A landlord's guide to reviewing a tenant redline

A tenant's first markup usually arrives with sixty to ninety changes. Most are standard tenant counsel positions that any landlord will accept. A handful affect financeability, and a few are drafted to look routine while moving real risk. Sorting them quickly is most of the job.

Start with what your lender cares about

Some provisions are not really yours to negotiate, because a loan document already constrains them. Identify these before responding to anything else:

• Subordination. Tenants reasonably ask that subordination be conditioned on delivery of a non disturbance agreement. That is standard and generally grantable, but the form of SNDA is the lender's, not yours. Agree to the concept, reserve the form.
• Casualty restoration. A tenant termination right on casualty is normal. An unrestricted one, or a threshold set very low, affects the loan. Keep the thresholds and the landlord's election rights.
• Early termination. A kick-out or termination option shortens the term a lender underwrote. If you grant one, price it, and make sure the fee genuinely returns unamortized capital.
• Estoppel and attornment. A tenant may narrow the estoppel obligation. Response windows and knowledge qualifiers are fine. Deleting the obligation is not.

The tenant asks that are routine

Accepting these quickly buys credibility for the positions you intend to hold.

• Assignment consent not to be unreasonably withheld, conditioned or delayed, with a response deadline
• Permitted transfers to affiliates and successors by merger without consent
• Mutual waiver of subrogation
• A knowledge qualifier and a longer response window on estoppel certificates, and deletion of deemed execution language
• Notice effective on receipt rather than on deposit
• A cure period extension where the non monetary default cannot reasonably be cured within the stated period, provided the tenant commences and diligently pursues cure
• Exclusion of the landlord's leasing commissions and executive salaries from operating expenses
• Audit rights with a reasonable window

None of these cost a well run property anything. Fighting them signals that the rest of your positions are equally reflexive.

The changes that look routine and are not

The pro rata share denominator. A tenant edit changing the denominator from total rentable area to total leased area shifts the entire cost of vacancy onto occupied tenants, which sounds tenant favorable, and it is the opposite. Watch which direction the edit runs, and confirm the change is consistent with how you bill every other tenant in the property. Inconsistency across a rent roll is its own problem at sale. See CAM charges.

Expense cap scope. A cap on controllable expenses is normal. A cap that quietly drops the word controllable, or that moves security, management fees, and costs required by law into the controllable bucket, is a different provision. See operating expense cap.

Landlord default and offset. A tenant self help right with an offset against rent is the change most likely to create a problem with a lender, and it frequently arrives as an addition to an article nobody reads closely. Offer a cure period and a right to seek damages instead.

Guaranty exhibit edits. The guaranty is a separate document, so revisions to it produce no marks in the lease body at all. Compare it separately every round. A good guy guaranty edited to release the guarantor on notice alone, without the requirement of actual vacancy, surrender in required condition, and payment through the surrender date, is not a good guy guaranty.

Continuous operation deletion. In a retail center where you collect percentage rent or where other tenants hold co-tenancy rights, a deleted operating covenant has consequences beyond the one lease. See continuous operation.

Respond in a way that closes

Two habits shorten negotiations measurably.

Explain the ones you hold. A markup returned with fifteen rejections and no reasoning produces another round of the same fifteen. A short note saying that the offset right conflicts with the loan documents, or that the restoration provision has to survive because the space has specialty installations, resolves most of them in one pass.

Group your response. Rather than responding clause by clause, respond in three groups: accepted, accepted with modification, and held with the reason. Tenants can approve the first group immediately, which shrinks the disputed set to something that fits in a phone call.

Track it round over round

Landlord counsel is usually running several deals at once, and the thing that goes wrong is not misreading a clause but losing the thread on which version of a provision each party last proposed. A concession granted in round one that reappears in your own returned draft in round three costs credibility and reopens a settled point.

One list per deal, carried forward, with each contested provision and what each side last proposed. CRE Redline builds that list from the tracked changes in the file itself, ranked by materiality, with each clause carrying its history across rounds, so round four starts from a list rather than from four attachments. Round 1 of every deal is free.

For the tenant side view of the same negotiation, see where a tenant's leverage actually is. This is general information, not legal advice.