terms of a lease option (CA)

May 09, 2021

by a searcher from Claremont McKenna College in San Francisco Bay Area, CA, USA

working on a potential acquisition of a RV dealership and negotiated reasonable payment terms for a "lease option" to buy the property in the future (~$5 M). Then received the lease option (draft) from the seller’s attorney, which includes 28 deal points (many in seller’s favor).

Tenant responsible for: Real property taxes Repairs (beyond ordinary wear and tear) Water well and pump (maintenance, expenses of) Lien and completion bond for improvements (at###-###-#### 5x estimated cost of improvement) Insurance (e.g. comprehensive public liability, property damage insurance) Utility and municipal service charges Attorney fees for any claims on the Premises

Landlord controls: Use (RV dealership only) New signs Alterations, additions (except for moveable furniture, trade fixtures) Subletting Permitting Hazardous materials on site

Wondering which of these is not customary/standard for a lease option in CA? In other words, which of these deal points, if any, should I definitely push back on?

Thanks for any thoughts! Best, Andy

Reply by a professional
from University of Minnesota in Minneapolis, MN, USA

In my experience, commercial leases are some of the most over-lawyered documents out there. Maybe, in the post-covid shakeup of CRE that many are predicting will soon be upon us, we will see some semblance of sanity return to commercial leases, instead of leases that attempt to mitigate LL's every conceivable cost and risk at Tenant's expense over the course of ~75 pages of legalese..../rant.

Reply by a searcher
from University of Kentucky in Spring, TX, USA

Andy, think you’ll find there is no “standard” lease and a lot of those provisions are commercial terms that get negotiated and can change the lease amount depending on final allocation of responsibility. Searching lawinsider.com or “(name of contract) sec Edgar” will typically give some precedent documents that have been filed with the SEC.

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