Did You Read Your Lease Before Or After You Signed It?

       In  acquiring  a  laundromat  business,  most  prospective
purchasers  focus  on  location and the historical  or  projected
economic  picture of the business.  The term of the lease  to  be
assumed, and the monthly outlay of cash required by the lease are
also  factors most purchasers consider; however, most  purchasers
don't  spend  much time reading the fine print of a lease.   They
don't  bother  to  do so under the theory that  the  lease  is  a
printed form and since it's entitled "Standard Lease", it must be
safe to sign it.

      Tenants  generally  do  not gather  together  and  form  an
association for the purpose of preparing and printing a "Standard
Lease".   Landlords,  on the other hand,  frequently  do.   As  a
result,  the Standard Lease regarding your business location  has
probably  been  prepared by an association funded  by  landlords.
Business leases are thus generally slanted toward the concerns of
landlords rather than tenants.  Notwithstanding the fact that the
lease is a printed form, many of the provisions may be subject to
negotiation  since the landlord wants your money as much  as  you
want his location.

      Everyone  always enters into a lease with  the  expectation
that  the  other side will perform.  What if it doesn't work  out
that  way?   What  if  the tenant encounters  difficulty  in  the
payment  of rent and the lease contains some type of late charge?
What  if  the  late charge turns out to be a substantial  penalty
that could have been avoided if discussed with the landlord prior
to signing the lease?

      One lease provision I have seen in a standard printed lease
is  the  following:  "PENALTY ON DELINQUENT RENT.  If any payment
of  rent  or  any other payment is not paid when due, the  lessee
shall,  as  a penalty for such delinquency pay one-tenth  of  one
percent (1%) per diem from the date when it became due until paid
. . . ."  One-tenth of one percent per day is equivalent to 36.5%
interest per annum.  Can it be said that 36.5% is a fair level of
compensation  to  the landlord in the event rent  is  not  timely
paid?

     This printed lease actually used the word "penalty" which is
tantamount  to  an admission that the provision is unenforceable.
The  courts  generally do not enforce penalty  provisions,  i.e.,
attempts  to coerce timely payment by a forfeiture not reasonably
calculated to merely compensate the landlord, but to penalize the
tenant.

      Whenever the amount of actual damage sustained by a  breach
of  a  contract is impracticable or extremely difficult  to  fix,
however,  the  law permits the parties to agree to  a  liquidated
amount  of  damages; however, such a provision can be invalidated
if  the  party  seeking to invalidate the provision  "establishes
that  the  provision  was  unreasonable under  the  circumstances
existing at the time the contract was made."

      If  such  a  penalty  is  to  alternatively  be  considered
interest,  the rate of interest violates the usury  laws  of  the
State of California.  Although there are many circumstances  when
such  a  rate of interest can be charged, such a rate of interest
is violative of the usury laws in a situation involving a lease.

      The  charges imposed for common area maintenance is another
fertile area for abuse.  Some landlords have been known to charge
exhorbitant management fees calculated as a percentage  of  gross
rents,  notwithstanding the fact that a property manager  is  not
employed to service the needs of the shopping center.

      Another common problem that might be addressed during lease
negotiations is the concept of tenant or employee parking  within
the shopping center parking area.  The idea of having a fast-food
outlet  within  the  shopping center  near  your  laundromat  may
initially  seem appealing; however, if delivery service  vehicles
monopolize  the  parking  spaces, your  customers  may  look  for
another nearby laundromat.

      Read  your  lease, preferably with the aid of an  attorney,
before you sign it.  Addressing these type of problems after  the
signature  ink has dried may prove to be too late and  ultimately
very costly for you!

[This column is intended to provide general information only  and
is  not intended to provide specific legal advice; if you have  a
specific  question  regarding the  law,  you  should  contact  an
attorney  of your choice.  Suggestions for topics to be discussed
in this column are welcome.]


Reprinted from New Era Magazine
Myles M. Mattenson © 1995-2002