What you need to know before signing on the dotted line
After months or years of searching, you have finally found the ideal studio space. The location, light, and rent all meet your criteria. The only thing between you and your ability to move in and start creating art is the dreaded lease.
Negotiating an art studio lease presents many unique challenges. The first of these challenges is the “use clause,” which defines the purposes for which the tenant can use the premises. Few landlords object to a gallery use, but some might find it disturbing that paint and other flammable materials will be on the premises. Thus, if you need more than just a retail space, the use clause must clearly stipulate that the lessee has the right to use the premises for creating art in addition to using it as a gallery.
However, your problems do not end there. The fine print of the lease often contains numerous clauses that might thwart the intended use of the space. Most leases stipulate that the tenant may not use or occupy the premises in violation of the building’s Certificate of Occupancy or local zoning or environmental laws. Accordingly, your attorney must review the Certificate of Occupancy for the building and the zoning laws to ensure that the proposed use is permitted, even if you have overcome the hurdle of spelling it out in the use clause.
Most leases contain a hazardous-materials provision, which prohibits the tenant from keeping any hazardous or flammable materials on the premises. Moreover, the tenant is generally liable for the cost of removal of any such materials, for the cost of any remedial action incurred by any governmental authority, and for personal injury or property damage arising from any violation of this provision.
Leases are complex instruments. You may think you have agreed upon the rent, but you will soon find out that the rent figure is only a base number, because the rent is often subject to annual percentage increases or increases based on the Consumer Price Index. The tenant often must pay a pro rata share of real estate tax increases and, depending on the location of the premises, a pro rata share of common area charges over a base year. Other items that are quick to add up include electricity, water, sewer, insurance, garbage removal, snow removal, and extermination services. You should immediately ascertain their cost so that you can determine whether the deal is still financially feasible for you.
If you default on a lease that you personally signed, you may face a huge amount of personal liability, which may equal the amount of the unpaid rent and other financial obligations for the remainder of the term of the lease. This amount of liability varies, depending on the state in which the property is located. Therefore, it is advisable to ensure that the tenant be a limited-liability company (LLC) or a corporation. The cost of organizing either entity is minimal, especially compared to the potential liability you would face if the lease were in your name. On the other hand, landlords may still want a personal guarantee because they recognize that LLCs and corporations have limited or no assets from which to recover damages in the event of a default.
If the landlord requests a personal guarantee, it is generally limited to a “good-guy” guarantee, which means that if the tenant knows that he or she will be unable to pay the rent and wants to return the premises to the landlord, then the tenant must give the landlord notice of his or her intention to vacate the premises and pay all of the rent and other charges due through the date set in the “notice to vacate.” The length of the notice to vacate is subject to negotiation, but is generally 90 days. The tenant must also deliver the premises in “broom clean” condition or in any other condition that the lease stipulates and must hand the keys to the landlord. If the tenant meets all of these conditions under a good-guy guarantee, the guarantor is no longer liable for obligations arising after the vacate date. However, the LLC or the corporation is still liable for the obligations under the lease for the balance of the term or until the landlord finds another tenant.
Most leases stipulate that the tenant is in default and can face lease termination if he or she is late in the payment of rent or if he or she fails to comply with any other lease provision. Hence, it is important to negotiate a “notice clause,” which states that the landlord must give the tenant some number of days’ notice and the opportunity to cure the default before the landlord’s right to terminate the lease comes into existence. The typical recommendation is 10 days’ notice for monetary defaults and 30 days’ notice for nonmonetary defaults.
To seal the deal, a landlord will often agree to give a tenant either some period of rent abatement or a cash allowance to make improvements to the premises. Otherwise, the landlord might decide to make some improvements, such as painting, electrical work, and lighting, before the commencement of the lease term.
In short, negotiating a studio lease can be a daunting task for an artist. Having an experienced attorney representing you in structuring the deal before signing a term sheet or a letter of intent and negotiating the lease is as important as priming your canvas with a good gesso.
I am delighted to find your website. Thank you so much for this trove of helpful information!
I look forward to reading and using this badly needed resource.
This is useful information since I am about to lease my first studio. I have already formed an LLC so I’m good there but I’m glad I waited to let the building manager know right away. Can I get some advice on negotiating a lease?
I looked at two studios in the same building last week, one looked pretty great just that the floor was olive green and I didn’t think to ask if they would paint it. The other was completely trashed by an artist they had in residence who F*d up the wood floor with paint all over, as well as the linoleum/vinyl tile in the entry of the studio, when I asked if they would clean the floor she first said no, then she said she’ll see. They are both the same size, both have a small room attached. I think I came off a bit naive because she started offering me all this stuff left behind by the previous artist and kept trying to steer me towards the that room, little did I know she was just trying to do less clean up work. Did I mention an exposed vertical pipe in the entry? I guess I didn’t really notice it when I was there but I did take pictures and then noticed it, I’m afraid it might be connected to a bathroom on the floor above. Specifically the toilet, it definitely was the standard size for sewage pipes but I haven’t asked yet and she didn’t even mention it.
Simple solution would be to take the other room, right? But I’m thinking, there’s no way that anyone is going to rent that messed up room, she practically begged me if I knew anyone else who was looking . Its in a pretty good spot, the first room you see when you walk into the building easy access to utility sink, far enough away from floor bathroom, close enough not to be a trek. If you’re superstitious, suite 206 would equal 8, numerology would suggest very good for business (maybe feng shui would disagree with the pipe). But wow if anyone who knew better saw it (aka not me) they would never pay 800 a month for that (I live in Westchester, NY that’s as good as it gets for a huge room with an extra room as an art studio). I think I want to negotiate the lease, because I know for a fact no one else is going to lease that space, the previous artist wasn’t even actually paying. I figure it would be easy to cover the pipe, either box it in, or put a temporary wall to hang art and since she was trying to get out of doing any renovation, I would ask a family member who owns a contracting company for help. I’m not sure what shes required to do if I ask for certain renovations to be done, I really don’t know anything about this. But I’m pretty sure if I ask her to reno the floor and paint the walls she supposed to? Utilities are included and its a 24 access building. Do you think I can negotiate from 800 to 600?
Sorry if this was loaded but I could use all the help I can. Thanks in advance.