An abstract of a commercial lease, like an abstract of anything
else, is a summary of the terms of the lease. Commercial leases are often full
of long, wordy paragraphs written in convoluted legal language, and an abstract
cuts through all of that language and condenses the lease to its important information.
Basically, a commercial lease abstract takes all the important information -
all the main terms and the fine print - and makes an easy to read report out
of it.
The details of an abstract vary depending on the type of lease, but all commercial
lease abstracts contain the following terms: the name of the
tenant; the name of the landlord; the term of the lease; the amount of square
footage leased; the space number; the base rent; the percentage rent and/or
sales reporting; and a list of documents modifying the terms of the lease. If
the lease is for retail space, the abstract might also contain the terms pertaining
to hours of operation and merchants' associations. If the lease is for office
space, the abstract might contain the terms pertaining to lessee improvements.
Most often, a person needs a lease abstract not for his or her own understanding
of the terms of the lease, but for financing purposes. When a person seeks to
purchase a commercial property with tenants, that person must perform what is
called due diligence. Due diligence requires the potential buyer to inspect
all aspects of the property including the status of the leases associated with
the property. Sometimes, as in the case of the purchase of a shopping mall or
a large office complex, there can be over 100 leases. If the lender, to whom
the task of due diligence usually falls, is able to review abstracts of the
leases rather than the leases themselves, the task is made that much more cost
and time efficient.
Lease abstractions are usually produced by abstracting agencies.
A good lease abstracting agency will use attorneys, accountants and real estate
professionals to ensure that the abstract accurately summarizes the essential
information described above and additional information such as insurance responsibilities,
and maintenance responsibilities for both the landlord and the lessee.
There are also a number of lease
management software packages that include a lease abstracting feature. The
feature uses reporting software to take a lease that has been created with the
software and abstract it. Usually, the abstracting feature allows the user to
pull out the exact information needed, allowing a customized lease abstraction
to be created each time.
An abstract has uses outside the context of due diligence, too. It's
a good idea to have a lease abstracted each time there is a change in the terms
of the lease, even for common changes such as a rent increase. Having it abstracted
every time there is a change in terms will make sure that there are no surprises
for either the landlord or the lessee.
Answer Submitted on Tue, Oct 24 2006
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