Don't Wait Until It's Too Late to Plan
for Future Expansion and Contraction

© 1999 by CSI Consultants Inc.

An office lease creates a long-term relationship between landlord and tenant.  It protects your right to occupancy, and obligates you to pay rent, for 5, 10 or 15 years.

Most non-profit organizations, though, cannot accurately project their space requirements so far into the future.  Missions change.  New funding materializes.  Existing funding disappears.  Mergers happen.

Your job is difficult enough.  You don't want every change in your organization's fortunes to trigger a major real estate problem.  Proper negotiation of your lease can provide you with the flexibility you need to handle almost any eventuality.

The Sublease Clause, for example, should allow you to transfer your obligations to another party if you need to move before the lease expires.  It should also allow you to sublet part of your space if your needs contract.

If you want to sublease space to an affiliated organization, the lease should allow you to do so without the consent of the landlord.  For other subleases, the landlord should not be able to unreasonably withhold or delay consent.  The Use Clause should not be specific to your organization; it should be broad enough to accommodate any potential sublessees.  The maximum number of tenants who can occupy the space must be negotiated as well.

The Sublease Clause can also be used to facilitate your expansion.  If, for example, you expect to grow from 10,000 to 15,000 square feet in five years, you might lease the 15,000 square feet now, and sublease the surplus for a 5-year term.  If your expansion doesn't pan out, you could sublease it again.

The Expansion Option is another method of providing for future growth.  This provision gives you the right to expand, but does not obligate you to do so.  It can be structured with the future rental set in advance, pegged to fair market value, or give you a right of first refusal.

Changing market conditions should be anticipated in negotiating these provisions.  If, for example, the value of your space goes up, you should be able to profit from a sublease.

Your broker should participate in the strategic planning that underlies these negotiations, and carry them out in a manner that protects your long-term interests.

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