OWM NEWSLETTER
OCTOBER 2016

ATTORNEY SPOTLIGHT

DAVID A. MEGAY

For over 25 years, I have represented clients that have purchased residential and commercial properties of all shapes, sizes and values. I have also represented business planning clients from those who are just starting their small business to those who have been large commercial and industrial businesses for generations. I was born and raised in the Tri-County area. My experience in the business community provides my clients with the tools necessary to succeed in their endeavors. I know how to get things done, and my clients benefit from that skill. I look forward to being a valuable member of your business team.

I have been a member of this firm for over 25 years and I have been a principal of same since 1995. For over 28 years I have represented clients that have purchased residential and commercial properties of all shapes, sizes and values. I have also represented business planning clients, from those who are just starting their small business to those who have been large commercial and industrial businesses for generations. I was born and raised in the Tri-County area. My experience in the business community provides my clients with the tools necessary to succeed in their endeavors. I know how to get things done, and my clients benefit from that skilled and from my experience and influence in the community. I look forward to being a valuable member of your business team.

Phone: 610-917-9347
Fax: 610-917-9348
Email: dmegay@owmlaw.com

 


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The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.

TOP FIVE ISSUES IN COMMERCIAL 
AND RESIDENTIAL LEASES

It is extremely important that landlords and tenants pay close attention to details when negotiating Leases, both commercial and residential. Failure to do so, in their zeal to complete the negotiations, results in mistakes that can cost either party, or both, substantial money, legal fees, headaches, delays, etc. The following are five (5) common mistakes that landlords and tenants make in commercial and residential Leases:

1. Failure to Use Correct Names:

In a residential Lease, it is extremely important that the landlord limit the number of adult and minor children who can reside in the leased premises. Once done, the landlord should have all of the adult tenants sign the Lease so they are all responsible for same. If you are a tenant in a commercial space, and you are doing business as a corporate entity, that corporation should be the tenant as opposed to you, individually. Many tenants do business as a corporation but yet the individual owner signs the commercial space Lease. If the corporation is the tenant, the landlord should try to negotiate a personal guarantee from all of the individual owners of the corporation. The personal guarantee could last the entire term or the parties could negotiate that the guarantee terminates after a time period, provided that the corporate tenant fully complies with the Lease terms;

2. Accurate Description of Premises:

This is rarely a problem issue in residential Leases as it is usually easy to identify the apartment number, house address, etc. In commercial Leases, it is extremely important that the parties accurately and specifically identify the premises, especially for new construction, by referring to number of square feet, parking spaces, loading dock usage, the right to use common areas, etc. We highly recommend that parties to a commercial Lease attach an exhibit which describes the layout of the premises;

3. Term:

Most residential Leases are either month-to-month or year-to-year. Commercial Leases are usually multi-year (i.e. an initial three (3) or five (5) year term). The parties must accurately set forth the beginning and ending date of each term (i.e. begins January 1, 2016 and ends on December 31, 2016). The parties should also provide for a renewal term . . . does it renew month-to-month, year-to-year, etc.? If either party wants to avoid a renewal obligation, how much of a notice must they give the other? A minimum of 30 days in the case of a monthly term? A minimum of 90 to 180 days in the case of a yearly Lease? The parties must pay attention to these issues as I have seen tenants negotiate what they believe to be a monthly term but yet it requires 90 days to terminate . . . thereby obligating themselves to a 90 day-to-90 day term. In addition, does the landlord want to give the tenant renewal options? If so, how many? What is the period within which the tenant must exercise the renewal option? The tenant should negotiate the rent for the renewal period; otherwise, the renewal option would be worthless;

4. Rent and Security Deposit:

The parties must make sure that they accurately set forth the rent for the entire term of the Lease. I have seen too many Leases that have a discrepancy between the monthly rent and the total rent due for the term, thereby causing confusion. The parties must negotiate rental increases for the renewal terms. The tenant may try to negotiate a fixed rent for a number of terms before it increases. The security deposit negotiations are relatively simple – tenants should try to limit their exposure by offering as little deposit as possible and landlords should protect themselves against subsequent default and damages by insisting upon as much as possible. Perhaps the landlord can insist upon the security deposit increasing in installments while, at the same time, the tenant could insist that some of the security deposit be returned to it so long as all terms are met; and

5. Default:

Landlords should insist that rent is due on the first of the month with a limited grace period (5 days? 15 days?). Any payment made beyond the grace period should incur a late charge (i.e., a flat fee? a percentage of the amount due?). Landlords should insist that rent double or triple if the tenant holds over (i.e.,stays in the premises beyond the termination date). Each party should insist that the Lease provide that they are eligible to collect their legal fees from the other party should the latter default. Finally, the landlord should insist upon a confession of judgment for money, and for possession, in a commercial Lease (not found in residential Leases) so as to attempt to avoid costly litigation, and delay tactics, should the tenant default. The tenant should try to negotiate both confessions of judgment out of the Lease (or, at a minimum, agreeing to confession of judgment for possession but preserving their right to defend themselves on a money judgment).

Please contact me at 610-323-2800 or email me at dmegay@owmlaw.com to review the above, and many more other issues, should you be a landlord or tenant in a commercial or residential Lease. Also, please watch the encore presentation of OWM's December 2015 Legal Talk program regarding Issues in Commercial Leases on our website here.


Upcoming Events

David A. Megay, Esq., speaking at Chester County Night School Seminar at Owen J. Roberts High School, Room 124, Pottstown, PA, on 10/26/16 from 6:30-8:30 p.m. entitled "Starting and Operating Your Own Business" (contact Chester County Night School at 610-692-1964 or online at www.chestercountynightschool.org).

Kathleen M. Martin, Esq., speaking at Chester County Night School Seminars at Owen J. Roberts High School, Pottstown, PA, on 10/12/16 from 7:00-8:30 p.m. entitled "Understanding the Unique Needs of Aging Adults from an Elder Law Perspective"; and at Owen J. Roberts High School, Pottstown, PA, on 10/26/16 from 7:00-8:30 p.m. entitled "Beyond the Simple Will" (contact Chester County Night School at 610-692-1964 or online at www.chestercountynightschool.org).

Rebecca A. Hobbs, Esq., speaking on the topic of Health Care Directives at the Fourth Annual Threshold Group Workshop at the Weaver Farm, 501 Seven Stars Road, Kimberton, PA, on 10/29/16 from 8:30 to 5:00 p.m. (to register, contact Kerry Lee via phone: 610-948-5026 or via email: musiklee@verizon.net).

Watch Legal Talk, brought to you by OWM, on PCTV, Tuesdays at 8:30 on Channel 28, and Thursdays at 9:30 p.m. on Channel 98, or on our website here.

Read Legal Ease every first and third Sunday in the Pottstown Mercury.

O'Donnell,Weiss & Mattei, P.C.

41 E. High Street
Pottstown, PA 19464
610-323-2800
Fax: 610-323-2845

347 Bridge Street, Suite 200
Phoenixville, PA 19460
610-917-9347
Fax: 610-917-9348

www.owmlaw.com