front door stating the name and address or telephone number

of company or the individual from whom the key may be obtained. The new key is required to be

provided only during Lessee’s regular business hours.

SIGNS AND ADVERTISEMENTS

The Lessee shall not place upon nor permit to be placed upon any part of the Premises, any signs,

billboards or advertisements whatsoever, or paint the exterior walls of the building without the

advance prior written consent of the Lessor. The Lessor shall have the right to remove any sign(s)

which have not been approved in order to maintain the leased premises or to make any repairs or

alterations thereto. All permitted signage placement and/or removal shall be at the Lessee’s sole

cost and expense.

FORCE MAJEURE

In the event that the Lessor or Lessee is unable to reasonably perform its obligations under this

Agreement as a result of a natural disaster, war, terrorist activities, strike, lockout, labor issues,

civil commotion, and act of God, or any other event beyond the control of the Lessor or Lessee,

with the exception for non-availability of funds, the party shall not be in breach of this Agreement

if the party diligently performs the obligations after the end of the force majeure event. The non-

performing party shall give written notice to the other party as soon as reasonably practicable in

the event of non-performance due to a force majeure event.

In the event, during the Term or previous Term thereto, the premises shall be destroyed or so

damaged by fire or other casualty as to become uninhabitable or unusable, then in such event, at

the option of the Lessor, this Lease shall terminate from the date of such damage and/or

destruction. The Lessor shall exercise this option to terminate this Lease by delivering written

notice to the Lessee within ____________________ days after the occurrence of such damage

and/or destruction. Upon such notice, the Lessee shall immediately surrender said Premises and

all interest therein to the Lessor, and the Lessee shall pay rent only to such time that damages

and/or destruction occurred. In the event that the Lessors does not elect to terminate this Lease,

this Lease shall therefore continue in full force and effect, and the Lessor shall expeditiously make

any and all necessary repairs to the Premises as needed, placing the same in as good condition as

it was prior to the occurrence of damage or destruction.

PERSONAL PROPERTY

The Lessor shall not be liable for any loss or damage to any merchandise inventory, goods, fixtures,

improvements or personal property of the Lessee in or about said Premises.

ALTERATIONS

Any and all alterations, additions and/or improvements, except trade fixtures, installed at the

expense of the Lessee shall become the property of the Lessor and shall remain upon and shall be

surrendered with the leased Premises as a part thereof on the termination of this lease. Such

alterations, additions, and improvements may only be made with the prior written consent and

approval of the Lessor, which shall not be unreasonably withhold said consent. If consent is

granted by the Lessor for the making of improvements, alterations or additions to the leased

Premises, such improvements, alterations or additions shall not commence until such time as the

Lessee has furnished to the Lessor a copy of all plans and a certificate of insurance showing

coverage in an amount satisfactory to the Lessor protecting the Lessor from liability for injury to

any person and damage to any personal property, on or off the leased Premises, in connection with

the making of such improvements, alterations or additions. No cooling tower, equipment, or

structure of any kind shall be placed on the roof or elsewhere on the leased premises by the Lessee

without prior written permission of the Lessor. If such permission is granted, such work or

installation shall be done at the Lessee’s expense and in such a manner that the roof shall not be

damaged thereby. If it becomes necessary to remove such cooling tower, equipment or structure

temporarily so that repairs to the roof can be made, Lessee shall promptly remove and reinstall the

cooling tower, equipment or structure at the Lessee’s expense and repair at the Lessee’s expense

any damage which may result from such removal or reinstallation. Upon termination of this lease,

Lessee shall remove or cause to be removed from the roof any such cooling tower, equipment or

structure if directed to do so by the Lessor. Lessee shall promptly repair, at its expense, any

damages resulting from such removal. At the termination of this lease, Lessee shall deliver the

leased Premises in good order and condition, natural deterioration only excepted. Any damage

caused by the installation of trade fixtures shall be repaired at the Lessee’s expense prior to the

expiration of the lease term. All alterations, improvements, additions and repairs made by the

Lessee shall be made in good and workmanlike manner.

UTILITIES & SERVICES

The ____________________ shall furnish and pay for all of the following and any other utilities

deemed necessary by the Lessee at the Premises:

___________________________________________________________________________

INTERRUPTION OF UTILITIES

Lessor or Lessor’s agent may not interrupt or cause the interruption of utility services paid directly

to the utility company by the Lessee unless interruption results from bona fide repairs,

construction, or an emergency. If any utility services furnished by the Lessor are interrupted and

continue to be interrupted despite the good faith efforts of Lessor to remedy the same, Lessor shall

not be liable in any respect for damages to the person or property of Lessee or Lessee’s employees,

agents, or guests and same shall not be construed as grounds for constructive eviction or abatement

of rent. Lessor shall use reasonable diligence to repair and remedy such interruption promptly.

LEGAL REQUIREMENTS

The Lessee shall comply with all laws, orders, ordinances and other public requirements now and

hereafter affecting the Premises or the use thereof, and the Lessee shall indemnify, defend and

hold harmless the Lessor from any expense or damage resulting from the failure to do so.

FIXTURES

With the exception for Lessee’s personal property and trade fixtures, all buildings, repairs,

alterations, additions, improvements, installation and other non-trade fixtures installed or erected

on the Premises, whether by or at the expense of the Lessor or Lessee, shall belong to the Lessor

and shall remain on and be surrendered with the Premises at the expiration or termination of this

Lease. However, the Lessor shall retain the option to permit the Lessee to remove their alterations

or improvements prior to the expiration of this Lease and return the Premise to its original

condition.

REPAIRS AND MAINTENANCE

The Lessor shall maintain the foundation, exterior walls (with the exception of glass; windows;

doors; door closure devices; window and door frames; molding; locks and hardware) and exterior

painting or other treatment of exterior walls, and the roof of the leased Premises in good repair

except that the Lessor shall not be required to make any repairs resulting from the negligence or

acts of negligence on the behalf of the Lessee, its staff, employees, sublessees, licensees and

concessionaires. The Lessee shall be responsible for maintenance of the common areas and

common area equipment and furnishings. Any such repairs and/or maintenance in which the

Lessor would be responsible, the Lessee agrees to provide Lessor with written notice of the needed

repairs and/or maintenance, and Lessor shall ensure that any repairs and/or maintenance shall be

made and completed within a reasonable time frame. Lessee shall notify the Lessor of any

emergency repairs to be made. Lessee shall keep the interior of the leased Premises in good, clean

and workable condition and shall, at its sole expense, make all needed repairs and replacements,

including replacement of cracked or broken glass, windows, doors, door closure devices, door and

window frames, molding, locks and hardware, except for repairs and replacements required to be

made by the Lessor under this section.

In the event that any repairs required to be made by the Lessee hereunder are not made within

____________________ days after written notice delivered to the Lessee by the Lessor, the Lessor

shall reserve the right and option to make or have said repairs made without liability to the Lessor

for any loss or damage which may result by reason of such repairs, and that Lessee shall pay to the

Lessor, upon demand as additional rent hereunder, the cost of such repairs plus. At the termination

of this Lease, Lessee shall deliver the leased premises in good order and condition, normal wear

and tear excepted. Normal wear and tear meaning the deterioration which results from normal use

and not as an act of carelessness, neglect, accident or abuse.

EMINENT DOMAIN

In the event that the Premises are taken under the power of eminent domain or a conveyance in

lieu thereof by any authority having the right of condemnation, or if a portion thereof is taken so

that the Premises are unsuitable, in the Lessee’s reasonable opinion, for Lessee’s use, then the term

of this lease shall terminate as of the date that title shall vest in the acquiring authority, and the

rent and other charges shall be adjusted as of the date of such taking. In such case, the Lessor shall

be entitled to the proceeds of the condemnation award made to the Lessor. Nothing herein shall be

construed to prevent the Lessee from separately pursuing a claim against the condemning authority

for its independent loss or damages to the extent available, provided however, that no award made

to or on behalf of the Lessee shall reduce, limit, or restrict the award to the Lessor, and no allocation

of the Lessor’s award in condemnation shall occur. The Lessee shall have no claim against the

Lessor for the value of the unexpired term of this Lease. Should any part of the Premises be taken

in the exercise of eminent domain or a conveyance in lieu thereof or in connection therewith, but

not such as to render the Premises unsuitable for the operation of Lessee’s business, this Lease

shall continue on the same terms and conditions except that the description of the Premises or the

real estate taken by right of eminent domain or conveyance in lieu thereof or in connection

therewith shall be modified to reflect such taking. In the event this Lease does not terminate by

reason of such taking, the condemnation proceeds from the ‘Demised Premises’ will first be used

to restore the Premises to a position of occupancy by the Lessee. The balance of such

condemnation proceeds from the Premises, if any, shall belong to the Lessor.

WAIVER OF SUBROGATION

As part of the consideration for this Lease, each of the parties hereby releases the other party from

all liability for damage due to any act or neglect of the other party occasioned to the property

owned by said parties which is or might be incident to or the result of fire or other casualty against

loss for which either of the parties is now carrying or hereafter carry insurance; provided however,

that the releases herein contained shall not apply to any loss or damage occasioned by intentional

acts of either of the parties, and the parties further covenant that any insurance they obtain on their

respective properties shall contain an appropriate provision whereby the insurance company, or

companies, consent to the mutual release of liability contain in this paragraph.

DEFAULT & REMEDIES

Lessor shall have the following remedies if Lessee commits a default. These remedies are not

exclusive; they are cumulative and in addition to any remedies now or later allowed by law:

RE-ENTRY: Upon the happening of any such event of default, Lessor, at any time thereafter may:

(a) Either with or without notice of demand, declare the Lease term ended and re-enter the

Premises or any part thereof, either with or without process of law, and expel or remove therefrom

Lessee and all parties occupying the same or any of them, using force as may be necessary so to

do, and again repossess and enjoy the same without prejudice to any remedies that Lessor may

otherwise have by reason of the breach hereof. Or

(b) Re-enter the Premises at its option without declaring the Lease Term ended and relet the

whole or any part therefor for the account of Lessee on such terms and conditions and at such rent

as Lessor may deem proper, collecting such rent and applying it on the amount due from Lessee

hereunder. And on the expense of such reletting (including expense of alteration and special

inducements to Lessee) and on any other damage or expense so sustained by Lessor, or on any

such item or items, Lessor will recover from Lessee the difference between the proceeds of such

reletting and the amount of rentals reserved hereunder and any such damage or expense from time

to time which said sum Lessee agrees to pay upon demand.

LESSEE DEFAULT AND REMOVAL OF ABANDONED PROPERTY

In the event that the Lessee abandons the Premises or otherwise defaults in the performance of any

obligations or covenants herein, the Lessor may enforce the performance of the lease in any manner

provided by law. This lease may be terminated at the Lessor’s discretion if such abandonment or

default continues for a period of ____________________ days after the Lessor notifies the Lessee

of such abandonment or default and of Lessor’s intention to declare this lease terminated. Such

notice shall be sent by the Lessor to the Lessee at the Lessee’s last known address by certified mail.

If Lessee has not completely removed or cured the default within the ____________________ day

period, this lease shall terminate. Thereafter, Lessor or its agents shall have the right without

further notice or demand to enter the leased Premises and remove all property without being

deemed guilty of trespass and without waiving any other remedies for arrears of rent or breach of

covenant. Upon abandonment or default by the Lessee, the remaining unpaid portion of any rent

shall become due and payable. For the sole purpose of this section, Lessee is presumed to have

abandoned the Premises if goods, equipment, or other property, in an amount substantial enough

to indicate a probable intent to abandon the Premises, is being or has been removed from the

Premises and the removal is not within the normal course of Lessee’s business. Lessor shall have

the right to store any property of Lessee that remains on the abandoned Premises and, in addition

to Lessor’s other rights, may dispose of the stored property if the Lessee does not claim the property

within ____________________ days after the date that the property is stored, provided Lessor

delivers notice by certified mail to Lessee.

DAMAGES

Should Lessor terminate this Lease by reason of any breach thereof by Lessee, Lessor may

thereupon recover from Lessee the worth at the time of such termination of the excess, if any, of

the amount of rent and charges equivalent to rent reserved herein for the balance of said Term over

the then reasonable rental value of the Premises for the same period. Lessor shall not by any re-

entry or other act be deemed to have terminated this Lease or the liability of Lessee for the total

rent hereunder or any installment thereof then due or thereafter accruing or for damages unless

Lessor shall notify Lessee in writing that Lessor has so elected to terminate the Lease.

LESSOR’S RIGHT TO CURE LESSEE’S DEFAULT

Lessor, at any time after Lessee commits a default, can cure the default at Lessee’s cost. If Lessor

at any time, by reason of Lessee’s default, pays any sum or does any act that requires the payment

of any sum, the sum paid by Lessor shall be due immediately from Lessee to Lessor at the time

the sum is paid.

WAIVER

The rights and remedies of the Lessor under this Lease, as well as those provided by law, shall be

cumulative, and none shall be exclusive of any other rights or remedies. A waiver by the Lessor

of any breach or default of the Lessee shall not be deemed or construed to be a continuing waiver

of such breach or default nor as a waiver of or permission, expressed or implied, for any subsequent

breach or default. It is agreed that the acceptance by the Lessor of any installment of rent

subsequent to the date the same should have been paid shall not alter the covenant and obligation

of Lessee to pay subsequent installments of rent promptly upon the due date. Receipt by Lessor of

partial payment after Lessee’s default shall not be construed to be or constitute a cure of any such

default. No receipt of money by Lessor before or after the termination of this Lease shall in any

way reinstate, continue or extend the term above demised.

TOXIC OR HAZARDOUS MATERIALS

Lessee shall not store, use or dispose of any toxic or hazardous materials in, on or about the

Premises without the prior written consent of Lessor. Lessee, at its sole cost, shall comply with all

laws relating to Tenant’s storage, use and disposal of hazardous or toxic materials. Lessee shall be

solely responsible for and shall defend, indemnify and hold Lessor, its agents and employees,

harmless from and against all claims, costs and liabilities, including attorney’s fees and costs,

arising out of or in connection with the Lessee’s storage, use or disposal of any toxic or hazardous

material in, on or about the Premises including, but not limited to, removal, clean-up and

restoration work and materials necessary to return the Premises, and any other property of

whatever nature located on the Premises, to their condition existing prior to the appearance of toxic

or hazardous materials on the Premises. Lessee’s obligations under this paragraph shall survive the

termination of this Lease.

GOVENING LAWS

This Agreement shall be construed under and in accordance with the laws of the State of

____________________.

COMPLIANCE WITH LAWS AND REGULATIONS

Lessee shall, at its own expense, comply with all laws, orders, codes and requirements of all

government entities with reference to the use and occupancy of the leased Premises. Lessee and

Lessee’s agents, employees, and invitees shall fully comply with any rules and regulations

governing the use of the buildings or other improvements to the leased premises as required by the

Lessor. Lessor may make reasonable changes in such rules and regulations from time to time as

deemed advisable for the safety, care and cleanliness of the leased Premises, provided same are in

writing and are not in conflict with this lease.

NOTICES

Any notice hereunder shall be sufficient if sent by certified mail, addressed to the Lessee at the

Premises, and to the Lessor where rent is payable.

SUBORDINATION OF LEASE TO MORTGAGES

This Lease shall be subject and subordinate at all times to the lien of existing mortgages and of

mortgages which hereafter may be made a lien on the Premises; provided however, that with regard

to any pledge or mortgage executed by the Lessor, Lessor shall use its best efforts to provide to

the Lessee a non-disturbance agreement from any mortgagee or other lien holder of Lessor’s

interest in the Premises. Such non-disturbance agreement shall be in form and content reasonably

acceptable to Lessee and Lessor’s mortgagee or other lien holder, together with a representation

that the Lessor is not in default of any of the terms of any such mortgage or security agreement as

of the date thereof. Although no instrument or act on the part of the Lessee shall be necessary to

effectuate such subordination, the Lessee will nevertheless execute and deliver such further

instruments subordinating this Lease to the lien of any such mortgages as may be desired by the

mortgagee. The Lessee hereby irrevocably appoints the Lessor as Lessee’s attorney-in-fact to

execute and deliver such instrument for the Lessee. Provided however, and notwithstanding the

foregoing provisions hereof, upon foreclosure of the mortgage with the mortgagee succeeding to

the rights of the Lessor, the Lessee shall, at the option of said mortgagee, be bound to the

mortgagee under all of the terms of the Lease for the balance of the term hereof remaining with

the same force and effect as if the mortgagee were the Lessor under the Lease, and the Lessee

hereby attorns to the mortgagee as its Lessor, such attornment to be effective and self-operative if

the mortgagee so elects. In no event, however, shall the mortgagee be liable for any act or omission

of any prior Lessor, be subject to any offsets or defenses which Lessee might have against any

prior Lessor, or be bound by any rent or additional rent which the Lessee might have paid to any

prior Lessor for more than the current month.

SUCCESSORS

The provisions, covenants and conditions of this Lease shall bind and inure to the benefit of the

legal representatives, heirs, successors and assigns of each of the parties hereto, except that no

assignment or subletting by Lessee without the written consent of Lessor shall vest any rights in

the assignee or subtenant of Lessee.

QUIET POSSESSION

Lessor agrees, so long as Lessee fully complies with all of the terms, covenants and conditions

herein contained on the Lessee’s part to be kept and performed, Lessee shall and may peaceably

and quietly have, hold and enjoy the Premises for the term aforementioned, it being expressly

understood and agreed that the aforementioned covenant of quiet enjoyment shall binding upon

the Lessor, its heirs, successors or assigns, but only during such party’s ownership of the Premises.

Lessor and Lessee further covenant and represent that each has full right, title, power and authority

to make, execute and deliver this Lease.

BANKRUPTCY

Neither this Lease nor any interest therein nor any estate hereby created shall pass to any trustee

or receiver in bankruptcy or to any other receiver or assignee for the benefit of creditors by

operation of law or otherwise during the Term or any renewal thereof.

PRIOR AGREEMENTS SUPERSEDED

This agreement constitutes the sole and only agreement of the parties to this lease and supersedes

any prior understandings, whether written or oral agreement, between the parties respecting the

subject matter of this lease.

AMENDMENT

No amendment, modification, or alteration of the terms hereof shall be binding unless it is in

writing, dated subsequent to the date hereof and duly executed by all parties to this agreement.

ADDITONAL INSTRUMENTS

The parties hereto will execute any and all additional document or instruments that may be

necessary or convenient to carry out the intent and purposes of the parties to this agreement.

ENTIRE AGREEMENT

This Lease contains the entire agreement between the parties and no modification of this Lease

shall be binding upon the parties unless evidenced by an agreement in writing and signed by the

Lessor and Lessee after the date hereof. If there be more than one Lessee name herein, the

provisions of this Lease shall be applicable to and binding upon such Lessees, jointly and severally.

IN WITNESS WHEREOF, said parties hereunto subscribe their names.

LESSOR

By

:

_________________________________________________

_
(Lessor Signature)

___________________

_
(Date)

Lessor Telephone: ____________________

Lessor Email: ____________________

LESSEE

By

:

_________________________________________________

_
(Lessee Signature)

___________________

_
(Date)

Lessee Telephone: ____________________

Lessee Email: ____________________

Lease Agreement Page 1 of 19

COMMERCIAL LEASE AGREEMENT

This Lease Agreement (the “Agreement”) is made and effective [DATE],

BETWEEN: [YOUR COMPANY NAME] (the “Landlord”), a corporation organized and

existing under the laws of the [State/Province] of [STATE/PROVINCE], with its
head office located at:

[YOUR COMPLETE ADDRESS]

AND: [TENANT NAME] (the “Tenant”), an individual with his main address located at

OR a corporation organized and existing under the laws of the [State/Province] of
[STATE/PROVINCE], with its head office located at:

[COMPLETE ADDRESS]

1. DESCRIPTION OF PREMISES

Landlord leases to Tenant the premises located at [ADDRESS], [CITY], [STATE], and described more
particularly as follows:

[INSERT LEGAL DESCRIPTION].

2. GRANT OF LEASE

Landlord, in consideration of the rents to be paid and the covenants and agreements to be performed and
observed by the Tenant, does hereby lease to the Tenant and the Tenant does hereby lease and take
from the Landlord the property described in Exhibit “A” attached hereto and by reference made a part
hereof (the “Leased Premises”), together with, as part of the parcel, all improvements located thereon.

3. LEASE TERM

a. Total Term of Lease: The term of this Lease shall begin on the commencement date, as
defined in Section b) of this Article 3, and shall terminate on [DATE].

b. Commencement Date: The “Commencement Date” shall mean the date on which the

Tenant shall commence to conduct business on the Leased Premised, so long as such date
is not in excess of [NUMBER] days subsequent to execution hereof.

4. EXTENSIONS

The parties hereto may elect to extend this Agreement upon such terms and conditions as may be agreed
upon in writing and signed by the parties at the time of any such extension.

Lease Agreement Page 2 of 19

5. DETERMINATION OF RENT

The Tenant agrees to pay the Landlord and the Landlord agrees to accept, during the term hereof, at
such place as the Landlord shall from time to time direct by notice to the Tenant, rent at the following
rates and times:

a. Annual Rent: Annual rent for the term of the Lease shall be [AMOUNT], plus applicable sales
tax.

b. Payment of Yearly Rent: The annual rent shall be payable in advance in equal monthly

installments of one-twelfth (1/12th) of the total yearly rent, which shall be [AMOUNT], on the
first day of each and every calendar month during the term hereof, and pro-rata for the
fractional portion of any month, except that on the first day of the calendar month immediately
following the Commencement Date, the Tenant shall also pay to the Landlord rent at the said
rate for any portion of the preceding calendar month included in the term of this Lease.

c. Reference to yearly rent hereunder shall not be implied or construed to the effect that this

Lease or the obligation to pay rent hereunder is from year to year, or for any term shorter
than the existing Lease term, plus any extensions as may be agreed upon.

d. A late fee in the amount of [AMOUNT] shall be assessed if payment is not postmarked or

received by Landlord on or before the tenth day of each month.

6. USE OF PROPERTY BY TENANT

The Leased Premises may be occupied and used by Tenant exclusively as a [DESCRIBE], to be known
as a [DESCRIBE].

Nothing herein shall give Tenant the right to use the property for any other purpose or to sublease,
assign, or license the use of the property to any Sub-Tenant, assignee, or licensee, which or who shall
use the property for any other use.

7. RESTRICTIONS ON USE

Tenant shall not use the demised premises in any manner that will increase risks covered by insurance
on the demised premises and result in an increase in the rate of insurance or a cancellation of any
insurance policy, even if such use may be in furtherance of Tenant’s business purposes.

Tenant shall not keep, use, or sell anything prohibited by any policy of fire insurance covering the
demised premises, and shall comply with all requirements of the insurers applicable to the demised
premises necessary to keep in force the fire and liability insurance.

8. WASTE, NUISANCE, OR UNLAWFUL ACTIVITY

Tenant shall not allow any waste or nuisance on the demised premises, or use or allow the demised
premises to be used for any unlawful purpose.

9. DELAY IN DELIVERING POSSESSION

This lease agreement shall not be rendered void or voidable by the inability of Landlord to deliver
possession to Tenant on the date set forth in Section 3. Landlord shall not be liable to Tenant for any loss
or damage suffered by reason of such a delay; provided, however, that Landlord does deliver possession

Lease Agreement Page 3 of 19

no later than [DATE]. In the event of a delay in delivering possession, the rent for the period of such delay
will be deducted from the total rent due under this lease agreement. No extension of this lease agreement
shall result from a delay in delivering possession.

10. SECURITY DEPOSIT

The Tenant has deposited with the Landlord the sum of [AMOUNT] as security for the full and faithful
performance by the Tenant of all the terms of this lease required to be performed by the Tenant. Such
sum shall be returned to the Tenant after the expiration of this lease, provided the Tenant has fully and
faithfully carried out all of its terms. In the event of a bona fide sale of the property of which the leased
premises are a part, the Landlord shall have the right to transfer the security to the purchaser to be held
under the terms of this lease, and the Landlord shall be released from all liability for the return of such
security to the Tenant.

11. TAXES

a. Property Taxes: The Tenant shall be liable for all taxes levied against any leasehold interest
of the Tenant or personal property and trade fixtures owned or placed by the Tenant in the
Leased Premises.

b. Real Estate Taxes: During the continuance of this lease Landlord shall deliver to Tenant a

copy of any real estate taxes and assessments against the Leased Property. From and after
the Commencement Date, the Tenant shall pay to Landlord not later than [NUMBER] days
after the day on which the same may become initially due, all real estate taxes and
assessments applicable to the Leased Premises, together with any interest and penalties
lawfully imposed thereon as a result of Tenant’s late payment thereof, which shall be levied
upon the Leased Premises during the term of this Lease.

c. Contest of Taxes: The Tenant, at its own cost and expense, may, if it shall in good faith so

desire, contest by appropriate proceedings the amount of any personal or real property tax.
The Tenant may, if it shall so desire, endeavor at any time or times, by appropriate
proceedings, to obtain a reduction in the assessed valuation of the Leased Premises for tax
purposes. In any such event, if the Landlord agrees, at the request of the Tenant, to join with
the Tenant at Tenant’s expense in said proceedings and the Landlord agrees to sign and
deliver such papers and instruments as may be necessary to prosecute such proceedings,
the Tenant shall have the right to contest the amount of any such tax and the Tenant shall
have the right to withhold payment of any such tax, if the statute under which the Tenant is
contesting such tax so permits.

d. Payment of Ordinary Assessments: The Tenant shall pay all assessments, ordinary and

extraordinary, attributable to or against the Leased Premises not later than [NUMBER] days
after the day on which the same became initially due. The Tenant may take the benefit of any
law allowing assessments to be paid in installments and in such event the Tenant shall only
be liable for such installments of assessments due during the term hereof.

e. Changes in Method of Taxation: Landlord and Tenant further agree that if at any time

during the term of this Lease, the present method of taxation or assessment of real estate
shall be changed so that the whole or any part of the real estate taxes, assessment or
governmental impositions now levied, assessed or imposed on the Leased Premises shall, in
lieu thereof, be assessed, levied, or imposed wholly or in part, as a capital levy or otherwise
upon the rents reserved herein or any part thereof, or as a tax, corporation franchise tax,
assessment, levy or charge, or any part thereof, measured by or based, in whole or in part,
upon the Leased Premises or on the rents derived therefrom and imposed upon the Landlord,
then the Tenant shall pay all such taxes, assessments, levies, impositions, or charges.

Lease Agreement Page 4 of 19

Nothing contained in this Lease shall require the Tenant to pay an estate, inheritance,
succession, capital levy, corporate franchise, gross receipts, transfer or income tax of the
Landlord, nor shall any of the same be deemed real estate taxes as defined herein unless the
same be imposed in lieu of the real estate taxes.

12. IMPROVEMENTS BY TENANTS

Tenant may have prepared plans and specifications for the construction of improvements, and, if so, such
plans and specifications are attached hereto as Exhibit “B” and incorporated herein by reference. Tenant
shall obtain all certificates, permits, licenses and other authorizations of governmental bodies or
authorities which are necessary to permit the construction of the improvements on the demised premises
and shall keep the same in full force and effect at Tenant’s cost.

Tenant shall negotiate, let and supervise all contracts for the furnishing of services, labor, and materials
for the construction of the improvements on the demised premises at its cost. All such contracts shall
require the contracting party to guarantee performance and all workmanship and materials installed by it
for a period of one year following the date of completion of construction. Tenant shall cause all contracts
to be fully and completely performed in a good and workmanlike manner, all to the effect that the
improvements shall be fully and completely constructed and installed in accordance with good
engineering and construction practice.

During the course of construction, Tenant shall, at its cost, keep in full force and effect a policy of builder’s
risk and liability insurance in a sum equal, from time to time, to three times the amount expended for
construction of the improvements. All risk of loss or damage to the improvements during the course of
construction shall be on Tenant with the proceeds from insurance thereon payable to Landlord.

Upon completion of construction, Tenant shall, at its cost, obtain an occupancy permit and all other
permits or licenses necessary for the occupancy of the improvements and the operation of the same as
set out herein and shall keep the same in force.

Nothing herein shall alter the intent of the parties that Tenant shall be fully and completely responsible for
all aspects pertaining to the construction of the improvements of the demised premises and for the
payment of all costs associated therewith. Landlord shall be under no duty to investigate or verify
Tenant’s compliance with the provision herein. Moreover, neither Tenant nor any third party may construe
the permission granted Tenant hereunder to create any responsibility on the part of the Landlord to pay
for any improvements, alterations or repairs occasioned by the Tenant. The Tenant shall keep the
property free and clear of all liens and, should the Tenant fail to do so, or to have any liens removed from
the property within [NUMBER] days of notification to do so by the Landlord, in addition to all other
remedies available to the Landlord, the Tenant shall indemnify and hold the Landlord harmless for all
costs and expenses, including attorney’s fees, occasioned by the Landlord in having said lien removed
from the property; and, such costs and expenses shall be billed to the Tenant monthly and shall be
payable by the Tenant with that month’s regular monthly rental as additional reimbursable expenses to
the Landlord by the Tenant.

13. UTILITIES

Tenant shall pay for all water, sanitation, sewer, electricity, light, heat, gas, power, fuel, janitorial, and
other services incident to Tenant’s use of the Leased Premises, whether or not the cost thereof be a
charge or imposition against the Leased Premises.

Lease Agreement Page 5 of 19

14. OBLIGATIONS FOR REPAIRS

a. Landlord’s Repairs: Subject to any provisions herein to the contrary, and except for
maintenance or replacement necessitated as the result of the act or omission of subtenants,
licensees or contractors, the Landlord shall be required to repair only defects, deficiencies,
deviations or failures of materials or workmanship in the building. The Landlord shall keep the
Leased Premises free of such defects, deficiencies, deviations or failures during the first
[NUMBER] months of the term hereof.

b. Tenant’s Repairs: The Tenant shall repair and maintain the Leased Premises in good order

and condition, except for reasonable wear and tear, the repairs required of Landlord pursuant
hereto, and maintenance or replacement necessitated as the result of the act or omission or
negligence of the Landlord, its employees, agents, or contractors.

c. Requirements of the Law: The Tenant agrees that if any federal, state or municipal

government or any department or division thereof shall condemn the Leased Premises or any
part thereof as not in conformity with the laws and regulations relating to the construction
thereof as of the commencement date with respect to conditions latent or otherwise which
existed on the Commencement Date, or, with respect to items which are the Landlord’s duty
to repair pursuant to Section a) and c) of this Article; and such federal, state or municipal
government or any other department or division thereof, has ordered or required, or shall
hereafter order or require, any alterations or repairs thereof or installations and repairs as
may be necessary to comply with such laws, orders or requirements (the validity of which the
Tenant shall be entitled to contest); and if by reason of such laws, orders or the work done by
the Landlord in connection therewith, the Tenant is deprived of the use of the Leased
Premises, the rent shall be abated or adjusted, as the case may be, in proportion to that time
during which, and to that portion of the Leased Premises of which, the Tenant shall be
deprived as a result thereof, and the Landlord shall be obligated to make such repairs,
alterations or modifications at Landlord’s expense. All such rebuilding, altering, installing and
repairing shall be done in accordance with Plans and Specifications approved by the Tenant,
which approval shall not be unreasonably withheld. If, however, such condemnation, law,
order or requirement, as in this Article set forth, shall be with respect to an item which shall
be the Tenant’s obligation to repair pursuant to Section b) of this Article 9 or with respect to
Tenant’s own costs and expenses, no abatement or adjustment of rent shall be granted;
provided, however, that Tenant shall also be entitled to contest the validity thereof.

d. Tenant’s Alterations: The Tenant shall have the right, at its sole expense, from time to time,

to redecorate the Leased Premises and to make such non-structural alterations and changes
in such parts thereof as the Tenant shall deem expedient or necessary for its purposes;
provided, however, that such alterations and changes shall neither impair the structural
soundness nor diminish the value of the Leased Premises. The Tenant may make structural
alterations and additions to the Leased Premises provided that Tenant has first obtained the
consent thereto of the Landlord in writing. The Landlord agrees that it shall not withhold such
consent unreasonably. The Landlord shall execute and deliver upon the request of the
Tenant such instrument or instruments embodying the approval of the Landlord which may be
required by the public or quasi public authority for the purpose of obtaining any licenses or
permits for the making of such alterations, changes and/or installations in, to or upon the
Leased Premises and the Tenant agrees to pay for such licenses or permits.

e. Permits and Expenses: Each party agrees that it will procure all necessary permits for

making any repairs, alterations, or other improvements for installations, when applicable.
Each Party hereto shall give written notice to the other party of any repairs required of the
other pursuant to the provisions of this Article and the party responsible for said repairs
agrees promptly to commence such repairs and to prosecute the same to completion
diligently, subject, however, to the delays occasioned by events beyond the control of such
party.

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Each party agrees to pay promptly when due the entire cost of any work done by it upon the Leased
Premises so that the Leased Premises at all times shall be free of liens for labor and materials. Each
party further agrees to hold harmless and indemnify the other party from and against any and all injury,
loss, claims or damage to any person or property occasioned by or arising out of the doing of any such
work by such party or its employees, agents or contractors. Each party further agrees that in doing such
work that it will employ materials of good quality and comply with all governmental requirements, and
perform such work in a good and workmanlike manner.

15. TENANT’S COVENANTS

Tenant covenants and agrees as follows:

a. To procure any licenses and permits required for any use made of the Leased Premises by
Tenant, and upon the expiration or termination of this Lease, to remove its goods and effects
and those of all persons claiming under it, and to yield up peaceably to Landlord the Leased
Premises in good order, repair and condition in all respects; excepting only damage by fire
and casualty covered by Tenant’s insurance coverage, structural repairs (unless Tenant is
obligated to make such repairs hereunder) and reasonable wear and tear;

b. To permit Landlord and its agents to examine the Leased Premises at reasonable times and

to show the Leased Premises to prospective purchasers of the Building and to provide
Landlord, if not already available, with a set of keys for the purpose of said examination,
provided that Landlord shall not thereby unreasonably interfere with the conduct of Tenant’s
business;

c. To permit Landlord to enter the Leased Premises to inspect such repairs, improvements,

alterations or additions thereto as may be required under the provisions of this Lease. If, as a
result of such repairs, improvements, alterations, or additions, Tenant is deprived of the use
of the Leased Premises, the rent shall be abated or adjusted, as the case may be, in
proportion to that time during which, and to that portion of the Leased Premises of which,
Tenant shall be deprived as a result thereof.

16. INDEMNITY BY TENANT

The Tenant shall save Landlord harmless and indemnify Landlord from all injury, loss, claims or damage
to any person or property while on the Leased Premises, unless caused by the willful acts or omissions or
gross negligence of Landlord, its employees, agents, licensees or contractors. Tenant shall maintain, with
respect to the Leased Premises, public liability insurance with limits of not less than [AMOUNT] for injury
or death from one accident and [AMOUNT] property damage insurance, insuring Landlord and Tenant
against injury to persons or damage to property on or about the Leased Premises. A copy of the policy or
a certificate of insurance shall be delivered to Landlord on or before the commencement date and no
such policy shall be cancelable without [NUMBER] days prior written notice to Landlord.

17. SIGNAGE

a. Exterior Signs: Tenant shall have the right, at its sole risk and expense and in conformity
with applicable laws and ordinances, to erect and thereafter, to repair or replace, if it shall so
elect signs on any portion of the Leased Premises, providing that Tenant shall remove any
such signs upon termination of this lease, and repair all damage occasioned thereby to the
Leased Premises.

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b. Interior Signs: Tenant shall have the right, at its sole risk and expense and in conformity
with applicable laws and ordinances, to erect, maintain, place and install its usual and
customary signs and fixtures in the interior of the Leased Premises.

18. INSURANCE

a. Insurance Proceeds: In the event of any damage to or destruction of the Leased Premises,
Tenant shall adjust the loss and settle all claims with the insurance companies issuing such
policies. The parties hereto do irrevocably assign the proceeds from such insurance policies
for the purposes hereinafter stated to any institutional first mortgagee or to Landlord and
Tenant jointly, if no institutional first mortgagee then holds an interest in the Leased
Premises. All proceeds of said insurance shall be paid into a trust fund under the control of
any institutional first mortgagee, or of Landlord and Tenant if no institutional first mortgagee
then holds an interest in the Leased Premises, for repair, restoration, rebuilding or
replacement, or any combination thereof, of the Leased Premises or of the improvements in
the Leased Premises. In case of such damage or destruction, Landlord shall be entitled to
make withdrawals from such trust fund, from time to time, upon presentation of:

i. bills for labor and materials expended in repair, restoration, rebuilding or

replacement, or any combination thereof;

ii. Landlord’s sworn statement that such labor and materials for which payment is being

made have been furnished or delivered on site; and

iii. the certificate of a supervising architect (selected by Landlord and Tenant and
approved by an institutional first mortgagee, if any, whose fees will be paid out of said
insurance proceeds) certifying that the work being paid for has been completed in
accordance with the Plans and Specifications previously approved by Landlord,
Tenant and any institutional first mortgagee in a first class, good and workmanlike
manner and in accordance with all pertinent governmental requirements.

Any insurance proceeds in excess of such proceeds as shall be necessary for such repair,
restoration, rebuilding, replacement or any combination thereof shall be the sole property of
Landlord subject to any rights therein of Landlord’s mortgagee, and if the proceeds necessary
for such repair, restoration, rebuilding or replacement, or any combination thereof shall be
inadequate to pay the cost thereof, Tenant shall suffer the deficiency.

b. Subrogation: Landlord and Tenant hereby release each other, to the extent of the insurance

coverage provided hereunder, from any and all liability or responsibility (to the other or
anyone claiming through or under the other by way of subrogation or otherwise) for any loss
to or damage of property covered by the fire and extended coverage insurance policies
insuring the Leased Premises and any of Tenant’s property, even if such loss or damage
shall have been caused by the fault or negligence of the other party.

c. Contribution: Tenant shall reimburse Landlord for all insurance premiums connected with or

applicable to the Leased Premises for whatever insurance policy the Landlord, at its sole and
exclusive option, should select.

19. DAMAGE TO DEMISED PREMISES

a. Abatement or Adjustment of Rent: If the whole or any part of the Leased Premises shall be
damaged or destroyed by fire or other casualty after the execution of this Lease and before
the termination hereof, then in every case the rent reserved in Article IV herein and other
charges, if any, shall be abated or adjusted, as the case may be, in proportion to that portion

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of the Leased Premises of which Tenant shall be deprived on account of such damage or
destruction and the work of repair, restoration, rebuilding, or replacement or any combination
thereof, of the improvements so damaged or destroyed, shall in no way be construed by any
person to effect any reduction of sums or proceeds payable under any rent insurance policy.

b. Repairs and Restoration: Landlord agrees that in the event of the damage or destruction of

the Leased Premises, Landlord forthwith shall proceed to repair, restore, replace or rebuild
the Leased Premises (excluding Tenant’s leasehold improvements), to substantially the
condition in which the same were immediately prior to such damage or destruction. The
Landlord thereafter shall diligently prosecute said work to completion without delay or
interruption except for events beyond the reasonable control of Landlord. Notwithstanding the
foregoing, if Landlord does not either obtain a building permit within [NUMBER] days of the
date of such damage or destruction, or complete such repairs, rebuilding or restoration within
[NUMBER] months of such damage or destruction, then Tenant may at any time thereafter
cancel and terminate this Lease by sending [NUMBER] days written notice thereof to
Landlord, or, in the alternative, Tenant may, during said [NUMBER] day period, apply for the
same and Landlord shall cooperate with Tenant in Tenant’s application. Notwithstanding the
foregoing, if such damage or destruction shall occur during the last year of the term of this
Lease, or during any renewal term, and shall amount to [%] or more of the replacement cost,
(exclusive of the land and foundations), this Lease, may be terminated at the election of
either Landlord or Tenant, provided that notice of such election shall be sent by the party so
electing to the other within [NUMBER] days after the occurrence of such damage or
destruction. Upon termination, as aforesaid, by either party hereto, this Lease and the term
thereof shall cease and come to an end, any unearned rent or other charges paid in advance
by Tenant shall be refunded to Tenant, and the parties shall be released hereunder, each to
the other, from all liability and obligations hereunder thereafter arising.

20. CONDEMNATION

a. Total Taking: If, after the execution of this Lease and prior to the expiration of the term
hereof, the whole of the Leased Premises shall be taken under power of eminent domain by
any public or private authority, or conveyed by Landlord to said authority in lieu of such
taking, then this Lease and the term hereof shall cease and terminate as of the date when
possession of the Leased Premises shall be taken by the taking authority and any unearned
rent or other charges, if any, paid in advance, shall be refunded to Tenant.

b. Partial Taking: If, after the execution of this Lease and prior to the expiration of the term

hereof, any public or private authority shall, under the power of eminent domain, take, or
Landlord shall convey to said authority in lieu of such taking, property which results in a
reduction by [%] or more of the area in the Leased Premises, or of a portion of the Leased
Premises that substantially interrupts or substantially obstructs the conducting of business on
the Leased Premises; then Tenant may, at its election, terminate this Lease by giving
Landlord notice of the exercise of Tenant’s election within [NUMBER] days after Tenant shall
receive notice of such taking. In the event of termination by Tenant of this Lease and the term
hereof shall cease and terminate as of the date when possession shall be taken by the
appropriate authority of that portion of the Entire Property that results in one of the above
takings, and any unearned rent or other charges, if any, paid in advance by Tenant shall be
refunded to Tenant.

c. Restoration: In the event of a taking in respect of which Tenant shall not have the right to

elect to terminate this Lease or, having such right, shall not elect to terminate this Lease, this
Lease and the term thereof shall continue in full force and effect and Landlord, at Landlord’s
sole cost and expense, forthwith shall restore the remaining portions of the Leased Premises,
including any and all improvements made theretofore to an architectural whole in
substantially the same condition that the same were in prior to such taking. A just proportion

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of the rent reserved herein and any other charges payable by Tenant hereunder, according to
the nature and extent of the injury to the Leased Premises and to Tenant’s business, shall be
suspended or abated until the completion of such restoration and thereafter the rent and any
other charges shall be reduced in proportion to the square footage of the Leased Premises
remaining after such taking.

d. The Award: All compensation awarded for any taking, whether for the whole or a portion of
the Leased Premises, shall be the sole property of the Landlord whether such compensation
shall be awarded for diminution in the value of, or loss of, the leasehold or for diminution in
the value of, or loss of, the fee in the Leased Premises, or otherwise. The Tenant hereby
assigns to Landlord all of Tenant’s right and title to and interest in any and all such
compensation. However, the Landlord shall not be entitled to and Tenant shall have the sole
right to make its independent claim for and retain any portion of any award made by the
appropriating authority directly to Tenant for loss of business, or damage to or depreciation
of, and cost of removal of fixtures, personality and improvements installed in the Leased
Premises by, or at the expense of Tenant, and to any other award made by the appropriating
authority directly to Tenant.

e. Release: In the event of any termination of this Lease as the result of the provisions of this

Article 20, the parties, effective as of such termination, shall be released, each to the other,
from all liability and obligations thereafter arising under this lease.

21. LANDLORD’S REMEDIES

In the event that:

a. Tenant shall on three or more occasions be in default in the payment of rent or other charges
herein required to be paid by Tenant (default herein being defined as payment received by
Landlord ten or more days subsequent to the due date), regardless of whether or not such
default has occurred on consecutive or non-consecutive months; or

b. Tenant has caused a lien to be filed against the Landlord’s property and said lien is not

removed within [NUMBER] days of recordation thereof; or

c. Tenant shall default in the observance or performance of any of the covenants and
agreements required to be performed and observed by Tenant hereunder for a period of
[NUMBER] days after notice to Tenant in writing of such default (or if such default shall
reasonably take more than [NUMBER] days to cure, Tenant shall not have commenced the
same within the [NUMBER] days and diligently prosecuted the same to completion); or

d. [NUMBER] days have elapsed after the commencement of any proceeding by or against

Tenant, whether by the filing of a petition or otherwise, seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar relief under the
present or future Federal Bankruptcy Act or any other present or future applicable federal,
state or other statute or law, whereby such proceeding shall not have been dismissed
(provided, however, that the non-dismissal of any such proceeding shall not be a default
hereunder so long as all of Tenant’s covenants and obligations hereunder are being
performed by or on behalf of Tenant); then Landlord shall be entitled to its election (unless
Tenant shall cure such default prior to such election), to exercise concurrently or
successively, any one or more of the following rights:

i. Terminate this Lease by giving Tenant notice of termination, in which event this Lease

shall expire and terminate on the date specified in such notice of termination, with the
same force and effect as though the date so specified were the date herein originally
fixed as the termination date of the term of this Lease, and all rights of Tenant under
this Lease and in and to the Premises shall expire and terminate, and Tenant shall

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remain liable for all obligations under this Lease arising up to the date of such
termination, and Tenant shall surrender the Premises to Landlord on the date specified
in such notice; or

ii. Terminate this Lease as provided herein and recover from Tenant all damages

Landlord may incur by reason of Tenant’s default, including, without limitation, a sum
which, at the date of such termination, represents the then value of the excess, if any,
of (a) the Minimum Rent, Percentage Rent, Taxes and all other sums which would have
been payable hereunder by Tenant for the period commencing with the day following
the date of such termination and ending with the date herein before set for the
expiration of the full term hereby granted, over (b) the aggregate reasonable rental
value of the Premises for the same period, all of which excess sum shall be deemed
immediately due and payable; or

iii. Without terminating this Lease, declare immediately due and payable all

Minimum Rent, Taxes, and other rents and amounts due and coming due under this
Lease for the entire remaining term hereof, together with all other amounts previously
due, at once; provided, however, that such payment shall not be deemed a penalty or
liquidated damages but shall merely constitute payment in advance of rent for the
remainder of said term. Upon making such payment, Tenant shall be entitled to receive
from Landlord all rents received by Landlord from other assignees, tenants, and
subtenants on account of said Premises during the term of this Lease, provided that the
monies to which tenant shall so become entitled shall in no event exceed the entire
amount actually paid by Tenant to Landlord pursuant to the preceding sentence less all
costs, expenses and attorney’s fees of Landlord incurred in connection with the
reletting of the Premises; or

iv. Without terminating this Lease, and with or without notice to Tenant, Landlord

may in its own name but as agent for Tenant enter into and upon and take possession
of the Premises or any part thereof, and, at landlord’s option, remove persons and
property there from, and such property, if any, may be removed and stored in a
warehouse or elsewhere at the cost of, and for the account of Tenant, all without being
deemed guilty of trespass or becoming liable for any loss or damage which may be
occasioned thereby, and Landlord may rent the Premises or any portion thereof as the
agent of Tenant with or without advertisement, and by private negotiations and for any
term upon such terms and conditions as Landlord may deem necessary or desirable in
order to relet the Premises. Landlord shall in no way be responsible or liable for any
rental concessions or any failure to rent the Premises or any part thereof, or for any
failure to collect any rent due upon such reletting. Upon such reletting, all rentals
received by Landlord from such reletting shall be applied: first, to the payment of any
indebtedness (other than any rent due hereunder) from Tenant to Landlord; second, to
the payment of any costs and expenses of such reletting, including, without limitation,
brokerage fees and attorney’s fees and costs of alterations and repairs; third, to the
payment of rent and other charges then due and unpaid hereunder; and the residue, if
any shall be held by Landlord to the extent of and for application in payment of future
rent as the same may become due and payable hereunder. In reletting the Premises as
aforesaid, Landlord may grant rent concessions and Tenant shall not be credited
therefore. If such rentals received from such reletting shall at any time or from time to
time be less than sufficient to pay to Landlord the entire sums then due from Tenant
hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall, at
Landlord’s option, be calculated and paid monthly. No such reletting shall be construed
as an election by Landlord to terminate this Lease unless a written notice of such
election has been given to Tenant by Landlord. Notwithstanding any such reletting
without termination, Landlord may at any time thereafter elect to terminate this Lease
for any such previous default provided same has not been cured; or

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v. Without liability to Tenant or any other party and without constituting a constructive or
actual eviction, suspend or discontinue furnishing or rendering to Tenant any property,
material, labor, Utilities or other service, whether Landlord is obligated to furnish or
render the same, so long as Tenant is in default under this Lease; or

vi. Allow the Premises to remain unoccupied and collect rent from Tenant as it
comes due; or

vii. Foreclose the security interest described herein, including the immediate taking

of possession of all property on or in the Premises; or

viii. Pursue such other remedies as are available at law or equity.

e. Landlord’s pursuit of any remedy of remedies, including without limitation, any one or more of
the remedies stated herein shall not (1) constitute an election of remedies or preclude pursuit
of any other remedy or remedies provided in this Lease or any other remedy or remedies
provided by law or in equity, separately or concurrently or in any combination, or (2) sever as
the basis for any claim of constructive eviction, or allow Tenant to withhold any payments
under this Lease.

22. LANDLORD’S SELF HELP

If in the performance or observance of any agreement or condition in this Lease contained on its part to
be performed or observed and shall not cure such default within [NUMBER] days after notice from
Landlord specifying the default (or if such default shall reasonably take more than [NUMBER] days to
cure, shall diligently prosecuted the same to completion), Landlord may, at its option, without waiving any
claim for damages for breach of agreement, at any time thereafter cure such default for the account of
Tenant, and any amount paid or contractual liability incurred by Landlord in so doing shall be deemed
paid or incurred for the account of Tenant and Tenant agrees to reimburse Landlord therefore and save
Landlord harmless there from. Provided, however, that Landlord may cure any such default as aforesaid
prior to the expiration of said waiting period, without notice to Tenant if any emergency situation exists, or
after notice to Tenant, if the curing of such default prior to the expiration of said waiting period is
reasonably necessary to protect the Leased Premises or Landlord’s interest therein, or to prevent injury or
damage to persons or property. If Tenant shall fail to reimburse Landlord upon demand for any amount
paid for the account of Tenant hereunder, said amount shall be added to and become due as a part of the
next payment of rent due and shall for all purposes be deemed and treated as rent hereunder.

23. TENANT’S SELF HELP

If Landlord shall default in the performance or observance of any agreement or condition in this Lease
contained on its part to be performed or observed, and if Landlord shall not cure such default within
[NUMBER] days after notice from Tenant specifying the default (or, if such default shall reasonably take
more than [NUMBER] days to cure, and Landlord shall not have commenced the same within [NUMBER]
days and diligently prosecuted the same to completion), Tenant may, at its option, without waiving any
claim for damages for breach of agreement, at any time thereafter cure such default for the account of
Landlord and any amount paid or any contractual liability incurred by Tenant in so doing shall be deemed
paid or incurred for the account of Landlord and Landlord shall reimburse Tenant therefore and save
Tenant harmless there from. Provided, however, that Tenant may cure any such default as aforesaid prior
to the expiration of said waiting period, without notice to Landlord if an emergency situation exists, or after
notice to Landlord, if the curing of such default prior to the expiration of said waiting period is reasonably
necessary to protect the Leased Premises or Tenant’s interest therein or to prevent injury or damage to
persons or property. If Landlord shall fail to reimburse Tenant upon demand for any amount paid or
liability incurred for the account of Landlord hereunder, said amount or liability may be deducted by
Tenant from the next or any succeeding payments of rent due hereunder; provided, however, that should
said amount or the liability therefore be disputed by Landlord, Landlord may contest its liability or the

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amount thereof, through arbitration or through a declaratory judgment action and Landlord shall bear the
cost of the filing fees therefore.

24. TITLE

a. Subordination: Tenant shall, upon the request of Landlord in writing, subordinate this Lease
to the lien of any present or future institutional mortgage upon the Leased Premises
irrespective of the time of execution or the time of recording of any such mortgage. Provided,
however, that as a condition to such subordination, the holder of any such mortgage shall
enter first into a written agreement with Tenant in form suitable for recording to the effect that:

i. in the event of foreclosure or other action taken under the mortgage by the holder

thereof, this Lease and the rights of Tenant hereunder shall not be disturbed but shall
continue in full force and effect so long as Tenant shall not be in default hereunder

ii. such holder shall permit insurance proceeds and condemnation proceeds to be used

for any restoration and repair required by the provisions of this Agreement,
respectively. Tenant agrees that if the mortgagee or any person claiming under the
mortgagee shall succeed to the interest of Landlord in this Lease, Tenant will
recognize said mortgagee or person as its Landlord under the terms of this Lease,
provided that said mortgagee or person for the period during which said mortgagee
or person respectively shall be in possession of the Leased Premises and thereafter
their respective successors in interest shall assume all of the obligations of Landlord
hereunder. The word “mortgage”, as used herein includes mortgages, deeds of trust
or other similar instruments, and modifications, and extensions thereof. The term
“institutional mortgage” as used in this Article 24 means a mortgage securing a loan
from a bank or trust company, insurance company or pension trust or any other
lender institutional in nature and constituting a lien upon the Leased Premises.

b. Quiet Enjoyment: Landlord covenants and agrees that upon Tenant paying the rent and

observing and performing all of the terms, covenants and conditions on Tenant’s part to be
observed and performed hereunder, that Tenant may peaceably and quietly have, hold,
occupy and enjoy the Leased Premises in accordance with the terms of this Lease without
hindrance or molestation from Landlord or any persons lawfully claiming through Landlord.

c. Zoning and Good Title: Landlord warrants and represents, upon which warranty and

representation Tenant has relied in the execution of this Lease, that Landlord is the owner of
the Leased Premises, in fee simple absolute, free and clear of all encumbrances, except for
the easements, covenants and restrictions of record as of the date of this Lease. Such
exceptions shall not impede or interfere with the quiet use and enjoyment of the Leased
Premises by Tenant. Landlord further warrants and covenants that this Lease is and shall be
a first lien on the Leased Premises, subject only to any Mortgage to which this Lease is
subordinate or may become subordinate pursuant to an agreement executed by Tenant, and
to such encumbrances as shall be caused by the acts or omissions of Tenant; that Landlord
has full right and lawful authority to execute this Lease for the term, in the manner, and upon
the conditions and provisions herein contained; that there is no legal impediment to the use of
the Leased Premises as set out herein; that the Leased Premises are not subject to any
easements, restrictions, zoning ordinances or similar governmental regulations which prevent
their use as set out herein; that the Leased Premises presently are zoned for the use
contemplated herein and throughout the term of this lease may continue to be so used
therefore by virtue of said zoning, under the doctrine of “non-conforming use”, or valid and
binding decision of appropriate authority, except, however, that said representation and
warranty by Landlord shall not be applicable in the event that Tenant’s act or omission shall
invalidate the application of said zoning, the doctrine of “non-conforming use” or the valid and
binding decision of the appropriate authority. Landlord shall furnish without expense to

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Tenant, within [NUMBER] days after written request therefore by Tenant, a title report
covering the Leased Premises showing the condition of title as of the date of such certificate,
provided, however, that Landlord’s obligation hereunder shall be limited to the furnishing of
only one such title report.

d. Licenses: It shall be the Tenant’s responsibility to obtain any and all necessary licenses and
the Landlord shall bear no responsibility therefore; the Tenant shall promptly notify Landlord
of the fact that it has obtained the necessary licenses in order to prevent any delay to
Landlord in commencing construction of the Leased Premises.

25. EXTENSIONS/WAIVERS/DISPUTES

a. Extension Period: Any extension hereof shall be subject to the provisions of Article c)
hereof.

b. Holding Over: In the event that Tenant or anyone claiming under Tenant shall continue

occupancy of the Leased Premises after the expiration of the term of this Lease or any
renewal or extension thereof without any agreement in writing between Landlord and Tenant
with respect thereto, such occupancy shall not be deemed to extend or renew the term of the
Lease, but such occupancy shall continue as a tenancy at will, from month to month, upon
the covenants, provisions and conditions herein contained. The rental shall be the rental in
effect during the term of this Lease as extended or renewed, prorated and payable for the
period of such occupancy.

c. Waivers: Failure of either party to complain of any act or omission on the part of the other

party, no matter how long the same may continue, shall not be deemed to be a waiver by
said party of any of its rights hereunder. No waiver by either party at any time, express or
implied, of any breach of any provision of this Lease shall be deemed a waiver of a breach of
any other provision of this Lease or a consent to any subsequent breach of the same or any
other provision. If any action by either party shall require the consent or approval of the other
party, the other party’s consent to or approval of such action on any one occasion shall not be
deemed a consent to or approval of said action on any subsequent occasion or a consent to
or approval of any other action on the same or any subsequent occasion. Any and all rights
and remedies which either party may have under this Lease or by operation of law, either at
law or in equity, upon any breach, shall be distinct, separate and cumulative and shall not be
deemed inconsistent with each other, and no one of them, whether exercised by said party or
not, shall be deemed to be an exclusion of any other; and any two or more or all of such
rights and remedies may be exercised at the same time.

d. Disputes: It is agreed that, if at any time a dispute shall arise as to any amount or sum of

money to be paid by one party to the other under the provisions hereof, the party against
whom the obligation to pay the money is asserted shall have the right to make payment
“under protest” and such payment shall not be regarded as a voluntary payment and there
shall survive the right on the part of the said party to institute suit for the recovery of such
sum. If it shall be adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this Lease. If at any time a
dispute shall arise between the parties hereto as to any work to be performed by either of
them under the provisions hereof, the party against whom the obligation to perform the work
is asserted may perform such work and pay the costs thereof “under protest” and the
performance of such work shall in no event be regarded as a voluntary performance and shall
survive the right on the part of the said party to institute suit for the recovery of the costs of
such work. If it shall be adjudged that there was no legal obligation on the part of the said
party to perform the same or any part thereof, said party shall be entitled to recover the costs
of such work or the cost of so much thereof as said party was not legally required to perform

Lease Agreement Page 14 of 19

under the provisions of this Lease and the amount so paid by Tenant may be withheld or
deducted by Tenant from any rents herein reserved.

e. Tenant’s Right to cure Landlord’s Default: In the event that Landlord shall fail, refuse or

neglect to pay any mortgages, liens or encumbrances, the judicial sale of which might affect
the interest of Tenant hereunder, or shall fail, refuse or neglect to pay any interest due or
payable on any such mortgage, lien or encumbrance, Tenant may pay said mortgages, liens
or encumbrances, or interest or perform said conditions and charge to Landlord the amount
so paid and withhold and deduct from any rents herein reserved such amounts so paid, and
any excess over and above the amounts of said rents shall be paid by Landlord to Tenant.

f. Notices: All notices and other communications authorized or required hereunder shall be in

writing and shall be given by mailing the same by certified mail, return receipt requested,
postage prepaid, and any such notice or other communication shall be deemed to have been
given when received by the party to whom such notice or other communication shall be
addressed. If intended for Landlord the same will be mailed to the address herein above set
forth or such other address as Landlord may hereafter designate by notice to Tenant, and if
intended for Tenant, the same shall be mailed to Tenant at the address herein above set
forth, or such other address or addresses as Tenant may hereafter designate by notice to
Landlord.

26. PROPERTY DAMAGE

a. Loss and Damage: Notwithstanding any contrary provisions of this Lease, Landlord shall not
be responsible for any loss of or damage to property of Tenant or of others located on the
Leased Premises, except where caused by the willful act or omission or negligence of
Landlord, or Landlord’s agents, employees or contractors, provided, however, that if Tenant
shall notify Landlord in writing of repairs which are the responsibility of Landlord under Article
VII hereof, and Landlord shall fail to commence and diligently prosecute to completion said
repairs promptly after such notice, and if after the giving of such notice and the occurrence of
such failure, loss of or damage to Tenant’s property shall result from the condition as to which
Landlord has been notified, Landlord shall indemnify and hold harmless Tenant from any
loss, cost or expense arising there from.

b. Force Majeure: In the event that Landlord or Tenant shall be delayed or hindered in or

prevented from the performance of any act other than Tenant’s obligation to make payments
of rent, additional rent, and other charges required hereunder, by reason of strikes, lockouts,
unavailability of materials, failure of power, restrictive governmental laws or regulations, riots,
insurrections, the act, failure to act, or default of the other party, war or other reason beyond
its control, then performance of such act shall be excused for the period of the delay and the
period for the performance of such act shall be extended for a period equivalent to the period
of such delay. Notwithstanding the foregoing, lack of funds shall not be deemed to be a
cause beyond control of either party.

27. ASSIGNMENT AND SUBLETTING

Under the terms and conditions hereunder, Tenant shall have the absolute right to transfer and assign
this lease or to sublet all or any portion of the Leased Premises or to cease operating Tenant’s business
on the Leased Premises provided that at the time of such assignment or sublease Tenant shall not be in
default in the performance and observance of the obligations imposed upon Tenant hereunder, and in the
event that Tenant assigns or sublets this property for an amount in excess of the rental amount then
being paid, then Landlord shall require as further consideration for the granting of the right to assign or
sublet, a sum equal to [%] of the difference between the amount of rental to be charged by Tenant to

Lease Agreement Page 15 of 19

Tenant’s subtenant or assignee and the amount provided for herein, payable in a manner consistent with
the method of payment by the subtenant or assignee to the Tenant, and/or [%] of the consideration paid
or to be paid to Tenant by Tenant’s or Sub-Tenant or assignee.

28. FIXTURES

All personal property, furnishings and equipment presently and all other trade fixtures installed in or
hereafter by or at the expense of Tenant and all additions and/or improvements, exclusive of structural,
mechanical, electrical, and plumbing, affixed to the Leased Premises and used in the operation of the
Tenant’s business made to, in or on the Leased Premises by and at the expense of Tenant and
susceptible of being removed from the Leased Premises without damage, unless such damage be
repaired by Tenant, shall remain the property of Tenant and Tenant may, but shall not be obligated to,
remove the same or any part thereof at any time or times during the term hereof, provided that Tenant, at
its sole cost and expense, shall make any repairs occasioned by such removal.

29. OPTION TO RENEW

Landlord grants to Tenant an option to renew this lease agreement for a period of [NUMBER] years after
expiration of the term of this Lease agreement at a rental of [AMOUNT] per month, with all other terms
and conditions of the renewal lease to be the same as those in this lease agreement. To exercise this
option to renew, Tenant must give Landlord written notice of intention to do so at least [NUMBER] days
before this lease agreement expires.

30. ESTOPPEL CERTIFICATES

At any time and from time to time, Landlord and Tenant each agree, upon request in writing from the
other, to execute, acknowledge and deliver to the other or to any person designated by the other a
statement in writing certifying that the Lease is unmodified and is in full force and effect, or if there have
been modifications, that the same is in full force and effect as modified (stating the modifications), that the
other party is not in default in the performance of its covenants hereunder, or if there have been such
defaults, specifying the same, and the dates to which the rent and other charges have been paid.

31. INVALIDITY OF PARTICULAR PROVISION

If any term or provision of this Lease or the application hereof to any person or circumstance shall, to any
extent, be held invalid or unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to
the fullest extent permitted by law.

32. CAPTIONS AND DEFINITIONS OF PARTIES

The captions of the Sections of this Lease are for convenience only and are not a part of this Lease and
do not in any way limit or amplify the terms and provisions of this Lease. The word “Landlord” and the
pronouns referring thereto, shall mean, where the context so admits or requires, the persons, firm or
corporation named herein as Landlord or the mortgagee in possession at any time, of the land and
building comprising the Leased Premises. If there is more than one Landlord, the covenants of Landlord
shall be the joint and several obligations of each of them, and if Landlord is a partnership, the covenants
of Landlord shall be the joint and several obligations of each of the partners and the obligations of the
firm. Any pronoun shall be read in the singular or plural and in such gender as the context may require.
Except as in this Lease otherwise provided, the terms and provisions of this Lease shall be binding upon
and inure to the benefit of the parties hereto and their respective successors and assigns.

Lease Agreement Page 16 of 19

33. RELATIONSHIP OF THE PARTIES

Nothing contained herein shall be deemed or construed by the parties hereto nor by any third party as
creating the relationship of principal and agent or of partnership or of a joint venture between the parties
hereto, it being understood and agreed that neither any provision contained herein, nor any acts of the
parties hereto, shall be deemed to create any relationship between the parties hereto other than the
relationship of Landlord and Tenant.

34. BROKERAGE

No party has acted as, by or through a broker in the effectuation of this Agreement, except as set out
hereinafter.

35. ENTIRE AGREEMENT

This instrument contains the entire and only agreement between the parties, and no oral statements or
representations or prior written matter not contained in this instrument shall have any force and effect.
This Lease shall not be modified in any way except by a writing executed by both parties.

36. GOVERNING LAW

All matters pertaining to this agreement (including its interpretation, application, validity, performance and
breach) in whatever jurisdiction action may be brought, shall be governed by, construed and enforced in
accordance with the laws of the [State/Province] of [STATE/PROVINCE]. The parties herein waive trial by
jury and agree to submit to the personal jurisdiction and venue of a court of subject matter jurisdiction
located in [STATE/PROVINCE].

37. LITIGATION

In the event that litigation results from or arises out of this Agreement or the performance thereof, the
parties agree to reimburse the prevailing party’s reasonable attorney’s fees, court costs, and all other
expenses, whether or not taxable by the court as costs, in addition to any other relief to which the
prevailing party may be entitled. In such event, no action shall be entertained by said court or any court of
competent jurisdiction if filed more than one year subsequent to the date the cause(s) of action actually
accrued regardless of whether damages were otherwise as of said time calculable.

If Landlord files an action to enforce any agreement contained in this lease agreement, or for breach of
any covenant or condition, Tenant shall pay Landlord reasonable attorney fees for the services of
Landlord’s attorney in the action, all fees to be fixed by the court.

38. CONTRACTUAL PROCEDURES

Unless specifically disallowed by law, should litigation arise hereunder, service of process therefore may
be obtained through certified mail, return receipt requested; the parties hereto waiving any and all rights
they may have to object to the method by which service was perfected.

Lease Agreement Page 17 of 19

39. EXTRAORDINARY REMEDIES

To the extent cognizable at law, the parties hereto, in the event of breach and in addition to any and all
other remedies available thereto, may obtain injunctive relief, regardless of whether the injured party can
demonstrate that no adequate remedy exists at law.

40. RELIANCE ON FINANCIAL STATEMENT

Tenant shall furnish concurrently with the execution of this lease, a financial statement of Tenant
prepared by an accountant. Tenant, both in corporate capacity, if applicable, and individually, hereby
represents and warrants that all the information contained therein is complete, true, and correct. Tenant
understands that Landlord is relying upon the accuracy of the information contained therein. Should there
be found to exist any inaccuracy within the financial statement which adversely affects Tenant’s financial
standing, or should Tenant’s financial circumstances materially change, Landlord may demand, as
additional security, an amount equal to an additional [NUMBER] months’ rent, which additional security
shall be subject to all terms and conditions herein, require a fully executed guaranty by a third party
acceptable to Landlord, elect to terminate this Lease, or hold Tenant personally and individually liable
hereunder.

IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above
written or have caused this Lease to be executed by their respective officers thereunto duly authorized.

LANDLORD TENANT

Authorized Signature Authorized Signature

Print Name and Title Print Name and Title

Lease Agreement Page 18 of 19

EXHIBIT “A” LEGAL DESCRIPTION

Lease Agreement Page 19 of 19

EXHIBIT “B” TENANT PLANS AND SPECIFICATIONS

University of Tulsa College of Law
TU Law Digital Commons

Articles, Chapters in Books and Other Contributions to Scholarly Works

1988

Tips for Drafting Contracts
Martin Frey

Follow this and additional works at: http://digitalcommons.law.utulsa.edu/fac_pub
Part of the Contracts Commons

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and Other Contributions to Scholarly Works by an authorized administrator of TU Law Digital Commons. For more information, please contact
[email protected].

Recommended Citation
5 J. of Paralegal Ed. & Practice 55 (1988).

Tips for Drafting Contracts

MARTIN A. FREY*

Some contracts must be in writing to be enforceable. Others are en-
forceable without a writing.I Even those contracts that do not need to be
in writing often are written. 2 This article briefly discusses the art of draft-
ing a written contract.3

Drafting contracts involves skills that can be developed and honed. The
ability to write well is the most valuable tool a paralegal can acquire. The
following material provides some suggestions for drafting a well-written
contract. These suggestions also apply to drafting well-written memoran-
da and briefs. Reflect upon your own writing. Can some of these tips im-
prove your writing?

A. Draft from an Outline

Before drafting, develop an outline for the contract. An outline helps
the drafter present the terms of the contract in a logical, orderly fashion.
An outline prevents the omission or duplication of essential terms.

Begin the outlining process by defining the purpose of the contract.
Next, following the organizational structure of the law of contracts,
develop a checklist of items that the contract might or should address.

* Professor of Law, The University of Tulsa. This article first appeared as a chapter in “In-
troduction to Contracts and Restitution for Paralegals,” by Martin A. Frey and Terry H. Bitting,
West Publishing Co. (1988). Adapted by permission from CoNTRAcTs AND REsTIrroN FOR
PARALEGAis BY MARTiN A. Fanv AND TERRY H. B1rrW. CoPYRIGr @ 1988 by West Publishing
Company. All rights reserved.

1. The formation of a contract and the enforcement of the contract are separate questions. A
writing is not required for contract formation (unless the offeror requires a writing as the last act of
contracting). A writing, however, may be required for the enforcement of the contract. Whether a
court will not enforce a contract because it is not in writing is controlled by the Statute of Frauds. The
three most common examples are: a contract for the sale of goods for the price of $500 or more must
be in writing to be enforceable; a contract that could not be fully performed within one year from the
date of contract formation must be in writing to be enforceable; and a contract for the sale of an in-
terest in real estate must be in writing to be enforceable. Even in those situations where a writing is re-
quired by the Statute of Frauds, the question then becomes what terms must be in the writing.

2. If a contract has been committed to writing, whether the writing was required or not, the ques-
tion must then be whether the writing includes all the contract terms or only some of the contract
terms. This question involves the parol evidence rule.

3. This article does not discuss the Statute of Frauds or the parol evidence rule. The focus of this
article is the writing, whether required or not and whether inclusive of all the contract terms or not.

56 Journal of Paralegal Education and Practice

The following is the beginning of a checklist:
1. Scope

The applicable state law if the parties decide to select the ap-
plicable state law (that is, choice-of-laws provision)

2. Contract formation

a. The offeror’s duties

b. The offeree’s duties
c. The timing and dependence of the performance of the duties on

one another

d. Events or conditions necessary to create the duty
e. Events or conditions necessary to terminate the duty

f. Whether all the terms of this contract will be set forth in this
writing and, if so, whether the writing should so state (that is, a
merger clause)

3. Enforcement

a. If the contract must be in writing to be enforceable, what terms
should the writing contain and who must sign

b. If the contract could be held unenforceable, what should be the
alternative course of action of the parties

4. Breach

a. Definition of breach

b. Significance of breach

5. Remedies for the Aggrieved Party

a. The aggrieved party’s remedies

b. Alternative methods of dispute resolution in lieu of litigation (for
example, mediation or arbitration)

c. A statement relating to costs and attorneys’ fees

d. The forum in which litigation would take place

B. Be Brief

Omit surplus words. State your meaning clearly and concisely. More
words do not make a better contract. Wordiness only creates an oppor-
tunity for ambiguity and confusion. Eliminate unnecessary paragraphs,
sentences, phrases, and words. Good writing stresses conciseness.

[Vol. 5

Tips for Drafting Contracts 57

A single word can often substitute for a verbose phrase:
afford an opportunity allow, let

and/or or

as to whether whether

at that point in time then

due to the fact that because

during the period when when

during the time that during, while

file an action against sue

first of all first
force and effect force, effect

for the reason that because

free and clear free, clear

full and complete full, complete

from the point of view from

good consideration consideration

have an impact on affect

have a tendency to tend

insofar as… is concerned (omit the entire p1

null, void, and of no further
effect

point in time

prior to

subsequent to

suffer and permit

sufficient consideration

there is no doubt but that

the question as to whether
this is a topic that

void contract

written document

written instrument

trase and
start with the subject)

void

time

before

after

permit

consideration

doubtless, no doubt

whether, the question whether
this topic

no contract
document

instrument

19881

58 Journal of Paralegal Education and Practice

Many verbose phrases are compound prepositions:

by means of by

by reason of because of

by virtue of by, under

for the period of for

for the purpose of to

in accordance with by, under
inasmuch as since

in connection with with, about,

in favor of for
instances in which when
in lieu thereof instead

in order to to

in regard to about

in relation to about, conce

in spite of the fact that although

in terms of in
in the nature of like

in view of because

on the basis of by, from

on the part of by

until such time as until

with the exception of except

with reference to about, conce

with regard to about, conce

with respect to on, about

[Vol. 5

concerning

.rning

rning
rning

As an exercise, remove the unnecessary verbiage from the following
paragraph.

1. The lessor, party of the first part, agrees
2. to lease, rent and/or otherwise allow the lessee

3. party of the second part, to use, occupy and
4. hereafter during the term of this lease, make use

5. of lessor’s, said party of the first part’s premises.

Tips for Drafting Contracts 59

6. The lessee, said party of the second part, shall
7. compensate, pay and/or remit to the lessor, said

8. party of the first part, for and in consideration

9. of the said agreement of lease, rent and/or
10. otherwise use lessor’s, said party of the first

11. part’s premises, the dollar sum of Two Thousand

12. Dollars ($2,000.00).

C. Simplify Your Language

Use clear, precise terms. Avoid synonyms. If you mean “rooster,” use
“rooster.” If you mean “hen,” use “hen.” If you mean “rooster” but
use “chicken,” a synonym, the reader might believe you mean “hen.” Do
not confuse your reader by using different words to refer to the same ob-
ject or idea.

Avoid “legalese.” Legalese does not make a writing “legal.” Legalese
only makes a writing pompous and confusing.

EXAMPLE
Said Jack and said Jill went up the said hill to fetch a said pail of said
water.

When removing “said” from your writing, also remove “heretofore,”
“one,” “whereas,” and any other legalese that you might find. The
following list will form a starting point for words to remove:

aforementioned
aforesaid
forthwith
hereafter
hereby
hereinafter
heretofore
herewith
one
said
thence
whereas

“Minimize confusion by referring to parties by name rather than
designating them “the party of the first part” and “the party of the se-
cond part.”

Avoid indefimite pronouns such as “it, they, this, who and which.” An

19881

60 Journal of Paralegal Education and Practice

indefinite pronoun only adds confusion. When possible, substitute a noun
for a pronoun.

EXAMPLE
The following sentences can be rewritten to eliminate the indefinite
pronouns.
“In this law review article it states that paralegals are real assets.”
“This law review article states that paralegals are real assets.”
“They say that the program for legal assistants is one which benefits
students.” “The legal assistants program benefits students.”
“There is a house, it stands on a hill.” “The house stands on a hill.”

Avoid “etc.” “Etc.” gives the reader no new information and only
demonstrates that either the writer does not know or is too lazy to tell the
reader.

EXAMPLE
“The bride received gifts from New York, Florida, California, etc.”
When rewritten to avoid “etc.”, the sentence becomes “The bride re-
ceived gifts from many states, including New York, Florida and Cali-
fornia.”

Simplify your drafting style. Group similar terms together.

EXAMPLE
“The seller shall deliver the goods to buyer’s store. The buyer shall

pay the seller upon delivery. The seller will pay the cost of shipping.
The buyer will inspect the goods upon delivery. The goods are sold as
is. The buyer shall insure the goods during transit.”

When rewritten to group similar terms together, the paragraph be-
comes:

“The seller shall:
1. sell the goods “as is;”
2. deliver the goods to the buyer’s store; and
3. pay the cost of shipping.

The buyer shall:
1. pay the seller upon delivery;
2. inspect the goods upon delivery; and
3. insure the goods during transit.”

Could the following lease be improved by deleting the legalese and
grouping the lessor’s duties and lessee’s duties?

[Vol. 5

Tips for Drafting Contracts 61

1. WITNESSETH: that the party of the first
2. part, for and in consideration of the rents,
3. covenants and agreements hereinafter contained,
4. does, and by these presents, demise, lease and
5. rent, for a period of six months from the first
6. day of June, 1987, to the party of the second
7. part, the following described property, to-wit:
8. The party of the second part, for and in
9. consideration of the use and possession of said

10. premises for said period, does hereby agree to pay
11. unto the party of the first part, the sum of Three
12. Thousand Dollars ($3,000.00), said sum to be paid
13. in the following amounts and at the time herein
14. designated, to-wit:
15. On the first day of June, 1987, the sum of
16. Five Hundred Dollars ($500.00), and on the first
17. day of each and every month hereafter the sum of
18. Five Hundred Dollars ($500.00), until the total
19. sum of Three Thousand Dollars ($3,000.00) shall
20. have been fully paid.
21. THE PARTY OF THE SECOND PART further agrees to
22. keep and maintain all portions of the building let
23. to him by the terms of this contract in as good
24. state of repair as the same are turned over to him.
25. THE SECOND PARTY further agrees to be
26. responsible and pay for the repair of any damage
27. done to any of the buildings or grounds by any of
28. his family or guests.
29. THE SECOND PARTY agrees to hold said first
30. party free from any and all expenses for lights,
31. heat or any other expense incident to the
32. occupant of said property.
33. THE PARTY OF THE SECOND PART shall not engage,
34. or allow any other person, pet or animal to engage
35. in, any conduct that will disturb the quiet and
36. peaceful enjoyment of the other tenants, the party
37. of the first part, or the neighbors of second
38. party, or use the premises for any purpose
39. whatsoever which violates the laws of the
40. United States, the State of New Hampshire, or the
41. City of Concord.

1988]

62 Journal of Paralegal Education and Practice

D. Use Base Verbs and the Active Voice

Activate your writing with verbs. Replace nouns with verbs. The purest
verb form is the base verb (for example, collide, decide, pay). Verbs give
sentences movement and life. Nouns do not. Use the base verb rather than
its derivative noun.

collide collision
decide decision
pay payment
resolve resolution

Replace forms of the verb “to be” (is, are, be) with active verbs (run,
skip, jump).

EXAMPLE
“The ruling was made by the trial judge” becomes “The trial judge
ruled.”

Active voice energizes your writing. Substitute active for passive verbs.
With active voice, the subject of the sentence acts. With passive voice, the
subject of the sentence is acted upon.

EXAMPLE
“The police were called by Tom” becomes “Tom called the police.”

Passive voice usually requires more words than active voice. In the
above example, the passive voice requires a supporting verb (were) and a
preposition (by).

Passive voice creates detached abstraction within the sentence. With the
active voice, the reader readily understands who is doing what to whom.
With passive voice, who is doing what to whom is often unclear.

E. Avoid Sexist Language

“Every man for himself” is history. Sexist language should be deleted
from your writing. Several tips are useful:

1. Avoid expressions that imply value judgments based on sex.

EXAMPLE
“Are you a man or a mouse?”
“A difficult task is a man’s work.”
“Don’t be such a weak sister.”
“He refused to do woman’s work.”

[Vol. 5

Tips for Drafting Contracts 63

2. Change the wording of male-oriented expressions to include both
men and women.

EXAMPLE
“reasonable man” becomes “reasonable person”
“gentlemen of the jury” becomes “members of the jury”
“Dear Sir” becomes “Dear Madam or Sir”

3. Replace sex-based descriptions and titles with non-sex-based

descriptions and titles.

EXAMPLE
“workman” becomes “worker”
“newsman” becomes “journalist”
“fireman” becomes “firefighter”

4. Use parallel construction when referring to both sexes.

EXAMPLE
“man and wife” becomes “husband and wife.”

5. Avoid masculine singular pronouns when not referring to a male.
Although “he or she” can be used in moderation, it is often best to rewrite
the sentence.

a. Omit the pronoun if it is unnecessary.

EXAMPLE
“The average citizen feels that he is doing his duty by voting” be-
comes “The average citizen feels a duty to vote.”

EXAMPLE
“Every person has his constitutional rights” becomes “Every person
has constitutional rights.”

b. Use the second person rather than the third person.

EXAMPLE
“Each voter must cast his own ballot” becomes “As a voter, you
must cast your own ballot.”

c. Use the plural rather than the singular.

19881

64 Journal of Paralegal Education and Practice

EXAMPLE
“Every spring the farmer plows his fields” becomes “Every spring
farmers plow their fields.”

EXAMPLE
“The policeman risks his life on a daily basis” becomes “Police of-
ficers risk their lives daily.”

F. Check for Spelling, Punctuation, and Grammatical Errors

Common spelling errors should be eliminated from your writing. Do
not expect a secretary to correct your work. Errors will reflect upon you
and not your secretary. Keep a list of words you tend to misspell.

EXAMPLE
The following are common spelling errors:

accommodate not accomodate
admissible not admissable
allege not alledge
already not allready
alright not all right
argument not arguement
coming not comming
condition precedent not condition president
defendant not defendent
definite not definate
demurrer not demurer
discussed not discused
dissatisfied not disatisfied
divisible not divisable
existence not existance
integrated not intagrated
judgment not judgement
occurred not ocurred or occured
separate not seperate
their not thier
unconscionable not unconcionable

or unconsionable
or uncontionable

until not untill
warranty not warrenty

or warrantee

[Vol. 5

Tips for Drafting Contracts 65

whether not wether
writing not writting
written not writen

Check punctuation.
Eliminate grammatical errors from your writing. A common error is to

write “it’s” for “its” and “its” for it’s.” “It’s” is a contraction, meaning
“it is.” “Its” is a possessive pronoun.

EXAMPLE
“It’s February 2 and the groundhog saw its shadow.”

“Irregardless” is improper. Use “regardless.”

EXAMPLE
“I will do as I please irregardless of the consequences” becomes “I
will do as I please regardless of the consequences.”

Check “to,” “too,” and “two.”

EXAMPLE
“We dined out from one to two and ate too much.”

Distinguish between “between” and “among.” “Between” is used for

only two while “among” implies more than two.

EXAMPLE
“The voters had a choice between Mary and John for President and
among Susan, Tony, and Robin for Vice President.”

“Their,” “there,” and “they’re” can cause problems.

EXAMPLE
“With the first crash of thunder, their horses broke away from the
wagon and left them there in the wilderness where they’re unlikely to
find help.”

“Affect” is always a verb and means to influence. “Effect” is most

commonly a noun and means result.

EXAMPLE
“The pickets will affect the company’s production but their actions
will have only a short term effect.”

19881

66 Journal of Paralegal Education and Practice [Vol. 5

“Whether” should be distinguished from “weather.”

EXAMPLE
“The weather report did not help us decide whether to risk a trip to
the beach.”

These suggestions are but a brief introduction to better drafting. A
number of helpful books are available. They include: G. Block, Effective
Legal Writing (Foundation Press 1981); L. Glorfeld, D. Lauerman, & N.
Stageberg, A Concise Guide for Writers (Holt, Rinehart, Winston 4th ed.
1977); K. E. Gordon, The Transitive Vampire: A Handbook of the Inno-
cent, the Eager, and the Doomed (Times Books 1984); D. Mellinkoff, The
Language of the Law (Little, Brown & Co. 1963); C. Miller & IK. Swift,
The Handbook of Nonsexist Writing (Harper & Row 1980); W. Strunk &
E. B. White, The Elements of Style (MacMillan 3d ed. 1979); R. Wydick,
Plain English for Lawyers (Carolina Academic Press 1979).

  • University of Tulsa College of Law
  • TU Law Digital Commons
    • 1988
  • Tips for Drafting Contracts
    • Martin Frey
      • Recommended Citation

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Considerations for the terms needed in the sale of a commercial property:

Suggested Answers from research:

When a seller and a buyer agree upon the terms for the sale of a commercial property the next step is often for the buyer to prepare the first draft of a Contract, which embodies those terms, as well as other customary provisions such as representations, warranties, covenants and conditions of closing. After receiving the draft, the seller, its agent and counsel can scrutinize each provision suggested by the buyer. With the Contract laid out in front of them, the seller’s team can focus on the concepts and language they would like to delete or modify. Somewhat more difficult, however, is for the seller’s team to know what is missing from the buyer’s draft. That is, what things does a buyer tactically omit from its Contract that the seller would want included?

Below are ten provisions that a seller would want in its Contract but that a buyer may well not include in its draft.

1. Not Binding until Executed

Negotiations often begin with the execution of a letter of intent. A letter of intent typically contains an express statement that there is no binding agreement until a final Contract is negotiated and executed. The buyer’s draft, however, usually will not have similar language. One might ask why such language is necessary. Either the Contract is eventually fully executed and delivered, in which case the Contract is effective, or the Contract, though negotiated, is never signed by one of the parties and, therefore, by virtue of the statute of frauds or otherwise, there is no enforceable agreement. Unfortunately, things are not always so clear cut. Buyers have been known to take the position that an unexecuted Contract, perhaps transmitted by email or facsimile together with a statement to the effect that the seller is in agreement with the terms of the Contract, constitutes the equivalent of a Contract executed and delivered. Though such a claim may not prevail on the merits, a suit to enforce the “contract”, or even the threat of such a suit, may cloud title to the property and render it unmarketable. To avoid this argument, the seller should be sure the Contract contains express language stating that there will be no binding agreement unless and until both parties sign and deliver a final Contract document.

2. Limitation on Survival of Representations and Warranties

The buyer’s draft will almost assuredly require the seller to make certain representations and warranties. Typically, the parties negotiate the time period for which the seller’s representations and warranties survive closing. Occasionally, however, the buyer’s draft may not set forth a survival period and, indeed, may be silent as to whether or not the seller’s representations and warranties survive closing. Does this mean that they do not survive and that the buyer is precluded from bringing a claim after closing based upon a breach of a seller’s representation or warranty? Depending upon the state’s law, it may well be that many representations and warranties survive closing, notwithstanding that the Contract was silent on the issue. The “merger doctrine” (i.e., the doctrine that the terms of the Contract merge into the Deed) may not apply to matters collateral to title.

Rather than leave it to chance, the seller should add language to the Contract explicitly stating that its representation and warranties do not survive at all (which likely will not be acceptable to the buyer) or that its representations and warranties survive for an agreed upon period but no longer. In this regard, the seller should be careful to avoid any ambiguity regarding the interpretation of the survival period. For example, what if the buyer notifies the seller of a breach within the survival period but does not file suit until after the expiration of the survival period. To avoid any such ambiguity, the seller can provide that the buyer is precluded from bringing a claim based upon an alleged breach of a representation or warranty unless an action is filed in a court of competent jurisdiction within a specified period of time after closing. Note, however, that not all States allow such a contractual statute of limitations, so the seller should inquire whether governing law prohibits the parties from agreeing to such a provision.

3. Definition of “Knowledge”

Some of the seller’s representations and warranties set forth in the buyer’s draft will be unqualified, but some may be made “to the best of the seller’s knowledge”. The seller then needs to consider what exactly it means when it makes a representation or warranty to the best of its knowledge. Does that mean that the seller is required to undertake an investigation of some sort? Must he review many years of files related to the property and its operation; interview the management company or others that are or were involved in the operation of the property; and, will the seller be charged with constructive knowledge from public sources or knowledge imputed from its officers, employees or agents? In order to avoid these uncertainties, the seller should include a definition of knowledge which limits knowledge to the actual, subjective knowledge of a named individual and expressly excludes constructive knowledge, imputed knowledge and any duty to investigate. As a drafting matter, if the seller succeeds in obtaining a favorable definition of “actual knowledge” then the seller should be sure to use that exact term throughout the Contract. That is, the seller should not use “actual knowledge” as the defined provision, but use “to the seller’s knowledge”, “to the best of the sellers knowledge” or similar but not identical language in other provisions. Doing so may give rise to the argument that the use of even slightly different language means that the parties intended that a different standard be applied where the different language is used.

4. As Is Sale/Integration Clause

As mentioned above, the buyer’s draft will likely ask the seller to make various representations and warranties. Certainly, that is fair and the seller has the opportunity to adjust the buyer’s language and limit the scope of those representations and warranties. In addition, however, the seller will want to be sure to include in the Contract a detailed statement to the effect that, except as expressly set forth in the Contract (or in documents executed and delivered by the seller at closing), the sale is strictly “As Is” without representation or warranty of any kind and that the buyer takes the property subject to any and all matters that affect its title or condition and also accepts the risk that information contained in due diligence materials may not be true or accurate. The “As Is” provision can be a sentence or two or run for several pages, depending upon the seller’s level of concern and the buyer’s willingness to accept many paragraphs of onerous language. Either way, the idea is to prevent the seller from being responsible for any statement of any party or for any inference raised from any materials, except to the extent expressly incorporated in a formal representation or warranty.

Together with the “As Is” provision, the seller should also include in the Contract an “integration clause”. The integration clause states that all of the prior negotiations and all of the parties’ understandings and agreements are integrated into and made a part of the Contract and that there are no other understandings or agreements relating to the transaction. Similarly, the seller should include a provision that no modification or addition to the Contract is effective unless it is in writing and signed by the parties. These provisions help to prevent a buyer from making an end run around the As-Is concept.

5. Seller’s Due Diligence Related Provisions

The buyer’s draft will typically provide for a study period and the right of the buyer and its designees to enter onto the property during the study period (and perhaps at all times prior to closing) to inspect and conduct tests on the property. This is appropriate, but the buyer’s draft may not include certain related provisions which are essential for the seller. The seller will want the buyer: to indemnify the seller against any injury, death or damage to property during the buyer’s entries; to promptly restore the property following any tests which might disturb it (and perhaps limit the type of tests the buyer can make to those that are non-invasive); to provide evidence of liability insurance coverage in a reasonable amount with the seller named as an additional insured; and, to give to the seller, at no cost, any title, survey or other test or study results (assuming the sale does not close for reasons other than the sellers default). The foregoing provisions should expressly survive any termination of the Contract and the indemnification provision should also survive closing under the Contract. The seller may also want to limit the time of day that the buyer can enter the property, require prior notice, require that a representative of the seller accompany the buyer during all entries and make all such entries subject to the rights of tenants under existing leases.

6. Broker Indemnity

More often than not, the buyer’s draft will include a provision stating either that the parties have not utilized brokers or specifying the brokers they have utilized and providing for cross-indemnities in the event a claim is made by a different broker. But if such a provision is not present, the Seller will want to add it, as under the law of most states the seller is likely to be the party responsible for paying the broker’s commission, even in the absence of a written agreement between the seller and the broker. In addition, the seller should be certain that the representation, warranty and indemnification survive any termination of the Contract and closing.

7. Limitations on the Buyer’s Remedies

The buyer’s draft may provide that in the event of a seller default, the buyer has all remedies available at law or in equity. Alternatively, the buyer’s draft may be silent on the buyer’s remedies in the event of a seller’s default. Under these circumstances, what is the seller’s exposure if the seller, perhaps for reasons beyond its control, does default under the Contract or does breach a representation or warranty? Because the seller’s exposure may be extensive and/or may not necessarily be clear, the seller will want to specify and limit the buyer’s available remedies.

The extent to which the seller can limit its exposure is, of course, a matter of negotiation. Ideally, a seller would not want to allow a buyer to obtain specific performance, as a suit for specific performance would tie up title to the property and likely prevent prompt remarketing of the property. Most buyers, however, will insist upon specific performance.

Whether or not the seller will need to agree to grant specific performance, the seller would be wise to limit the buyer’s other remedies in the event of a pre-closing default to termination of the Contract and reimbursement for reasonable and customary out of pocket costs and expenses paid to unrelated third parties, up to a maximum dollar amount. This would at least liquidate the seller’s exposure for monetary damages in the event of a pre-closing default.

In addition, the seller will want to consider its exposure in connection with defaults that are not discovered until after closing. For example, what if the buyer discovers after closing that the seller breached a representation or warranty? The seller would not want to have unlimited liability. To deal with post-closing claims, sellers often negotiate limitations on damages based on a basket and cap concept. That is, the seller may suggest a provision that states the buyer cannot make any claim unless the buyer can show that the buyer’s aggregate damages exceed a specified amount (to prevent nuisance claims) and that the buyer is limited to recovering a certain maximum amount under all claims (to provide a ceiling on the seller’s liability). Also, the seller may want to include a provision stating that if the buyer knows, before closing, that a representation or warranty is breached and yet consummates closing the buyer cannot recover any damages resulting from the known breach of that representation or warranty.

8. Time is of Essence

Typically, a time is of the essence provision is more of a concern for the buyer than for the seller. Therefore, this provision is often absent from the buyer’s draft. Time is of the essence can be a double-edged sword, but, typically, the seller would rather have definitive drop dead dates which it can rely upon in the event that the buyer does not close and the seller wants to remarket the property. In the absence of such a provision, the buyer, even if it does not close on the specified closing date, would likely be afforded a reasonable additional period of time under the circumstances to consummate closing. If the seller wants to insist on a time is of the essence provision, but the buyer strenuously objects, a middle ground is to include the time is of the essence provision, but also add notice and cure language, specifying that before any party can pursue its remedies for default, the non-defaulting party must notify the other party of a default and the defaulting party is given a short period of time to cure.

9. Buyer’s Representations

While the buyer’s draft will likely require the seller to make many representations and warranties, it typically will not include any representations or warranties from the buyer. The seller would be wise to include some basic representations and warranties regarding the status and authority of the buyer, the due authorization of the Contract, the absence of conflicting agreements and the enforceability of the Contract against the buyer. Typically, a buyer will not object to reasonably drawn representations and warranties of this nature. Adding these representations and warranties should, at the very least, cause the buyer to consider and undertake whatever internal approval processes are required in order to make the Contract the enforceable act of the buyer and eliminate possible issues related to claims of parties with an ownership interest in the buyer that were not involved in the Contract discussions. The seller may also want to require representations and warranties relating to anti-money laundering and anti-terrorism laws.

10. Does the Buyer have Assets?

During the preliminary phase of negotiations, the seller typically deals with one or more individuals that are affiliated with a solvent entity. By the time the buyer’s draft reaches the seller, however, the actual “Buyer” may be an undercapitalized, single purpose entity set up solely to acquire the property. The seller would be wise to avoid dealing with such a buyer and would rather deal with a buyer that has substantial assets and ongoing viability.

While the buyer may counter that (as is typically the case) its exposure in the event of default is limited to forfeiture of the deposit that is not a satisfactory response. As noted above, the seller will want to obtain indemnities from the buyer, at least regarding entries onto the property and disclosure of brokers. These indemnities would be largely meaningless if the buyer has no assets beyond the deposit. Moreover, the buyer’s draft may provide for legal fees to the prevailing party in the event of litigation. This is a reasonable provision and, indeed, a preferable provision in the event that the seller agrees to give the buyer the remedy of specific performance (the prospect of paying the seller’s legal fees could provide at least some disincentive for the buyer to file a frivolous claim for a specific performance). Such an attorneys’ fees provision, however, is really a one way provision if the buyer does not have assets. Therefore, if at all possible, the seller should deal with a properly capitalized buyer or perhaps obtain a guarantor of the buyer’s liabilities.

There are other provisions that the seller may want to insert into the buyer’s draft Contract, such as permitting a like kind exchange; providing for conditions of the seller’s obligation to close; and providing a requirement that the buyer’s title company deliver all closing documents a certain period of time in advance of closing so that the seller’s attendance at closing is unnecessary. But, in any event, it is clear that when evaluating the initial draft of a buyer’s proposed Contract, the seller and its team must not only carefully review each provision that is included in the draft, but must also carefully consider what provisions do not appear in the draft but should become a part of the Contract.


By Robert E. Scher


This article was published in Citybizlist and Law360.

REAL ESTATE SALE CASE STUDY

Background

SALES INFORMATION

Property Location:

1424-1450 N FEDERAL HWY,

BOCA RATON, FL 33432

Price $5,990,000

Sale Type Investment

Cap Rate 7.01%

Sale Conditions Lease Option

Property Type Retail

Property Sub-type Restaurant

Less

 General Retail
Freestanding

 General Retail
Storefront
Retail/Office

 Office Medical

Building Class C

Lot Size 1.36 AC

Gross Leasable Area 7,615 SF

No. Stories 1

Year Built 1970

Tenancy Single

Parking Ratio 10/1,000 SF

Zoning Description B4

APN / Parcel ID 06-43-47-20-15-001-

0011

Date Created 5/29/2019

ID#: 16181065
Last

Updated: 6/18/2019

DESCRIPTION

Total 7615 Sq. Feet 6,000 Square foot Under Air, with a 1,615 square foot Outdoor
Covered Patio and deck for outside dining.

HIGHLIGHTS

 Local 24-Hour always open 30 year old diner chain currently in three locations

 Walking distance to Downtown and Mizner Park and the Museum. Additionally, the IPIC
Theater is just within half mile

 Property can seat 259 combined inside and outside, 93 Parking spaces and a covered
patio seating with a full bar and wine case set up

 Located on the FAU (Florida Atlantic University) corridor on Federal Hwy just north of
Glades Road with a B-4 Zoning

 Current tenant in building is relocating by August 31st, 2019 meaning this is a wonderful
owner/user OR investment opportunity

 Strategically positioned along heavily trafficked North Federal Highway with a Vehicle
Per Day count of over 34,000 cars

SALE NOTES

Free-Standing Restaurant Building, For SALE at $5,995,000 OR NNN Lease for $35,000

monthly, plus $4,200 in property taxes monthly Current Tenant Relocating by July 2019 or

August 2019. The property is offered for Sale or Lease By the Owner. Half A Mile North of

Mizner Park, Boca Downtown Museum, and IPIC Theater. Free Standing Luxury Building

recently renovated in 2013, In and Out. The current tenant operates 7 Days a Week, 24 Hours.

Tenant scheduled to vacate in July or August of this year, per request. Exterior covered Patio

and partially uncovered with Fire torches and Water Fountain. Full Bar and Wine Cabinet

Display area. Dining room Kitchen with Hood, separate Chef’s Kitchen with Hood and Main Line

Kitchen with On Demand Hood.

Brokers Representation of Property owners position

1) The Owners position: What do they want? Why?

The Seller would like to capitalize on his most profitable real estate holdings. Selling the

property at maximum return is the Owner’s ultimate goal, and she realizes that the age

of the building is eventually going to present problems in any future sale, even though

the building was recently completely renovated. The building owners’ interest is to sell,

preferably within the next two months, before or on the date of the current lease

terminates. If not, the Owner’s carrying cost increases since the building may go vacant

until she identifies a new leaseholder. A sale solves all of the Owner’s issues because

the price includes the Amortization of the building renovation costs in the asking price,

including a six-month lease recovery premium in the event the building was to remain

vacant until a sale. The Broker has stated that that the Owner would consider a lease

arrangement either a straight term or a Triple Net lease. There is also the option for any

variation such as a Net or Net-Net Lease with terms such as taxes, utilities,

Amortization of the renovation costs, and rent-plus percentage based on Gross income

from the Restaurant.

The property owner believes that the property fits well within Sally’s plan to establish a

new Restaurant. Great location, floor setup, lots of parking. The current tenant has had

an exceptional long-term reputation in the area, and the customer base should help

establish and carry over to the new Restaurant.

The though is that If the purchase price is too top-heavy, maybe they will consider the

NNN Lease options. There may be some room for negotiation on the purchase price,

but that depends on Sally’s costs model. There may be a slight margin based on the

carryover of the tenant or discounting the lease price if Sally assumes the final lease

period any holdover pass the lease period. Also, the cleanout costs are high, and

maybe if there was an assumption of that responsibility, there could be adjustments

made.

An assumption probably would make sense if Sally wants to get in early to renovate to

the floor plan and set up the kitchen and dining floor and start ordering and stocking

foodstuff.

The Owner believes that his walk-away alternative is that he will not go over a 20%

discount on all pricing terms. He is willing to carry the property until a buyer comes

along within, at least the end of the current tenant lease expires.

The Owner will discount the price of the sale by as much 30% net thirty-days if offered a

cash buyout and not have to wait for financing to take place.

The Owner realizes that the best solutions for both parties would be to reach a

reasonable price reduction with incentives to close early and turn lease period revenue

over to the buyer.

FINANCIAL SUMMARY (PRO FORMA – 2019)

Gross Rental Income

Annual $420,000

Annual Per SF 55.15

Other Income

Annual –

Annual Per SF –

Vacancy Loss

Annual –

Annual Per SF –

Effective Gross Income

Annual $420,000

Effective Gross Income

Annual Per SF 55.15

Net Operating Income

Annual –

Annual Per SF –

DEMOGRAPHICS

[1 Mile /]

HOUSEHOLD INCOME

$0K – $35K 32% $35K – $75K 34.4% $75K – $100K 10.2% $100K+23.4%

Income Thousand

$0K – $35K 1,775

$35K – $75K 1,910

$75K – $100K 564

$100K+ 1,299

$96,376

Average

AGE DISTRIBUTION

0 – 1920.1%20 – 2913.6%30 – 3914.8%40 – 4912.4%50 – 6420.8%65+18.4%

Age Year

0 – 19 2,869

20 – 29 1,934

30 – 39 2,113

40 – 49 1,763

50 – 64 2,962

65+ 2,618

41.4

Average

TRADE AREAS

1 mi 3 mi 5 mi

[15 Min Drive /]

Total Population

1 Mile 14,259

3 Mile 74,783

5 Mile 177,827

2010 Population

1 Mile 9,942

3 Mile 57,482

5 Mile 153,525

2024 Population

1 Mile 15,710

3 Mile 81,307

5 Mile 190,006

Employees

1 Mile 15,760

3 Mile 84,516

5 Mile 171,639

Total Businesses

1 Mile 2,191

3 Mile 8,493

5 Mile 15,527

Average Household Income

1 Mile $96,376

3 Mile $110,391

5 Mile $98,696

Median Household Income

1 Mile $59,231

3 Mile $74,611

5 Mile $65,969

Total Consumer Spending

1 Mile $163.57M

3 Mile $936.46M

5 Mile $2.2B

Median Age

1 Mile 41.2

3 Mile 47.1

5 Mile 48.7

Households

1 Mile 6,325

3 Mile 32,447

5 Mile 81,325

Percent College Degree or Above

1 Mile 25%

3 Mile 27%

5 Mile 26%

Average Housing Unit Value

1 Mile $498,302

3 Mile $547,651

5 Mile $460,971

MAJOR TENANT INFORMATION

FLASHBACK DINER

SF Occupied 7,615

Lease End Date July 2019

AMENITIES

 Signage
 Monument Signage

TRAFFIC

Collection Street: N Federal Hwy

Cross Street NE 15th Ter, SW

Traffic Vol 34,622

Year 2018

Distance 0.14 mi

Collection Street: NE 5th Ave

Cross Street NE 16th St, N

Traffic Vol 6,578

Year 2018

Distance 0.18 mi

Collection Street: Glades Rd

Cross Street N Federal Hwy, E

Traffic Vol 22,699

Year 2018

Distance 0.24 mi

Collection Street: Glades Rd

Cross Street N Federal Hwy, E

Traffic Vol 22,744

Year 2018

Distance 0.28 mi

Collection Street: NE 20th St

Cross Street NE 4th Way, NE

Traffic Vol 15,308

Year 2018

Distance 0.28 mi

PUBLIC TRANSPORTATION

COMMUTER RAIL

Boca Raton Commuter Rail (Tri-County

Commuter)

Drive 9 min

Distance 4.1 mi

Deerfield Beach Commuter Rail (Tri-County

Commuter)

Drive 13 min

Distance 5.5 mi

AIRPORT

Palm Beach International Airport

Drive 37 min

Distance 25.7 mi

Fort Lauderdale–Hollywood International

Airport

Drive 38 min

Distance 26.7 mi

WALK SCORE ®

85

Very Walkable

TRANSIT SCORE ®

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