The offer to lease: where the real deal gets made

What it is

An offer to lease sets out the main business terms between you and the landlord. Once it’s accepted and the conditions are removed, it can be a binding agreement, even before the full lease is signed. Treat it as the real thing, because it is.

Some deals start with a non-binding letter of intent first. Either way, whatever you don’t ask for at this stage is much harder to get later.

What it should cover

• Parties, including who signs and any guarantor.
• The premises, the measured area and how it was measured.
• Term, start date, fixturing period and free rent.
• Base rent and every step-up, plus the estimated additional rent.
• Deposit.
• Landlord’s work and the tenant improvement allowance, including how and when it’s paid.
• Permitted use and any exclusive use.
• Renewal options and how renewal rent is set.
• Assignment and subletting, including release.
• Signage, parking, access and hours.
• Demolition, relocation and restoration terms.
• Conditions, and how long you have to remove them.

Conditions that protect you

• Lease review: your lawyer approves the full lease form.
• Permits and zoning: your use and your build-out can be approved.
• Financing, if you’re borrowing for the build-out.
• Inspection of the space and building systems: power, HVAC, plumbing, venting.
• Board or partner approval, if you need it.

Common mistakes

• Accepting “as is” without checking power, HVAC or venting.
• Agreeing to a personal guarantee with no cap.
• Leaving renewal rent as “to be agreed”.
• Forgetting the assignment clause, which can make the business hard to sell later.
• Short condition periods that don’t leave time for permits.

I’m not a lawyer, and neither is the offer form. Have yours review it before conditions come off.

Related: tenant improvements, commercial lease rules in BC and the touring checklist.