Commercial Lease Due Diligence 101: Landlord and Tenant Considerations, Provisions to Mitigate Client Risk

The due diligence process is a critical step for tenants and landlords to take before finalizing any commercial lease deal because each party to the lease assumes significant risks and liabilities. The process allows the parties to evaluate those risks and liabilities before committing to the transaction. 

Due diligence considerations for tenants include property inspection for any needed repairs and possible environmental issues, verification of zoning laws to ensure local zoning laws permit the tenant's intended property use, and a landlord background check to assess the landlord's financial stability, reputation, and performance with past tenants.

Key landlord considerations include assessing the tenant's financial stability and track record, rental history, running credit checks, and reviewing the company's business plan. 

New attorneys representing tenants and landlords should understand the comprehensive scope of the due diligence process and how to best protect their clients' interests when drafting due diligence provisions in the commercial lease that outline each party's rights and obligations during the due diligence process. 

Listen as our expert panel provides an overview of the due diligence process for tenants and landlords in commercial lease transactions. The panel will discuss how to navigate issues for both parties to avoid potential pitfalls while successfully guiding clients through the lease transaction.

I. Introduction

A. Purpose of due diligence

B. Defining the scope of due diligence

II. Due diligence process and required documentation: tenant and landlord considerations

A. Physical inspection of the property and buildings

B. Zoning laws

C. Environmental review

D. Financial analysis of the parties

E. Lender considerations

F. Other

III. Due diligence provisions in the lease

IV. Practitioner takeaways

The panel will review these and other key considerations:

• What areas should tenants focus on when performing due diligence? Why?
• What are key due diligence considerations for landlords? Why?
• How may counsel best protect their clients' interests when drafting due diligence provisions in the lease?
• What are best practices for practitioners when guiding clients through the due diligence process?