Negotiate Lease Termination for Key Death
Sometimes, tenants get tunnel vision when negotiating leases; they tend to focus on certain issues, like those that will affect them on a day-to-day basis or are pretty likely to happen in the future. But don’t put an emphasis on just tenant improvement allowances, common area maintenance costs, parking, or renewal or recapture rights. You should plan for some less likely circumstances—say, being forced to move your business or dissolve it altogether. Make sure that you ask for a termination right if you’re faced with those situations. For example, if your business depends on a “key player,” it’s important to get the option to terminate the lease if that key player dies or becomes disabled.
This type of termination option protects your interests in case you’re not able to carry on your business without that key player. But not all tenants need a loss of key player option. So who is susceptible? An accountant, an attorney, a dentist, or a doctor who practices alone or with only a few other professionals is at risk, so this option is especially important. Without this termination option, you—or your estate—could be stuck in a lease that no longer works for you. For example, your business may not be able to function if the key player isn’t available—the remaining workers might be just support staff, such as bookkeepers and administrative assistants. Even if your business consists of two or three professionals practicing together, the remaining practitioners might want to downsize the practice and move to a smaller space.
For four points to negotiate for this option, plus model language you can adapt to draft it in your favor, see “Include Four Points in Termination Option for Loss of 'Key Player,'” available to subscribers here.