Modernizing Lease Forms

Modern and efficient lease forms are in the best interest of landlord's lawyer as well. A well-organized and visually appealing lease form is more pleasant to work with on a repetitive basis, and results in missing fewer points and dealing with fewer internal inconsistencies. A good-looking lease lends an appearance of professionalism to the lawyer's work product.

Clients often ask their lawyers to produce a simplified lease form for smaller transactions. That request is symptomatic of the client's familiarity with outdated and inefficient lease forms. A lease form that is visually appealing and well-organized should be relatively short and easy to review, making it appropriate for both larger and smaller transactions.

Why the Bad Forms?

Why then, given all of the good reasons to produce and use visually appealing and well-organized lease forms do we see so many forms in the market that are neither? Presumably, part of the answer to that question goes to a general problem in the field ' inertia. Continuing to use old lease forms on the bases of historical practice, habit, laziness, or the inability to bill form work, however, is not a defensible position.

Lease forms that are designed to be inefficient in an attempt to hide the ball, or demoralize opponents into submission, or win points hidden in the mess (or not worth finding and fixing given budgetary and time constraints) are even more nefarious. A landlord's lawyer should keep in mind his or her own reputation in the marketplace, as well as his or her relationships with opposing counsel, and should also prioritize fostering the landlord's relationships with tenants. A more readable lease form may cost a few expendable points, but will reward its drafter and its drafter's client with better relationships.

Basic Lease Formatting

Consider first the most basic aspects of the lease form: page size, margins, typeface and size, text alignment, and line spacing. Good choices in respect of these items lead to readable leases that appear to have been produced by a professional.

• Do not use legal size paper. It is awkward and almost everyone dislikes working with it.
• Choose reasonable settings for margins and type size. It is hard to read (and even harder to make notes on) a lease where the lines of text stretch endlessly from the far reaches of the left side of the page to the far reaches of the right, or where the type is unreasonably small, or where the lines are too tightly spaced.
• On the other hand, avoid formatting that makes the lease look as if it has been produced by and for children, e.g., a sans-serif typeface set in double-spaced lines.
• Question the orthodoxy of justification. Justified text is pleasurable to read when produced by professional typesetting software for books or magazines, but is decidedly less so when displayed or printed by standard word processing software.

Second-Level Formatting And Organization

Choose a reasonable numbering scheme and adhere to it strictly. One method is to break a lease form into articles, with numbered sections, lettered sub-sections, and romanette sub-sub-sections, resulting in references such as “Section 2.3(a)(i),” which are easier to follow than, say, “Section 2.3.1.1.” For a section that does not include sub-sections, but does include numbered clauses, be consistent and use (a), (b), (c) for the clauses. If a section seems to demand more than one set of numbered clauses, then avoid the demand by breaking the section into a least two separate sections.' No paragraph in a lease should extend for more than half the page (let alone a full page) without a break.

Make repetitive references simple and consistent. Referencing “the document attached to this Lease as Exhibit A, which is by this reference incorporated into this Lease” instead of “Exhibit A” accomplishes the same thing but uses 105 characters instead of nine characters. Some attorneys, wishing to retain the incorporation language without retaining the complication will state such language once in the miscellaneous section (and should confirm that it is in fact only stated once). If the lease form bolds “Exhibit A,” then the lease form should similarly bold every exhibit reference. Consider the general principle that every such item of optional additional complexity (such as bolding Exhibit references) is exactly that.

Be careful with defined terms. Do not define the same term twice at two different places in the lease (this often happens with the term “Landlord”). Do not give the same concept two alternative defined terms, e.g., by referring to the owner of a building as “'Owner' or 'Landlord.'” Choose one.

It is most efficient to define all terms in the text, as they are used, and include an automatically generated index of defined terms with page references. Eliminate the defined terms article. If you cannot bring yourself to do so, then at least move that article to the end of the lease, and make sure that it includes all of the defined terms in the lease. Writing “means” after a defined term accomplishes the same thing as writing “shall mean,” but it is shorter.

If the lease references both “Exhibits” and “Schedules,” consider whether there is a rational justification for maintaining the distinction and, if so, whether the distinction is applied consistently.

Try to delete the summary of basic lease terms. While recognizing that such summaries are widely used for quick reference, they often result in conflicts and ambiguities, and can actually make a lease more difficult to review by physically separating portions of a related provision. An efficient, well-organized lease form can be so easy to follow that the summary of basic lease terms feels unnecessary. But if you prefer to keep the summary, or if your client insists on keeping it, you can at least remove any separate signature blocks appearing at the end of it.

Unless the same is required by law in your jurisdiction, avoid drafting paragraphs in all capitals ' they are difficult to read. Subject to the same caveat, eliminate any areas that require the parties to “initial” pages of the lease. Generally, the parties' signature blocks at the end of the lease are sufficient to make all of the contents of the lease effective.

Lease Architecture

Diagram the lease into a flow chart. Does the overall organization of the lease make sense? If it does not, then consider revising the overall organizational structure of the lease. Most leases need no more than ten articles. The following example shows one way to organize the articles: (1) Premises and Term. (2) Rent. (3) Covenants. (4) Alterations. (5) Transfers. (6) Default and Remedies. (7) Casualty, Condemnation, and Insurance. (8) Subordination and Indemnities, (9) Options. (10) Miscellaneous. Every standard lease provision fits into those categories. An automatically generated table of contents with page references for articles and sections is helpful and looks professional.

Reducing the number of articles in the lease form helps to improve organization and thereby identify and eliminate duplicative or conflicting provisions. It makes it more likely that related provisions will appear adjacent to each other, which makes such provisions more likely to be drafted consistently and easier to locate and review in the future.

Do not include substantive lease provisions in the exhibits unless drafting leases on a typewriter (drafting leases on a typewriter is not the recommended method ' and probably is impossible at this time). Operating expenses and taxes are appropriately handled under the Article for “Rent.” Initial tenant improvements can be a section under “Alterations.” An expansion option is an “Option.”

After reorganizing the lease form, take the time to check, update, and correct all references to articles, sections, exhibits, and the like. A lease form should not contain the words “intentionally omitted.”

A Second Pass

Once the lease form is well-formatted and well-organized, take time to apply the same principles to the structure of each provision. Minor tinkering within sections and sub-sections to consolidate related portions, break out unrelated portions, and match conceptual levels with visual levels can transform a provision from being difficult to read to being easy to read.

Identify and remove provisions that are superfluous. Form leases often contain provisions that are unenforceable, or are not applicable to the building for which they are used, or would never be invoked or enforced by the landlord. Rather than leaving them in the form “just in case,” question whether efficiency would be served by removing them.

Rules and Regulations Exhibits are a major offender in the superfluous category, often because no effort has been made to tailor them to the operation of the building in question. These exhibits are often hopelessly out-of-date (e.g., addressing “bootblacking” and “telegraphic services”). Worse, Rules and Regulations often intrude clumsily on provisions such as signage, services, and alterations that should instead be addressed in full in the body of the lease.

Final Thoughts

While improving the lease form is not usually at the top of a leasing lawyer's to-do list, it is a valuable exercise that will lead to leases that are easier to prepare, easier to negotiate, easier to administer, and easier to review in diligence, all of which, ultimately, make the leasing lawyer's product more valuable to the client.'

Daniel W. Finley is an associate at Pircher, Nichols & Meeks, a real estate law firm with offices in Los Angeles and Chicago.

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Leasing is a forms-driven practice, and the success of a lawyer's landlord-side leasing work is tied directly to the strength of the lawyer's lease forms. Unfortunately, many lease forms are outdated and inefficient. This article discusses certain simple methods of improving the visual layout and organization of lease forms to produce a stronger template for future leases.

The Importance of Good Forms

When compared with other areas of commercial real estate practice where the lawyer controls the forms, such as dispositions, loan originations, and joint venture agreements, the lease form is particularly important. Generally, leases are significantly longer lived than purchase agreements, loan agreements, or joint venture agreements. Leases are referenced regularly and need to be administered efficiently. Owners benefit from consistent and comprehensible lease files when attempting to sell or finance buildings.

Modern and efficient lease forms are in the best interest of landlord's lawyer as well. A well-organized and visually appealing lease form is more pleasant to work with on a repetitive basis, and results in missing fewer points and dealing with fewer internal inconsistencies. A good-looking lease lends an appearance of professionalism to the lawyer's work product.

Clients often ask their lawyers to produce a simplified lease form for smaller transactions. That request is symptomatic of the client's familiarity with outdated and inefficient lease forms. A lease form that is visually appealing and well-organized should be relatively short and easy to review, making it appropriate for both larger and smaller transactions.

Why the Bad Forms?

Why then, given all of the good reasons to produce and use visually appealing and well-organized lease forms do we see so many forms in the market that are neither? Presumably, part of the answer to that question goes to a general problem in the field ' inertia. Continuing to use old lease forms on the bases of historical practice, habit, laziness, or the inability to bill form work, however, is not a defensible position.

Lease forms that are designed to be inefficient in an attempt to hide the ball, or demoralize opponents into submission, or win points hidden in the mess (or not worth finding and fixing given budgetary and time constraints) are even more nefarious. A landlord's lawyer should keep in mind his or her own reputation in the marketplace, as well as his or her relationships with opposing counsel, and should also prioritize fostering the landlord's relationships with tenants. A more readable lease form may cost a few expendable points, but will reward its drafter and its drafter's client with better relationships.

Basic Lease Formatting

Consider first the most basic aspects of the lease form: page size, margins, typeface and size, text alignment, and line spacing. Good choices in respect of these items lead to readable leases that appear to have been produced by a professional.

• Do not use legal size paper. It is awkward and almost everyone dislikes working with it.
• Choose reasonable settings for margins and type size. It is hard to read (and even harder to make notes on) a lease where the lines of text stretch endlessly from the far reaches of the left side of the page to the far reaches of the right, or where the type is unreasonably small, or where the lines are too tightly spaced.
• On the other hand, avoid formatting that makes the lease look as if it has been produced by and for children, e.g., a sans-serif typeface set in double-spaced lines.
• Question the orthodoxy of justification. Justified text is pleasurable to read when produced by professional typesetting software for books or magazines, but is decidedly less so when displayed or printed by standard word processing software.

Second-Level Formatting And Organization

Choose a reasonable numbering scheme and adhere to it strictly. One method is to break a lease form into articles, with numbered sections, lettered sub-sections, and romanette sub-sub-sections, resulting in references such as “Section 2.3(a)(i),” which are easier to follow than, say, “Section 2.3.1.1.” For a section that does not include sub-sections, but does include numbered clauses, be consistent and use (a), (b), (c) for the clauses. If a section seems to demand more than one set of numbered clauses, then avoid the demand by breaking the section into a least two separate sections.' No paragraph in a lease should extend for more than half the page (let alone a full page) without a break.

Make repetitive references simple and consistent. Referencing “the document attached to this Lease as Exhibit A, which is by this reference incorporated into this Lease” instead of “Exhibit A” accomplishes the same thing but uses 105 characters instead of nine characters. Some attorneys, wishing to retain the incorporation language without retaining the complication will state such language once in the miscellaneous section (and should confirm that it is in fact only stated once). If the lease form bolds “Exhibit A,” then the lease form should similarly bold every exhibit reference. Consider the general principle that every such item of optional additional complexity (such as bolding Exhibit references) is exactly that.

Be careful with defined terms. Do not define the same term twice at two different places in the lease (this often happens with the term “Landlord”). Do not give the same concept two alternative defined terms, e.g., by referring to the owner of a building as “'Owner' or 'Landlord.'” Choose one.

It is most efficient to define all terms in the text, as they are used, and include an automatically generated index of defined terms with page references. Eliminate the defined terms article. If you cannot bring yourself to do so, then at least move that article to the end of the lease, and make sure that it includes all of the defined terms in the lease. Writing “means” after a defined term accomplishes the same thing as writing “shall mean,” but it is shorter.

If the lease references both “Exhibits” and “Schedules,” consider whether there is a rational justification for maintaining the distinction and, if so, whether the distinction is applied consistently.

Try to delete the summary of basic lease terms. While recognizing that such summaries are widely used for quick reference, they often result in conflicts and ambiguities, and can actually make a lease more difficult to review by physically separating portions of a related provision. An efficient, well-organized lease form can be so easy to follow that the summary of basic lease terms feels unnecessary. But if you prefer to keep the summary, or if your client insists on keeping it, you can at least remove any separate signature blocks appearing at the end of it.

Unless the same is required by law in your jurisdiction, avoid drafting paragraphs in all capitals ' they are difficult to read. Subject to the same caveat, eliminate any areas that require the parties to “initial” pages of the lease. Generally, the parties' signature blocks at the end of the lease are sufficient to make all of the contents of the lease effective.

Lease Architecture

Diagram the lease into a flow chart. Does the overall organization of the lease make sense? If it does not, then consider revising the overall organizational structure of the lease. Most leases need no more than ten articles. The following example shows one way to organize the articles: (1) Premises and Term. (2) Rent. (3) Covenants. (4) Alterations. (5) Transfers. (6) Default and Remedies. (7) Casualty, Condemnation, and Insurance. (8) Subordination and Indemnities, (9) Options. (10) Miscellaneous. Every standard lease provision fits into those categories. An automatically generated table of contents with page references for articles and sections is helpful and looks professional.

Reducing the number of articles in the lease form helps to improve organization and thereby identify and eliminate duplicative or conflicting provisions. It makes it more likely that related provisions will appear adjacent to each other, which makes such provisions more likely to be drafted consistently and easier to locate and review in the future.

Do not include substantive lease provisions in the exhibits unless drafting leases on a typewriter (drafting leases on a typewriter is not the recommended method ' and probably is impossible at this time). Operating expenses and taxes are appropriately handled under the Article for “Rent.” Initial tenant improvements can be a section under “Alterations.” An expansion option is an “Option.”

After reorganizing the lease form, take the time to check, update, and correct all references to articles, sections, exhibits, and the like. A lease form should not contain the words “intentionally omitted.”

A Second Pass

Once the lease form is well-formatted and well-organized, take time to apply the same principles to the structure of each provision. Minor tinkering within sections and sub-sections to consolidate related portions, break out unrelated portions, and match conceptual levels with visual levels can transform a provision from being difficult to read to being easy to read.

Identify and remove provisions that are superfluous. Form leases often contain provisions that are unenforceable, or are not applicable to the building for which they are used, or would never be invoked or enforced by the landlord. Rather than leaving them in the form “just in case,” question whether efficiency would be served by removing them.

Rules and Regulations Exhibits are a major offender in the superfluous category, often because no effort has been made to tailor them to the operation of the building in question. These exhibits are often hopelessly out-of-date (e.g., addressing “bootblacking” and “telegraphic services”). Worse, Rules and Regulations often intrude clumsily on provisions such as signage, services, and alterations that should instead be addressed in full in the body of the lease.

Final Thoughts

While improving the lease form is not usually at the top of a leasing lawyer's to-do list, it is a valuable exercise that will lead to leases that are easier to prepare, easier to negotiate, easier to administer, and easier to review in diligence, all of which, ultimately, make the leasing lawyer's product more valuable to the client.'

Daniel W. Finley is an associate at Pircher, Nichols & Meeks, a real estate law firm with offices in Los Angeles and Chicago.

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