Myles M. Mattenson
ATTORNEY AT LAW
5550 Topanga Canyon Blvd.
Woodland Hills, California 91367
Telephone (818) 313-9060
Facsimile (818) 313-9260
|Did You Read Your Lease Before Or After You Signed It?|
Did You Read Your Lease Before Or After You Signed It?
In acquiring a laundromat business, most prospective purchasers focus on location and the historical or projected economic picture of the business. The term of the lease to be assumed, and the monthly outlay of cash required by the lease are also factors most purchasers consider; however, most purchasers don't spend much time reading the fine print of a lease. They don't bother to do so under the theory that the lease is a printed form and since it's entitled "Standard Lease", it must be safe to sign it. Tenants generally do not gather together and form an association for the purpose of preparing and printing a "Standard Lease". Landlords, on the other hand, frequently do. As a result, the Standard Lease regarding your business location has probably been prepared by an association funded by landlords. Business leases are thus generally slanted toward the concerns of landlords rather than tenants. Notwithstanding the fact that the lease is a printed form, many of the provisions may be subject to negotiation since the landlord wants your money as much as you want his location. Everyone always enters into a lease with the expectation that the other side will perform. What if it doesn't work out that way? What if the tenant encounters difficulty in the payment of rent and the lease contains some type of late charge? What if the late charge turns out to be a substantial penalty that could have been avoided if discussed with the landlord prior to signing the lease? One lease provision I have seen in a standard printed lease is the following: "PENALTY ON DELINQUENT RENT. If any payment of rent or any other payment is not paid when due, the lessee shall, as a penalty for such delinquency pay one-tenth of one percent (1%) per diem from the date when it became due until paid . . . ." One-tenth of one percent per day is equivalent to 36.5% interest per annum. Can it be said that 36.5% is a fair level of compensation to the landlord in the event rent is not timely paid? This printed lease actually used the word "penalty" which is tantamount to an admission that the provision is unenforceable. The courts generally do not enforce penalty provisions, i.e., attempts to coerce timely payment by a forfeiture not reasonably calculated to merely compensate the landlord, but to penalize the tenant. Whenever the amount of actual damage sustained by a breach of a contract is impracticable or extremely difficult to fix, however, the law permits the parties to agree to a liquidated amount of damages; however, such a provision can be invalidated if the party seeking to invalidate the provision "establishes that the provision was unreasonable under the circumstances existing at the time the contract was made." If such a penalty is to alternatively be considered interest, the rate of interest violates the usury laws of the State of California. Although there are many circumstances when such a rate of interest can be charged, such a rate of interest is violative of the usury laws in a situation involving a lease. The charges imposed for common area maintenance is another fertile area for abuse. Some landlords have been known to charge exhorbitant management fees calculated as a percentage of gross rents, notwithstanding the fact that a property manager is not employed to service the needs of the shopping center. Another common problem that might be addressed during lease negotiations is the concept of tenant or employee parking within the shopping center parking area. The idea of having a fast-food outlet within the shopping center near your laundromat may initially seem appealing; however, if delivery service vehicles monopolize the parking spaces, your customers may look for another nearby laundromat. Read your lease, preferably with the aid of an attorney, before you sign it. Addressing these type of problems after the signature ink has dried may prove to be too late and ultimately very costly for you!
[This column is intended to provide general information only and is not intended to provide specific legal advice; if you have a specific question regarding the law, you should contact an attorney of your choice. Suggestions for topics to be discussed in this column are welcome.] Reprinted from New Era Magazine Myles M. Mattenson © 1995-2002