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Video of The Lease is the Law

Start Transcript The Lease is the Law

Commercial leases can be really complicated. Leasing makes a lot of sense sometimes for both the landlord and the tenant. There are some good business reasons to lease. Sometimes it makes more sense than buying a building, even if you can afford to buy a building, but there is some complexity that gets introduced into that relationship. The relationship is usually governed by the terms of the lease.

When it comes to residential real estate in Arizona, there is a significant amount of statutory law that governs the relationship between the landlord and the tenant. The lease agreement between the landlord and tenant, when you’re talking about residential property, is almost always subject to the statute. But when you’re talking about commercial property, there is actually very little law that, in terms of a statutory framework, that governs how that relationship is going to operate.

Usually what you will find, and this is a saying that real estate lawyers use, is that the lease is the law. You want to know what the law is governing your lease agreement? Look at the lease. Usually the terms in those leases are enforceable. Courts rarely step into those situations and say, “Ah, we’re going to rewrite this. We don’t think this is fair and we think you’re taking advantage of this unsophisticated commercial tenant.” The court does that all the time in the case of residential leases, very reluctant to do that in the case of commercial leases.

It’s important to know that. The judge is not going to rescue you when something goes bad on your lease. You need to negotiate for the right terms at the outset of your lease. Also, if you’re coming at it from the landlord side of things, you need to recognize the power that you have in that negotiation, because those terms are going to be very important to you as the landlord.

Because you may have many properties out there that are being governed by this commercial lease form that you use on all your properties, it’s going to be a lot more important to you to preserve those terms than it’s going to be for your tenant in this 1 property to have a certain term. The landlord really does have quite a bit of negotiating power there, but it is something that both sides of the transaction really need to understand before they sign a lease agreement.

End Transcript The Lease is the Law