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902:Real Estate Basics: Negotiating & Structuring Commercial Leases

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902:Real Estate Basics: Negotiating & Structuring Commercial Leases ACC’S 2004 ANNUAL MEETING THE NEW FACE OF IN-HOUSE COUNSEL 902:Real Estate Basics: Negotiating & Structuring Commercial Leases & Subleases Kimberly M.W. Gilpin Vice President, Assistant General Counsel The Finish Line, Inc. Angela L. Humphreys General Counsel Investco Financial Corporation Carol D. Miller General Counsel Restaurants Unlimited This material is protected by copyright. Copyright © 2004 various authors and the Association of Corporate Counsel (ACC). Materials may not be reproduced without the consent of ACC. Reprint permission requests should be directed to James Merklinger at ACC: 202/293-4103, ext. 326; [email protected] ACC's 2004 ANNUAL MEETING THE NEW FACE OF IN-HOUSE COUNSEL Faculty Biographies Kimberly M.W. Gilpin Kimberly M.W. Gilpin is vice president, assistant general counsel, lease administration at The Finish Line, Inc., an athletic footwear and apparel retailer located in Indianapolis. Ms. Gilpin is primarily responsible for the company's legal leasing functions including negotiating and drafting lease language and documents. In addition, she is responsible for supervising lease process flow and implementation as well as acting as a department head for the legal/lease administration department, managing company policy compliance issues, reviewing and negotiating third party vendor contracts, and providing legal support to other corporate departments on real estate activities and corporate compliance matters. Prior to joining the Finish Line team, Ms. Gilpin served as a program director for the Paralegal Studies Program at International Business College. Her experience in the practice areas of real estate, probate, and estate planning, and working as an account representative for West Publishing Company led to her success in building the program and working with paraprofessional students. Ms. Gilpin continues to support the Paralegal Studies Program at International Business College as a member of the curriculum advisory board. In addition to her membership with ACC, Ms. Gilpin is a member of the International Counsel of Shopping Centers (ICSC) and the National Retail Tenants Association (NRTA). Her prior speaking engagements include monitoring ICSC U.S. Shopping Center Law Conference Round Table Discussions, participating as a panelist at the 2003 and 2004 ICSC Ohio, Kentucky and Indiana Law Symposium, and presenting at the 2003 NBI seminar, "Drafting and Negotiating Indiana Commercial Real Estate Leases." Angela L. Humphreys Angela L. Humphreys is general counsel for Investco Financial Corporation (IFC) in Sumner, Washington. IFC is a real estate development and management company focused in the Puget Sound region. Ms. Humphreys oversees all legal work for IFC and its affiliate organizations and is responsible for overseeing the preparation and negotiation of leases for the commercial portfolio, which includes 19 properties totaling three million square feet of industrial, retail, and office space. Prior to joining IFC, Ms. Humphreys was an associate with The Nathanson Group PLLC in Seattle, where her practice focused on commercial real estate and business asset acquisitions, dispositions, leasing, financing, and landlord/tenant matters. Ms. Humphreys is a board member of ACC's Washington State Chapter. Her education includes a JD from the University of Denver and a BBA in from the University of San Diego. This material is protected by copyright. Copyright © 2004 various authors and the Association of Corporate Counsel (ACC). 2 ACC's 2004 ANNUAL MEETING THE NEW FACE OF IN-HOUSE COUNSEL Carol D. Miller Carol D. Miller is general counsel for Restaurants Unlimited, headquartered in Seattle. She is the legal department for the closely held company which operates 30 full-service restaurants in 13 states under a variety of brands, including Palomino and Kincaid's. She oversees all legal matters for the company, including real estate, corporate, human resources, compliance, and intellectual property. Prior to joining Restaurants Unlimited, Ms. Miller was a partner in the Seattle law firm Ogden Murphy Wallace. Her practice focused on commercial leasing. She negotiated in-line mall leases for Cinnabon during its rapid expansion providing her experience with all national landlord groups. She also negotiated numerous leases for full-service restaurants located in stand-alone buildings, office buildings, and malls. Her long-standing relationships with these clients allowed her to deal with a multitude of lease related issues that arose during the lease terms. Ms. Miller also represented landlords and tenants in lease related bankruptcy proceedings. She is a member of ACC and the Academy of Hospitality Industry Attorneys, and is active in restaurant associations both at the national level and in various states, particularly on pertinent legislative matters. Ms. Miller received a BA from Boise State University and is a graduate of University of Puget Sound Law School. This material is protected by copyright. Copyright © 2004 various authors and the Association of Corporate Counsel (ACC). 3 ACC's 2004 ANNUAL MEETING THE NEW FACE OF IN-HOUSE COUNSEL Session 902 Real Estate Basics Negotiating & Structuring Commercial Leases & Subleases ACCA 2004 Annual Meeting October 25-27, 2004 Sheraton Chicago Presented By: Carol D. Miller General Counsel Restaurants Unlimited Kimberly M.W. Gilpin V.P. Assistant General Counsel, Lease Administration The Finish Line, Inc. Angela L. Humphreys General Counsel Investco Financial Corporation This material is protected by copyright. Copyright © 2004 various authors and the Association of Corporate Counsel (ACC). 4 ACC's 2004 ANNUAL MEETING THE NEW FACE OF IN-HOUSE COUNSEL • The following pages contain a full commercial lease for a new restaurant location. • The base lease is as it was received from the landlord. • The redlining shows tenant requests for modifications (insertions and deletions). • Language that is bold and italicized are explanations to the landlord regarding some of the requested revisions. • This is how Carol typically provides the first round of comments to landlord’s counsel. The comment boxes are explanations for seminar participants provided by Carol and Kimberly as to why the revisions were requested, some additional considerations and suggestions on how to handle sensitive issues. Angela represents landlords in commercial lease negotiations. She joins the panel to provide a landlord perspective and typical landlord responses to and concerns regarding the requested modifications. The panel anticipates selecting some of the more contentious provisions for the panel discussion and providing some middle of the road language that satisfies both parties’ concerns. The goal of both attorneys must be to “get the deal done” while protecting their respective client’s interests. We hope the expansive materials will provide insight into the variety of matters in-house counsel should be considering when negotiating commercial leases for their clients’ operations. This material is protected by copyright. Copyright © 2004 vario us authors and the Association of Corporate Counsel (ACC). 5 ACC's 2004 ANNUAL MEETING THE NEW FACE OF IN-HOUSE COUNSEL Requested revisions are redlined. Comments are bolded and italicized. The Project LEASE AGREEMENT BETWEEN PROJECT OWNER as Landlord and RESTAURANT as Tenant Dated: as of October ____, 2004 This material is protected by copyright. Copyright © 2004 vario us authors and the Association of Corporate Counsel (ACC). 6 ACC's 2004 ANNUAL MEETING THE NEW FACE OF IN-HOUSE COUNSEL TABLE OF CONTENTS PARAGRAPH SUBJECT 1 BASIC LEASE PROVISIONS 2 PREMISES 3 USE AND STORE NAME 4 MINIMUM RENT; COMMENCEMENT DATE; COST OF LIVING INCREASES 4 5 TERM 6 SECURITY DEPOSIT 7 ADDITIONAL CHARGES 8 USES PROHIBITED 9 COMPLIANCE WITH LAW; OTHER REQUIREMENTS 10 ALTERATIONS AND ADDITIONS 11 REPAIRS AND MAINTENANCE 12 LIENS 13 ASSIGNMENT AND SUBLETTING 14 INDEMNITY AND INSURANCE 15 UTILITIES 16 PERSONAL PROPERTY TAXES 17 RULES AND REGULATIONS 18 HOLDING OVER 19 ENTRY BY LANDLORD 20 TENANT’S DEFAULT 21 REMEDIES IN DEFAULT 22 DEFAULT BY LANDLORD; LIMITATIONS ON REMEDIES 23 RECONSTRUCTION 24 EMINENT DOMAIN 25 PARKING AND COMMON AREAS 26 SIGNS 27 AUCTIONS; OTHER PROHIBITED ACTIVITIES 28 DISPLAYS; APPEARANCE OF PREMISES 29 OPERATION OF PREMISES; BUSINESS 30 PROMOTIONAL FUND 31 WAIVERS 32 JOINT OBLIGATION 33 TIME OF ESSENCE 34 RECORDATION 35 QUIET POSSESSION 36 LATE CHARGES 37 INABILITY TO PERFORM 38 ATTORNEYS’ FEES 39 SALE BY LANDLORD 40 SUBORDINATION; ATTORNMENT 41 ESTOPPEL CERTIFICATE; TENANTS’ STATEMENT 42 LANDLORD’S FINANCING 43 TRANSFER OF THE PROJECT TO A REIT; SIMILAR SITUATIONS. 44 FINANCIAL STATEMENTS 45 SPECIFIC PERFORMANCE 46 CUMULATIVE REMEDIES 47 CONFIGURATION OF THE PROJECT; OTHER TENANTS 48 AUTHORITY, GOOD STANDING, EXECUTION, DELIVERY AND TAX COMPLIANCE OF TENANT. 49 LIMITATION OF LANDLORD’S LIABILITY 50 NOTICES 51 NO REPRESENTATIONS, WARRANTIES OR COVENANTS. This material is protected by copyright. Copyright © 2004 various authors and the Association of Corporate Counsel (ACC). 7 ACC's 2004 ANNUAL MEETING THE NEW FACE OF IN-HOUSE COUNSEL 52 NON-DISCRIMINATION 53 SECURITY 54 BROKERS. 55 RELATIONSHIP OF PARTIES. 56 CONSTRUCTION OF THIS LEASE; GOVERNING LAW. 57 MERGER 58 ACCORD AND SATISFACTION. 59 SURVIVAL OF OBLIGATIONS. 60 COUNTERCLAIM AND JURY TRIAL. 61 QUITCLAIM DEED. Exhibit A - Floor Plan Exhibit A-1 - Legal Description Exhibit B - Description of Landlord’s Work and Tenant’s Work Exhibit C - Sign Criteria Exhibit D - Form of Statement of Gross
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