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A subordination provision is incorporated by the landlord to ensure that the tenant’s lease is subordinate to any existing or future mortgages (and ground lease, if any) of the landlord on the building.
A basic tenant SNDA LOI provision may state that, “Landlord shall provide a SNDA to tenant from landlord’s current mortgagee and from any subsequent mortgagee.”
Landlord advocates should make sure to include in the letter of intent that the tenant shall not cause or permit any hazardous substances to be brought, kept, or used in the building.
The LOI should provide whether the tenant or landlord will clean the premises, which party will pay for such cleaning, and the frequency and manner at which the premises will be cleaned.
In most commercial leases, landlords, in a seemingly subtle yet relentless manner, shift the legal and financial burden of compliance with applicable laws pertaining to its space to tenants.
Tenant advocates should include the following in the letter of intent: “Tenant shall not be required to comply with any law or to cure any illegal condition if the illegality or necessity to comply existed or arose before tenant took possession of the premises or at any time by reason of any act or omission of landlord.”
From a landlord’s perspective, the LOI provisions need to contain a high degree of broadness.
If a tenant’s principal and its team do not properly negotiate an exit strategy in the good guy guarantee (“GGG”), the tenant’s principal who signs as guarantor of the lease will generally remain subject to personal liability for the full term of the lease and any renewals thereof, even after his or her business is sold (despite the fact that he or she no longer possesses control over what may or may not transpire relative to that space during the period subsequent to the effective date of the lease assignment).