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Learning Objectives:
Guidelines
Note: See grading rubrics for Short Assignment #1 – Reviewing a Commercial Lease
Readings and Research
Chapter 49 (Landlord-Tenant Law); Internet research on issues to consider when entering into a commercial lease.
Assignment [total point value 30 points]
Read the commercial lease agreement that has been modified for this assignment. Identify ten (10) terms in the lease that are important to the landlord and tenant. Explain the importance of each term or condition from the perspective of the landlord and then the tenant.
Number each term that you have identified in numerical order: 1, 2, 3, etc. Identify where the term can be found in the lease agreement. (For example: 1. Termination date of lease, Article 2, Section 2 – ….) Your comments for each term identified should be in a separate paragraph.
COMMERCIAL LEASE AGREEMENT.docx
COMMERCIAL LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into on December 1, 2013, by and between ABC,
LLC, whose address is 12345 El Monte Road, Los Altos Hills, California 94022 (hereinafter referred to
as “Landlord”), and XYZ, LLC, whose address is 6789 Main Street, Any City, California 94612
(hereinafter referred to as “Tenant”).
ARTICLE I – GRANT OF LEASE
Landlord, in consideration of the rents to be paid and the covenants and agreements to be performed and
observed by the Tenant, does hereby lease to the Tenant and the Tenant does hereby lease and take from
the Landlord the property described in Exhibit “A” attached hereto and by reference made a part hereof
(the “Leased Premises”), together with, as part of the parcel, all improvements located thereon.
ARTICLE II – LEASE TERM
Section l. Term of Lease. The term of this Lease shall begin on the Commencement Date, as defined in
Section 2 of this Article II, and shall terminate on May 31, 2025 (“the Termination Date”); provided,
however, that at the option of Tenant, Tenant may renew this Lease for five additional successive oneyear terms at a Monthly Rent of $8,000 per month, provided that notice of such renewal is given in
writing no less than 120 days prior to the Termination Date or the expiration of any one-year renewal
term. Tenant may at any time cancel this Lease and terminate all of its obligations hereunder by the
payment of $50,000, plus all other amounts then due under this Lease.
Section 2. Commencement Date. The “Commencement Date” shall mean December 1, 2020.
ARTICLE III – EXTENSIONS
The parties hereto may elect to extend this Agreement upon such terms and conditions as may be agreed
upon in writing and signed by the parties at the time of any such extension.
ARTICLE IV – DETERMINATION OF RENT
Section 1. Monthly Rent: The Tenant agrees to pay the Landlord and the Landlord agrees to accept,
during the term hereof, at such place as the Landlord shall from time to time direct by notice to the
Tenant, monthly rent set forth in the following table:
Initial Period of December 1, 2020 to May 31, 2021:
June 1, 2021 to May 31, 2022: $ 8,000.00
June 1, 2022 to May 31, 2023: $ 8,500.00
June 1, 2023 to May 31, 2024: $ 9,000.00
June 1, 2024 to May 31, 2025: $ 9,500.00
$
Section 2. Late Fee. A late fee in the amount of 5% of the Monthly Rent shall be assessed if payment is
not postmarked or received by Landlord on or before the tenth day of each month.
ARTICLE V – SECURITY DEPOSIT
The Tenant has deposited with the Landlord the sum of Twenty Thousand Dollars ($20,000.00) as
security for the full and faithful performance by the Tenant of all the terms of this lease required to be
performed by the Tenant. Such sum shall be returned to the Tenant after the expiration of this lease,
provided the Tenant has fully and faithfully carried out all of its terms. In the event of a bona fide sale of
the property of which the leased premises are a part, the Landlord shall have the right to transfer the
security to the purchaser to be held under the terms of this lease, and the Landlord shall be released from
all liability for the return of such security to the Tenant.
ARTICLE VI – TAXES
Section l. Personal Property Taxes. The Tenant shall be liable for all taxes levied against any leasehold
interest of the Tenant or personal property and trade fixtures owned or placed by the Tenant in the Leased
Premises.
Section 2. Real Estate Taxes. During the continuance of this lease Landlord shall deliver to Tenant a
copy of any real estate taxes and assessments against the Leased Property. From and after the
Commencement Date, the Tenant shall pay to Landlord not later than twenty-one (21) days after the day
on which the same may become initially due, all real estate taxes and assessments applicable to the
Leased Premises, together with any interest and penalties lawfully imposed thereon as a result of Tenant’s
late payment thereof, which shall be levied upon the Leased Premises during the term of this Lease.
Section 3. Contest of Taxes. The Tenant, at its own cost and expense, may, if it shall in good faith so
desire, contest by appropriate proceedings the amount of any personal or real property tax. The Tenant
may, if it shall so desire, endeavor at any time or times, by appropriate proceedings, to obtain a reduction
in the assessed valuation of the Leased Premises for tax purposes. In any such event, if the Landlord
agrees, at the request of the Tenant, to join with the Tenant at Tenant’s expense in said proceedings and
the Landlord agrees to sign and deliver such papers and instruments as may be necessary to prosecute
such proceedings, the Tenant shall have the right to contest the amount of any such tax and the Tenant
shall have the right to withhold payment of any such tax, if the statute under which the Tenant is
contesting such tax so permits.
Section 4. Payment of Ordinary Assessments. The Tenant shall pay all assessments, ordinary and
extraordinary, attributable to or against the Leased Premises not later than twenty-one (21) days after the
day on which the same became initially due. The Tenant may take the benefit of any law allowing
assessments to be paid in installments and in such event the Tenant shall only be liable for such
installments of assessments due during the term hereof.
Section 5. Changes in Method of Taxation. Landlord and Tenant further agree that if at any time during
the term of this Lease, the present method of taxation or assessment of real estate shall be changed so that
the whole or any part of the real estate taxes, assessment or governmental impositions now levied,
assessed or imposed on the Leased Premises shall, in lieu thereof, be assessed, levied, or imposed wholly
or in part, as a capital levy or otherwise upon the rents reserved herein or any part thereof, or as a tax,
corporation franchise tax, assessment, levy or charge, or any part thereof, measured by or based, in whole
or in part, upon the Leased Premises or on the rents derived therefrom and imposed upon the Landlord,
then the Tenant shall pay all such taxes, assessments, levies, impositions, or charges. Nothing contained
in this Lease shall require the Tenant to pay an estate, inheritance, succession, capital levy, corporate
franchise, gross receipts, transfer or income tax of the Landlord, nor shall any of the same be deemed real
estate taxes as defined herein unless the same be imposed in lieu of the real estate taxes.
ARTICLE VII – CONSTRUCTION AND COMPLETION
Section 1. Improvements by Tenant. Tenant may have prepared plans and specifications for the
construction of improvements, and, if so, such plans and specifications are attached hereto as Exhibit “B”
and incorporated herein by reference. Tenant shall obtain all certificates, permits, licenses and other
authorizations of governmental bodies or authorities which are necessary to permit the construction of the
improvements on the demised premises and shall keep the same in full force and effect at Tenant’s cost.
Tenant shall negotiate, let and supervise all contracts for the furnishing of services, labor, and materials
for the construction of the improvements on the demised premises at its cost. All such contracts shall
require the contracting party to guarantee performance and all workmanship and materials installed by it
for a period of one year following the date of completion of construction. Tenant shall cause all contracts
to be fully and completely performed in a good and workmanlike manner, all to the effect that the
improvements shall be fully and completely constructed and installed in accordance with good
engineering and construction practice.
During the course of construction, Tenant shall, at its cost, keep in full force and effect a policy of
builder’s risk and liability insurance in a sum equal, from time to time, to three times the amount
expended for construction of the improvements. All risk of loss or damage to the improvements during
the course of construction shall be on Tenant with the proceeds from insurance thereon payable to
Landlord.
Upon completion of construction, Tenant shall, at its cost, obtain an occupancy permit and all other
permits or licenses necessary for the occupancy of the improvements and the operation of the same as set
out herein and shall keep the same in force.
Nothing herein shall alter the intent of the parties that Tenant shall be fully and completely responsible for
all aspects pertaining to the construction of the improvements of the demised premises and for the
payment of all costs associated therewith. Landlord shall be under no duty to investigate or verify
Tenant’s compliance with the provision herein. Moreover, neither Tenant nor any third party may
construe the permission granted Tenant hereunder to create any responsibility on the part of the Landlord
to pay for any improvements, alterations or repairs occasioned by the Tenant. The Tenant shall keep the
property free and clear of all liens and, should the Tenant fail to do so, or to have any liens removed from
the property within fourteen (14) days of notification to do so by the Landlord , in addition to all other
remedies available to the Landlord , the Tenant shall indemnify and hold the Landlord harmless for all
costs and expenses, including attorney’s fees, occasioned by the Landlord in having said lien removed
from the property; and, such costs and expenses shall be billed to the Tenant monthly and shall be payable
by the Tenant with that month’s regular monthly rental as additional reimburseable expenses to the
Landlord by the Tenant.
Section 2. Utilities. Tenant shall pay for all water, sanitation, sewer, electricity, light, heat, gas, power,
fuel, janitorial, and other services incident to Tenant’s use of the Leased Premises, whether or not the cost
thereof be a charge or imposition against the Leased Premises.
ARTICLE VIII – OBLIGATIONS FOR REPAIRS
Section 1. Landlord’s Repairs. Subject to any provisions herein to the contrary, and except for
maintenance or replacement necessitated as the result of the act or omission of sublessees, licensees or
contractors, the Landlord shall be required to repair only defects, deficiencies, deviations or failures of
materials or workmanship in the building. The Landlord shall keep the Leased Premises free of such
defects, deficiencies, deviations or failures during the first twelve (12) months of the term hereof.
Section 2. Tenant’s Repairs. The Tenant shall repair and maintain the Leased Premises in good order and
condition, except for reasonable wear and tear, the repairs required of Landlord pursuant hereto, and
maintenance or replacement necessitated as the result of the act or omission or negligence of the
Landlord, its employees, agents, or contractors.
Section 3. Requirements of the Law. The Tenant agrees that if any federal, state or municipal
government or any department or division thereof shall condemn the Leased Premises or any part thereof
as not in conformity with the laws and regulations relating to the construction thereof as of the
commencement date with respect to conditions latent or otherwise which existed on the Commencement
Date, or, with respect to items which are the Landlord’s duty to repair pursuant to Section 1 and 3 of this
Article; and such federal, state or municipal government or any other department or division thereof, has
ordered or required, or shall hereafter order or require, any alterations or repairs thereof or installations
and repairs as may be necessary to comply with such laws, orders or requirements (the validity of which
the Tenant shall be entitled to contest); and if by reason of such laws, orders or the work done by the
Landlord in connection therewith, the Tenant is deprived of the use of the Leased Premises, the rent shall
be abated or adjusted, as the case may be, in proportion to that time during which, and to that portion of
the Leased Premises of which, the Tenant shall shall be deprived as a result thereof, and the Landlord
shall be obligated to make such repairs, alterations or modifications at Landlord’s expense.
All such rebuilding, altering, installing and repairing shall be done in accordance with Plans and
Specifications approved by the Tenant, which approval shall not be unreasonably withheld. If, however,
such condemnation, law, order or requirement, as in this Article set forth, shall be with respect to an item
which shall be the Tenant’s obligation to repair pursuant to Section 2 of this Article VII or with respect to
Tenant’s own costs and expenses, no abatement or adjustment of rent shall be granted; provided, however,
that Tenant shall also be entitled to contest the validity thereof.
Section 4. Tenant’s Alterations. The Tenant shall have the right, at its sole expense, from time to time, to
redecorate the Leased Premises and to make such non-structural alterations and changes in such parts
thereof as the Tenant shall deem expedient or necessary for its purposes; provided, however, that such
alterations and changes shall neither impair the structural soundness nor diminish the value of the Leased
Premises. The Tenant may make structural alterations and additions to the Leased Premises provided that
Tenant has first obtained the consent thereto of the Landlord in writing. The Landlord agrees that it shall
not withhold such consent unreasonably. The Landlord shall execute and deliver upon the request of the
Tenant such instrument or instruments embodying the approval of the Landlord which may be required by
the public or quasi public authority for the purpose of obtaining any licenses or permits for the making of
such alterations, changes and/or installations in, to or upon the Leased Premises and the Tenant agrees to
pay for such licenses or permits. The parties understand that a portion of the Leased Premises requires
environmental remediation, and the Tenant anticipates that it will undertake such remediation and will be
responsible therefore as if it were a structural alteration or addition set forth above.
Section 5. Permits and Expenses. Each party agrees that it will procure all necessary permits for making
any repairs, alterations, or other improvements for installations, when applicable. Each Party hereto shall
give written notice to the other party of any repairs required of the other pursuant to the provisions of this
Article and the party responsible for said repairs agrees promptly to commence such repairs and to
prosecute the same to completion diligently, subject, however, to the delays occasioned by events beyond
the control of such party.
Each party agrees to pay promptly when due the entire cost of any work done by it upon the Leased
Premises so that the Leased Premises at all times shall be free of liens for labor and materials. Each party
further agrees to hold harmless and indemnify the other party from and against any and all injury, loss,
claims or damage to any person or property occasioned by or arising out of the doing of any such work by
such party or its employees, agents or contractors. Each party further agrees that in doing such work that
it will employ materials of good quality and comply with all governmental requirements, and perform
such work in a good and workmanlike manner.
ARTICLE IX – TENANT’S COVENANTS
Section 1. Tenant’s Covenants. Tenant covenants and agrees as follows:
a. To procure any licenses and permits required for any use made of the Leased Premises by Tenant, and
upon the expiration or termination of this Lease, to remove its goods and effects and those of all persons
claiming under it, and to yield up peaceably to Landlord the Leased Premises in good order, repair and
condition in all respects; excepting only damage by fire and casualty covered by Tenant’s insurance
coverage, structural repairs (unless Tenant is obligated to make such repairs hereunder) and reasonable
wear and tear;
b. To permit Landlord and its agents to examine the Leased Premises at reasonable times and to show the
Leased Premises to prospective purchasers of the Building and to provide Landlord, if not already
available, with a set of keys for the purpose of said examination, provided that Landlord shall not thereby
unreasonably interfere with the conduct of Tenant’s business;
c. To permit Landlord to enter the Leased Premises to inspect such repairs, improvements, alterations or
additions thereto as may be required under the provisions of this Lease. If, as a result of such repairs,
improvements, alterations, or additions, Tenant is deprived of the use of the Leased Premises, the rent
shall be abated or adjusted, as the case may be, in proportion to that time during which, and to that portion
of the Leased Premises of which, Tenant shall be deprived as a result thereof.
ARTICLE X – INDEMNITY BY TENANT
Section l. Indemnity and Public Liability. The Tenant shall save Landlord harmless and indemnify
Landlord from all injury, loss, claims or damage to any person or property while on the Leased Premises,
unless caused by the willful acts or omissions or gross negligence of Landlord, its employees, agents,
licensees or contractors. Tenant shall maintain, with respect to the Leased Premises, public liability
insurance with limits of not less than one million dollars for injury or death from one accident and
$250,000.00 property damage insurance, insuring Landlord and Tenant against injury to persons or
damage to property on or about the Leased Premises. A copy of the policy or a certificate of insurance
shall be delivered to Landlord on or before the commencement date and no such policy shall be
cancellable without ten (10) days prior written notice to Landlord.
ARTICLE XI – USE OF PROPERTY BY TENANT
Section 1. Use. The Leased Premises may be occupied and used by Tenant exclusively for restaurant or
coffee shop.
Nothing herein shall give Tenant the right to use the property for any other purpose or to sublease, assign,
or license the use of the property to any sublessee, assignee, or licensee, which or who shall use the
property for any other use.
ARTICLE XII – SIGNAGE
Section l. Exterior Signs. Tenant shall have the right, at its sole risk and expense and in conformity with
applicable laws and ordinances, to erect and thereafter, to repair or replace, if it shall so elect signs on any
portion of the Leased Premises, providing that Tenant shall remove any such signs upon termination of
this lease, and repair all damage occasioned thereby to the Leased Premises.
Section 2. Interior Signs. Tenant shall have the right, at its sole risk and expense and in conformity with
applicable laws and ordinances, to erect, maintain, place and install its usual and customary signs and
fixtures in the interior of the Leased Premises.
ARTICLE XIII – INSURANCE
Section 1. Insurance Proceeds. In the event of any damage to or destruction of the Leased Premises,
Tenant shall adjust the loss and settle all claims with the insurance companies issuing such policies. The
parties hereto do irrevocably assign the proceeds from such insurance policies for the purposes hereinafter
stated to any institutional first mortgagee or to Landlord and Tenant jointly, if no institutional first
mortgagee then holds an interest in the Leased Premises. All proceeds of said insurance shall be paid into
a trust fund under the control of any institutional first mortgagee, or of Landlord and Tenant if no
institutional first mortgagee then holds an interest in the Leased Premises, for repair, restoration,
rebuilding or replacement, or any combination thereof, of the Leased Premises or of the improvements in
the Leased Premises. In case of such damage or destruction, Landlord shall be entitled to make
withdrawals from such trust fund, from time to time, upon presentation of:
a. bills for labor and materials expended in repair, restoration, rebuilding or replacement, or any
combination thereof;
b. Landlord’s sworn statement that such labor and materials for which payment is being made have been
furnished or delivered on site; and
c. the certificate of a supervising architect (selected by Landlord and Tenant and approved by an
institutional first mortgagee, if any, whose fees will be paid out of said insurance proceeds) certifying that
the work being paid for has been completed in accordance with the Plans and Specifications previously
approved by Landlord , Tenant and any institutional first mortgagee in a first class, good and
workmanlike manner and in accordance with all pertinent governmental requirements.
Any insurance proceeds in excess of such proceeds as shall be necessary for such repair, restoration,
rebuilding, replacement or any combination thereof shall be the sole property of Landlord subject to any
rights therein of Landlord’s mortgagee, and if the proceeds necessary for such repair, restoration,
rebuilding or replacement, or any combination thereof shall be inadequate to pay the cost thereof, Tenant
shall suffer the deficiency.
Section 2. Subrogation. Landlord and Tenant hereby release each other, to the extent of the insurance
coverage provided hereunder, from any and all liability or responsibility (to the other or anyone claiming
through or under the other by way of subrogation or otherwise) for any loss to or damage of property
covered by the fire and extended coverage insurance policies insuring the Leased Premises and any of
Tenant’s property, even if such loss or damage shall have been caused by the fault or negligence of the
other party.
Section 3. Contribution. Tenant shall reimburse Landlord for all insurance premiums connected with or
applicable to the Leased Premises for whatever insurance policy the Landlord , at its sole and exclusive
option, should select.
ARTICLE XIV – DAMAGE TO DEMISED PREMISES
Section 1. Abatement or Adjustment of Rent. If the whole or any part of the Leased Premises shall be
damaged or destroyed by fire or other casualty after the execution of this Lease and before the termination
hereof, then in every case the rent reserved in Article IV herein and other charges, if any, shall be abated
or adjusted, as the case may be, in proportion to that portion of the Leased Premises of which Tenant shall
be deprived on account of such damage or destruction and the work of repair, restoration, rebuilding, or
replacement or any combination thereof, of the improvements so damaged or destroyed, shall in no way
be construed by any person to effect any reduction of sums or proceeds payable under any rent insurance
policy.
Section 2. Repairs and Restoration. Landlord agrees that in the event of the damage or destruction of the
Leased Premises, Landlord forthwith shall proceed to repair, restore, replace or rebuild the Leased
Premises (excluding Tenant’s leasehold improvements), to substantially the condition in which the same
were immediately prior to such damage or destruction. The Landlord thereafter shall diligently prosecute
said work to completion without delay or interruption except for events beyond the reasonable control of
Landlord . Notwithstanding the foregoing, if Landlord does not either obtain a building permit within
ninety (90) days of the date of such damage or destruction, or complete such repairs, rebuilding or
restoration and comply with conditions (a), (b) and (c) in Section 1 of Article XIII within nine (9) months
of such damage or destruction, then Tenant may at any time thereafter cancel and terminate this Lease by
sending ninety (90) days written notice thereof to Landlord , or, in the alternative, Tenant may, during
said ninety (90) day period, apply for the same and Landlord shall cooperate with Tenant in Tenant’s
application. Notwithstanding the foregoing, if such damage or destruction shall occur during the last year
of the term of this Lease, or during any renewal term, and shall amount to twenty-five (25%) percent or
more of the replacement cost, (exclusive of the land and foundations), this Lease, except as hereinafter
provided in Section 3 of Article XV, may be terminated at the election of either Landlord or Tenant,
provided that notice of such election shall be sent by the party so electing to the other within thirty (30)
days after the occurrence of such damage or destruction. Upon termination, as aforesaid, by either party
hereto, this Lease and the term thereof shall cease and come to an end, any unearned rent or other charges
paid in advance by Tenant shall be refunded to Tenant, and the parties shall be released hereunder, each to
the other, from all liability and obligations hereunder thereafter arising.
ARTICLE XV – CONDEMNATION
Section 1. Total Taking. If, after the execution of this Lease and prior to the expiration of the term
hereof, the whole of the Leased Premises shall be taken under power of eminent domain by any public or
private authority, or conveyed by Landlord to said authority in lieu of such taking, then this Lease and the
term hereof shall cease and terminate as of the date when possession of the Leased Premises shall be
taken by the taking authority and any unearned rent or other charges, if any, paid in advance, shall be
refunded to Tenant.
Section 2. Partial Taking. If, after the execution of this Lease and prior to the expiration of the term
hereof, any public or private authority shall, under the power of eminent domain, take, or Landlord shall
convey to said authority in lieu of such taking, property which results in a reduction by fifteen (15%)
percent or more of the area in the Leased Premises, or of a portion of the Leased Premises that
substantially interrupts or substantially obstructs the conducting of business on the Leased Premises; then
Tenant may, at its election, terminate this Lease by giving Landlord notice of the exercise of Tenant’s
election within thirty (30) days after Tenant shall receive notice of such taking. In the event of termination
by Tenant under the provisions of Section 1 of this Article XV, this Lease and the term hereof shall cease
and terminate as of the date when possession shall be taken by the appropriate authority of that portion of
the Entire Property that results in one of the above takings, and any unearned rent or other charges, if any,
paid in advance by Tenant shall be refunded to Tenant.
Section 3. Restoration. In the event of a taking in respect of which Tenant shall not have the right to
elect to terminate this Lease or, having such right, shall not elect to terminate this Lease, this Lease and
the term thereof shall continue in full force and effect and Landlord , at Landlord’s sole cost and expense,
forthwith shall restore the remaining portions of the Leased Premises, including any and all improvements
made theretofore to an architectural whole in substantially the same condition that the same were in prior
to such taking. A just proportion of the rent reserved herein and any other charges payable by Tenant
hereunder, according to the nature and extent of the injury to the Leased Premises and to Tenant’s
business, shall be suspended or abated until the completion of such restoration and thereafter the rent and
any other charges shall be reduced in proportion to the square footage of the Leased Premises remaining
after such taking.
Section 4. The Award. All compensation awarded for any taking, whether for the whole or a portion of
the Leased Premises, shall be the sole property of the Landlord whether such compensation shall be
awarded for diminution in the value of, or loss of, the leasehold or for diminution in the value of, or loss
of, the fee in the Leased Premises, or otherwise. The Tenant hereby assigns to Landlord all of Tenant’s
right and title to and interest in any and all such compensation. However, the Landlord shall not be
entitled to and Tenant shall have the sole right to make its independent claim for and retain any portion of
any award made by the appropriating authority directly to Tenant for loss of business, or damage to or
depreciation of, and cost of removal of fixtures, personally and improvements installed in the Leased
Premises by, or at the expense of Tenant, and to any other award made by the appropriating authority
directly to Tenant.
Section 5. Release. In the event of any termination of this Lease as the result of the provisions of this
Article XV, the parties, effective as of such termination, shall be released, each to the other, from all
liability and obligations thereafter arising under this lease.
ARTICLE XVI – DEFAULT
Section 1. Landlord’s Remedies. In the event that:
a. Tenant shall on three or more occasions be in default in the payment of rent or other charges herein
required to be paid by Tenant (default herein being defined as payment received by Landlord ten or more
days subsequent to the due date), regardless of whether or not such default has occurred on consecutive or
non-consecutive months; or
b. Tenant has caused a lien to be filed against the Landlord’s property and said lien is not removed within
thirty (30) days of recordation thereof; or
c. Tenant shall default in the observance or performance of any of the covenants and agreements required
to be performed and observed by Tenant hereunder for a period of thirty (30) days after notice to Tenant
in writing of such default (or if such default shall reasonably take more than thirty (30) days to cure,
Tenant shall not have commenced the same within the thirty (30) days and diligently prosecuted the same
to completion); or
d. Sixty (60) days have elapsed after the commencement of any proceeding by or against Tenant, whether
by the filing of a petition or otherwise, seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the present or future Federal Bankruptcy Act
or any other present or future applicable federal, state or other statute or law, whereby such proceeding
shall not have been dismissed (provided, however, that the non-dismissal of any such proceeding shall not
be a default hereunder so long as all of Tenant’s covenants and obligations hereunder are being performed
by or on behalf of Tenant); then Landlord shall be entitled to its election (unless Tenant shall cure such
default prior to such election), to exercise concurrently or successively, any one or more of the following
rights:
I. Terminate this Lease by giving Tenant notice of termination, in which event this Lease shall expire and
terminate on the date specified in such notice of termination, with the same force and effect as though the
date so specified were the date herein originally fixed as the termination date of the term of this Lease,
and all rights of Tenant under this Lease and in and to the Premises shall expire and terminate, and Tenant
shall remain liable for all obligations under this Lease arising up to the date of such termination, and
Tenant shall surrender the Premises to Landlord on the date specified in such notice; or
ii. Terminate this Lease as provided herein and recover from Tenant all damages Landlord may incur by
reason of Tenant’s default, including, without limitation, a sum which, at the date of such termination,
represents the then value of the excess, if any, of (a) the Minimum Rent, Percentage Rent, Taxes and all
other sums which would have been payable hereunder by Tenant for the period commencing with the day
following the date of such termination and ending with the date herein before set for the expiration of the
full term hereby granted, over (b) the aggregate reasonable rental value of the Premises for the same
period, all of which excess sum shall be deemed immediately due and payable; or
iii. Without terminating this Lease, declare immediately due and payable all Minimum Rent, Taxes, and
other rents and amounts due and coming due under this Lease for the entire remaining term hereof,
together with all other amounts previously due, at once; provided, however, that such payment shall not
be deemed a penalty or liquidated damages but shall merely constitute payment in advance of rent for the
remainder of said term. Upon making such payment, Tenant shall be entitled to receive from Landlord all
rents received by Landlord from other assignees, tenants, and subtenants on account of said Premises
during the term of this Lease, provided that the monies to which tenant shall so become entitled shall in
no event exceed the entire amount actually paid by Tenant to Landlord pursuant to the preceding sentence
less all costs, expenses and attorney’s fees of Landlord incurred in connection with the reletting of the
Premises; or
iv. Without terminating this Lease, and with or without notice to Tenant, Landlord may in its own name
but as agent for Tenant enter into and upon and take possession of the Premises or any part thereof, and,
at landlord’s option, remove persons and property therefrom, and such property, if any, may be removed
and stored in a warehouse or elsewhere at the cost of, and for the account of Tenant, all without being
deemed guilty of trespass or becoming liable for any loss or damage which may be occasioned thereby,
and Landlord may rent the Premises or any portion thereof as the agent of Tenant with or without
advertisement, and by private negotiations and for any term upon such terms and conditions as Landlord
may deem necessary or desirable in order to relet the Premises. Landlord shall in no way be responsible
or liable for any rental concessions or any failure to rent the Premises or any part thereof, or for any
failure to collect any rent due upon such reletting. Upon such reletting, all rentals received by Landlord
from such reletting shall be applied: first, to the payment of any indebtedness (other than any rent due
hereunder) from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting,
including, without limitation, brokerage fees and attorney’s fees and costs of alterations and repairs; third,
to the payment of rent and other charges then due and unpaid hereunder; and the residue, if any shall be
held by Landlord to the extent of and for application in payment of future rent as the same may become
due and payable hereunder. In reletting the Premises as aforesaid, Landlord may grant rent concessions
and Tenant shall not be credited therefor. If such rentals received from such reletting shall at any time or
from time to time be less than sufficient to pay to Landlord the entire sums then due from Tenant
hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall, at Landlord’s option,
be calculated and paid monthly. No such reletting shall be construed as an election by Landlord to
terminate this Lease unless a written notice of such election has been given to Tenant by Landlord.
Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to
terminate this Lease for any such previous default provided same has not been cured; or
v. Without liability to Tenant or any other party and without constituting a constructive or actual
eviction, suspend or discontinue furnishing or rendering to Tenant any property, material, labor, Utilities
or other service, whether Landlord is obligated to furnish or render the same, so long as Tenant is in
default under this Lease; or
vi. Allow the Premises to remain unoccupied and collect rent from Tenant as it comes due; or
vii. Foreclose the security interest described herein, including the immediate taking of possession of all
property on or in the Premises; or
viii. Pursue such other remedies as are available at law or equity.
e. Landlord’s pursuit of any remedy of remedies, including without limitation, any one or more of the
remedies stated herein shall not (1) constitute an election of remedies or preclude pursuit of any other
remedy or remedies provided in this Lease or any other remedy or remedies provided by law or in equity,
separately or concurrently or in any combination, or (2) sever as the basis for any claim of constructive
eviction, or allow Tenant to withhold any payments under this Lease.
Section 2. Landlord’s Self Help. If in the performance or observance of any agreement or condition in
this Lease contained on its part to be performed or observed and shall not cure such default within thirty
(30) days after notice from Landlord specifying the default (or if such default shall reasonably take more
than thirty (30) days to cure, shall diligently prosecuted the same to completion), Landlord may, at its
option, without waiving any claim for damages for breach of agreement, at any time thereafter cure such
default for the account of Tenant, and any amount paid or contractual liability incurred by Landlord in so
doing shall be deemed paid or incurred for the account of Tenant and Tenant agrees to reimburse
Landlord therefor and save Landlord harmless therefrom. Provided, however, that Landlord may cure any
such default as aforesaid prior to the expiration of said waiting period, without notice to Tenant if any
emergency situation exists, or after notice to Tenant, if the curing of such default prior to the expiration of
said waiting period is reasonably necessary to protect the Leased Premises or Landlord’s interest therein,
or to prevent injury or damage to persons or property. If Tenant shall fail to reimburse Landlord upon
demand for any amount paid for the account of Tenant hereunder, said amount shall be added to and
become due as a part of the next payment of rent due and shall for all purposes be deemed and treated as
rent hereunder.
Section 3. Tenant’s Self Help. If Landlord shall default in the performance or observance of any
agreement or condition in this Lease contained on its part to be performed or observed, and if Landlord
shall not cure such default within thirty (30) days after notice from Tenant specifying the default (or, if
such default shall reasonably take more than thirty (30) days to cure, and Landlord shall not have
commenced the same within the thirty (30) days and diligently prosecuted the same to completion),
Tenant may, at its option, without waiving any claim for damages for breach of agreement, at any time
thereafter cure such default for the account of Landlord and any amount paid or any contractual liability
incurred by Tenant in so doing shall be deemed paid or incurred for the account of Landlord and Landlord
shall reimburse Tenant therefor and save Tenant harmless therefrom. Provided, however, that Tenant may
cure any such default as aforesaid prior to the expiration of said waiting period, without notice to
Landlord if an emergency situation exists, or after notice to Landlord , if the curing of such default prior
to the expiration of said waiting period is reasonably necessary to protect the Leased Premises or Tenant’s
interest therein or to prevent injury or damage to persons or property. If Landlord shall fail to reimburse
Tenant upon demand for any amount paid or liability incurred for the account of Landlord hereunder, said
amount or liability may be deducted by Tenant from the next or any succeeding payments of rent due
hereunder; provided, however, that should said amount or the liability therefor be disputed by Landlord,
Landlord may contest its liability or the amount thereof, through arbitration or through a declaratory
judgment action and Landlord shall bear the cost of the filing fees therefor.
ARTICLE XVII – TITLE
Section l. Subordination. Tenant shall, upon the request of Landlord in writing, subordinate this Lease to
the lien of any present or future institutional mortgage upon the Leased Premises irrespective of the time
of execution or the time of recording of any such mortgage. Provided, however, that as a condition to
such subordination, the holder of any such mortgage shall enter first into a written agreement with Tenant
in form suitable for recording to the effect that:
a. in the event of foreclosure or other action taken under the mortgage by the holder thereof, this Lease
and the rights of Tenant hereunder shall not be disturbed but shall continue in full force and effect so long
as Tenant shall not be in default hereunder, and
b. such holder shall permit insurance proceeds and condemnation proceeds to be used for any restoration
and repair required by the provisions of Articles XIII, XIV or XV, respectively. Tenant agrees that if the
mortgagee or any person claiming under the mortgagee shall succeed to the interest of Landlord in this
Lease, Tenant will recognize said mortgagee or person as its Landlord under the terms of this Lease,
provided that said mortgagee or person for the period during which said mortgagee or person respectively
shall be in possession of the Leased Premises and thereafter their respective successors in interest shall
assume all of the obligations of Landlord hereunder. The word “mortgage”, as used herein includes
mortgages, deeds of trust or other similar instruments, and modifications, and extensions thereof. The
term “institutional mortgage” as used in this Article XVII means a mortgage securing a loan from a bank
(commercial or savings) or trust company, insurance company or pension trust or any other lender
institutional in nature and constituting a lien upon the Leased Premises.
Section 2. Quiet Enjoyment. Landlord covenants and agrees that upon Tenant paying the rent and
observing and performing all of the terms, covenants and conditions on Tenant’s part to be observed and
performed hereunder, that Tenant may peaceably and quietly have, hold, occupy and enjoy the Leased
Premises in accordance with the terms of this Lease without hindrance or molestation from Landlord or
any persons lawfully claiming through Landlord .
Section 3. Zoning and Good Title. Landlord warrants and represents, upon which warranty and
representation Tenant has relied in the execution of this Lease, that Landlord is the owner of the Leased
Premises, in fee simple absolute, free and clear of all encumbrances, except for the easements, covenants
and restrictions of record as of the date of this Lease. Such exceptions shall not impede or interfere with
the quiet use and enjoyment of the Leased Premises by Tenant. Landlord further warrants and covenants
that this Lease is and shall be a first lien on the Leased Premises, subject only to any Mortgage to which
this Lease is subordinate or may become subordinate pursuant to an agreement executed by Tenant, and
to such encumbrances as shall be caused by the acts or omissions of Tenant; that Landlord has full right
and lawful authority to execute this Lease for the term, in the manner, and upon the conditions and
provisions herein contained; that there is no legal impediment to the use of the Leased Premises as set out
herein; that the Leased Premises are not subject to any easements, restrictions, zoning ordinances or
similar governmental regulations which prevent their use as set out herein; that the Leased Premises
presently are zoned for the use contemplated herein and throughout the term of this lease may continue to
be so used therefor by virtue of said zoning, under the doctrine of “non-conforming use”, or valid and
binding decision of appropriate authority, except, however, that said representation and warranty by
Landlord shall not be applicable in the event that Tenant’s act or omission shall invalidate the application
of said zoning, the doctrine of “non-conforming use” or the valid and binding decision of the appropriate
authority. Landlord shall furnish without expense to Tenant, within thirty (30) days after written request
therefor by Tenant, a title report covering the Leased Premises showing the condition of title as of the
date of such certificate, provided, however, that Landlord’s obligation hereunder shall be limited to the
furnishing of only one such title report.
Section 4. Licenses. It shall be the Tenant’s responsibility to obtain any and all necessary licenses and
the Landlord shall bear no responsibility therefor; the Tenant shall promptly notify Landlord of the fact
that it has obtained the necessary licenses in order to prevent any delay to Landlord in commencing
construction of the Leased Premises.
ARTICLE XVIII – EXTENSIONS/WAIVERS/DISPUTES
Section l. Extension Period. Any extension hereof shall be subject to the provisions of Article III hereof.
Section 2. Holding Over. In the event that Tenant or anyone claiming under Tenant shall continue
occupancy of the Leased Premises after the expiration of the term of this Lease or any renewal or
extension thereof without any agreement in writing between Landlord and Tenant with respect thereto,
such occupancy shall not be deemed to extend or renew the term of the Lease, but such occupancy shall
continue as a tenancy at will, from month to month, upon the covenants, provisions and conditions herein
contained. The rental shall be the rental in effect during the term of this Lease as extended or renewed,
prorated and payable for the period of such occupancy.
Section 3. Waivers. Failure of either party to complain of any act or omission on the part of the other
party, no matter how long the same may continue, shall not be deemed to be a waiver by said party of any
of its rights hereunder. No waiver by either party at any time, express or implied, of any breach of any
provision of this Lease shall be deemed a waiver of a breach of any other provision of this Lease or a
consent to any subsequent breach of the same or any other provision. If any action by either party shall
require the consent or approval of the other party, the other party’s consent to or approval of such action
on any one occasion shall not be deemed a consent to or approval of said action on any subsequent
occasion or a consent to or approval of any other action on the same or any subsequent occasion. Any and
all rights and remedies which either party may have under this Lease or by operation of law, either at law
or in equity, upon any breach, shall be distinct, separate and cumulative and shall not be deemed
inconsistent with each other, and no one of them, whether exercised by said party or not, shall be deemed
to be an exclusion of any other; and any two or more or all of such rights and remedies may be exercised
at the same time.
Section 4. Disputes. It is agreed that, if at any time a dispute shall arise as to any amount or sum of
money to be paid by one party to the other under the provisions hereof, the party against whom the
obligation to pay the money is asserted shall have the right to make payment “under protest” and such
payment shall not be regarded as a voluntary payment and there shall survive the right on the part of the
said party to institute suit for the recovery of such sum. If it shall be adjudged that there was no legal
obligation on the part of said party to pay such sum or any part thereof, said party shall be entitled to
recover such sum or so much thereof as it was not legally required to pay under the provisions of this
Lease. If at any time a dispute shall arise between the parties hereto as to any work to be performed by
either of them under the provisions hereof, the party against whom the obligation to perform the work is
asserted may perform such work and pay the costs thereof “under protest” and the performance of such
work shall in no event be regarded as a voluntary performance and shall survive the right on the part of
the said party to institute suit for the recovery of the costs of such work. If it shall be adjudged that there
was no legal obligation on the part of the said party to perform the same or any part thereof, said party
shall be entitled to recover the costs of such work or the cost of so much thereof as said party was not
legally required to perform under the provisions of this Lease and the amount so paid by Tenant may be
withheld or deducted by Tenant from any rents herein reserved.
Section 5. Tenant’s Right to cure Landlord’s Default. In the event that Landlord shall fail, refuse or
neglect to pay any mortgages, liens or encumbrances, the judicial sale of which might affect the interest
of Tenant hereunder, or shall fail, refuse or neglect to pay any interest due or payable on any such
mortgage, lien or encumbrance, Tenant may pay said mortgages, liens or encumbrances, or interest or
perform said conditions and charge to Landlord the amount so paid and withhold and deduct from any
rents herein reserved such amounts so paid, and any excess over and above the amounts of said rents shall
be paid by Landlord to Tenant.
Section 6. Notices. All notices and other communications authorized or required hereunder shall be in
writing and shall be given by mailing the same by certified mail, return receipt requested, postage
prepaid, and any such notice or other communication shall be deemed to have been given when received
by the party to whom such notice or other communication shall be addressed. If intended for Landlord the
same will be mailed to the address herein above set forth or such other address as Landlord may hereafter
designate by notice to Tenant, and if intended for Tenant, the same shall be mailed to Tenant at the
address herein above set forth, or such other address or addresses as Tenant may hereafter designate by
notice to Landlord.
ARTICLE XIX – PROPERTY DAMAGE
Section l. Loss and Damage. Notwithstanding any contrary provisions of this Lease, Landlord shall not
be responsible for any loss of or damage to property of Tenant or of others located on the Leased
Premises, except where caused by the willful act or omission or negligence of Landlord , or Landlord’s
agents, employees or contractors, provided, however, that if Tenant shall notify Landlord in writing of
repairs which are the responsibility of Landlord under Article VII hereof, and Landlord shall fail to
commence and diligently prosecute to completion said repairs promptly after such notice, and if after the
giving of such notice and the occurrence of such failure, loss of or damage to Tenant’s property shall
result from the condition as to which Landlord has been notified, Landlord shall indemnify and hold
harmless Tenant from any loss, cost or expense arising therefrom.
Section 2. Force Majeure. In the event that Landlord or Tenant shall be delayed or hindered in or
prevented from the performance of any act other than Tenant’s obligation to make payments of rent,
additional rent, and other charges required hereunder, by reason of strikes, lockouts, unavailability of
materials, failure of power, restrictive governmental laws or regulations, riots, insurrections, the act,
failure to act, or default of the other party, war or other reason beyond its control, then performance of
such act shall be excused for the period of the delay and the period for the performance of such act shall
be extended for a period equivalent to the period of such delay. Notwithstanding the foregoing, lack of
funds shall not be deemed to be a cause beyond control of either party.
ARTICLE XX – OPTION TO PURCHASE
During the Term of this Lease, Tenant shall have the right to purchase the Leased Premises at any time
for a purchase price equal to Three Million Dollars ($3,000,000).
ARTICLE XXI – MISCELLANEOUS
Section 1. Assignment and Subletting. Under the terms and conditions hereunder, Tenant shall have the
absolute right to transfer and assign this lease or to sublet all or any portion of the Leased Premises or to
cease operating Tenant’s business on the Leased Premises provided that at the time of such assignment or
sublease Tenant shall not be in default in the performance and observance of the obligations imposed
upon Tenant hereunder. The use of the Leased Premises by such assignee or sublessee shall be expressly
limited by and to the provisions of this lease.
Section 2. Fixtures. All personal property, furnishings and equipment presently and all other trade
fixtures installed in or hereafter by or at the expense of Tenant and all additions and/or improvements,
exclusive of structural, mechanical, electrical, and plumbing, affixed to the Leased Premises and used in
the operation of the Tenant’s business made to, in or on the Leased Premises by and at the expense of
Tenant and susceptible of being removed from the Leased Premises without damage, unless such damage
be repaired by Tenant, shall remain the property of Tenant and Tenant may, but shall not be obligated to,
remove the same or any part thereof at any time or times during the term hereof, provided that Tenant, at
its sole cost and expense, shall make any repairs occasioned by such removal.
Section 3. Estoppel Certificates. At any time and from time to time, Landlord and Tenant each agree,
upon request in writing from the other, to execute, acknowledge and deliver to the other or to any person
designated by the other a statement in writing certifying that the Lease is unmodified and is in full force
and effect, or if there have been modifications, that the same is in full force and effect as modified (stating
the modifications), that the other party is not in default in the performance of its covenants hereunder, or
if there have been such defaults, specifying the same, and the dates to which the rent and other charges
have been paid.
Section 4. Invalidity of Particular Provision. If any term or provision of this Lease or the application
hereof to any person or circumstance shall, to any extent, be held invalid or unenforceable, the remainder
of this Lease, or the application of such term or provision to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by law.
Section 5. Captions and Definitions of Parties. The captions of the Sections of this Lease are for
convenience only and are not a part of this Lease and do not in any way limit or amplify the terms and
provisions of this Lease. The word “Landlord” and the pronouns referring thereto, shall mean, where the
context so admits or requires, the persons, firm or corporation named herein as Landlord or the mortgagee
in possession at any time, of the land and building comprising the Leased Premises. If there is more than
one Landlord, the covenants of Landlord shall be the joint and several obligations of each of them, and if
Landlord is a partnership, the covenants of Landlord shall be the joint and several obligations of each of
the partners and the obligations of the firm. Any pronoun shall be read in the singular or plural and in
such gender as the context may require. Except as in this Lease otherwise provided, the terms and
provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
Nothing contained herein shall be deemed or construed by the parties hereto nor by any third party as
creating the relationship of principal and agent or of partnership or of a joint venture between the parties
hereto, it being understood and agreed that neither any provision contained herein, nor any acts of the
parties hereto, shall be deemed to create any relationship between the parties hereto other than the
relationship of Landlord and Tenant.
Section 6. Brokerage. No party has acted as, by or through a broker in the effectuation of this
Agreement, except as set out hereinafter.
Section 7. Entire Agreement. This instrument contains the entire and only agreement between the
parties, and no oral statements or representations or prior written matter not contained in this instrument
shall have any force and effect. This Lease shall not be modified in any way except by a writing executed
by both parties.
Section 8. Governing Law. All matters pertaining to this agreement (including its interpretation,
application, validity, performance and breach) in whatever jurisdiction action may be brought, shall be
governed by, construed and enforced in accordance with the laws of the State of California. The parties
herein waive trial by jury and agree to submit to the personal jurisdiction and venue of a court of subject
matter jurisdiction located in Los Angeles County, State of California. In the event that litigation results
from or arises out of this Agreement or the performance thereof, the parties agree to reimburse the
prevailing party’s reasonable attorney’s fees, court costs, and all other expenses, whether or not taxable by
the court as costs, in addition to any other relief to which the prevailing party may be entitled. In such
event, no action shall be entertained by said court or any court of competent jurisdiction if filed more than
one year subsequent to the date the cause(s) of action actually accrued regardless of whether damages
were otherwise as of said time calculable.
Section 9. Contractual Procedures. Unless specifically disallowed by law, should litigation arise
hereunder, service of process therefor may be obtained through certified mail, return receipt requested;
the parties hereto waiving any and all rights they may have to object to the method by which service was
perfected.
Section 10. Extraordinary remedies. To the extent cognizable at law, the parties hereto, in the event of
breach and in addition to any and all other remedies available thereto, may obtain injunctive relief,
regardless of whether the injured party can demonstrate that no adequate remedy exists at law.
Section 11. Reliance on Financial Statement. Tenant shall furnish concurrently with the execution of this
lease, a financial statement of Tenant prepared by an accountant. Tenant, both in corporate capacity, if
applicable, and individually, hereby represents and warrants that all the information contained therein is
complete, true, and correct. Tenant understands that Landlord is relying upon the accuracy of the
information contained therein. Should there be found to exist any inaccuracy within the financial
statement which adversely affects Tenant’s financial standing, or should Tenant’s financial circumstances
materially change, Landlord may demand, as additional security, an amount equal to an additional two (2)
months’ rent, which additional security shall be subject to all terms and conditions herein, require a fully
executed guaranty by a third party acceptable to Landlord, elect to terminate this Lease, or hold Tenant
personally and individually liable hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above
written or have caused this Lease to be executed by their respective officers thereunto duly authorized.
ABC, LLC
XYZ, LLC
_______________________________
By: ____________________________
Its: Managing Director
__________________________________
By: _______________________________
Its: Managing Director
EXHIBIT “A” LEGAL DESCRIPTION
The following described real property, together with all improvements thereon:
Initials:
LANDLORD ______________
TENANT ______________
EXHIBIT “B” TENANT PLANS AND SPECIFICATIONS
Initials:
LANDLORD _____________
TENANT _____________
