Take Three Steps to Keep Complete Leases on Hand

Leases often consist of many documents—from riders and addenda to side letter agreements and lease amendments. So it's easy to misplace or lose track of a document. Having an incomplete lease could create big problems for you: You won't be certain of all of your lease rights and responsibilities, or those of your tenant.

For instance, if the tenant renews its lease under the same terms and conditions as the original lease, you won't know all of the terms of the renewal lease. Plus, you can expect a potential lender, assignee, or buyer to demand to see a complete copy of each lease and an estoppel certificate from each tenant that identifies all of the documents in the lease. If you're unable to produce the documents and estoppel certificates, the lender, assignee, or buyer may be unwilling to go through with the loan, assignment, or sale.

There are three steps that can help you make sure that you'll have a complete copy of each lease available, says Santa Monica attorney Susan Fowler McNally. We'll tell you about those steps and give you a Model Checklist to help you carry out the first step (see p. 6).

Step #1: Prepare Checklist

Start off by preparing a checklist that you can use to keep track of all your leases and the documents in them, says McNally. You can use our Model Checklist as a starting point and modify it to suit your operations.

Your checklist, like ours, should list all of the documents that the lease may potentially consist of—such as the lease form and any addenda, riders, exhibits, amendments and related agreements, as well as assignment/sublet consents. Next to each document on the list, place a box that you can check off if the lease includes that document. Print out a checklist for each lease, advises McNally.

Step #2: Assemble Lease Documents

Assemble a complete copy of each lease by referring to and marking up the checklist, says McNally. You should do this as you're preparing the lease to be signed. You'll have to determine which documents form the lease and fill in descriptive information about each document on the checklist.

Step #3: File Lease Documents Together

Once you've assembled the lease documents, file them together so that you've got a complete lease, says McNally. And make sure that the lease documents are easily accessible, so that you can refer to them when necessary and copy them for prospective lenders, assignees, and buyers, she adds.

Practical Pointer: It's a good idea to file each marked up checklist with the lease documents it refers to. Not only will the checklist provide a quick way of seeing which documents are included in a particular lease, but it will also guide you in assembling the lease again if its documents become separated, McNally notes. And don't forget to later include documents that are added during the lease term—and to check them off on the checklist.

CLLI Source

Susan Fowler McNally, Esq.: Partner, Gilchrist & Rutter, PC, 1299 Ocean Ave., Ste. 900, Santa Monica, CA 90401; (310) 393-4000, SMcNally@GRLawyers.com.