When to Abstract a Lease

Why are real estate lease abstracts important and why you should get one.

The commercial real estate industry, and to a lesser degree, the residential real estate industry as well, leans heavily on that age-old contract; the lease.

Historically, a lease agreement has been a very effective way for an owner of real estate to “hand over” a set of rights to a tenant for a time, while still owning the property. In theory, a written lease agreement could be as simple as one page, naming the landlord and tenant, and spelling out the term of the lease, in time and money. Somewhere along the line, lease abstracting became a thing; taking a long lease and summarizing the key terms and details.

If you are a party to a lease agreement, why should you have it abstracted?

Lease agreements are long. Surveying the countless commercial and residential leases we’ve reviewed over the years, we found the average page length of commercial leases is 42 pages! That may not quite be a Dickens’ novel, but three key things make it easy to miss critical details:

  1. Legal Language - The type of legalese (*sips tea) used in lease agreements can make it difficult to follow along and comprehend the full picture of what each clause means

  2. Scattered Terms - Sometimes a simple term, like security deposit amounts, is not listed on page one with the rest of the financial terms, but instead is buried on page 38

  3. Circular References - Usually a term used by excel junkies, some clauses will reference other clauses, that in turn reference the original clause; trying to make sense of all the potential outcomes can be overwhelming

Just like with doctors, sometimes with lease agreements it’s wise to get a second or third (or even fourth) opinion to ensure nothing gets missed. This is especially true for tenants prior to signing a lease, and equally valuable for landlords to keep track of the terms of their agreements with tenants.

When should you get your lease abstracted?

For tenants, once a lease agreement has been fully negotiated, and all the parties are reasonably satisfied with the agreed upon terms, it’s time to have the lease abstracted prior to signing and executing the agreement. Getting a lease abstracted before any changes or negotiations can end up being useless, especially if there are a lot of material changes from the original lease document.

For landlords, either right before or right after a lease agreement is executed is the best time to have a lease abstracted. Just like tenants have to track how much rent they owe on an ongoing basis, landlords must be aware of the terms that they are responsible for, especially any terms that change in the future as the lease term progresses.

Ready to get a lease abstracted? Head on over and check out our Commercial Lease Abstract package to see an example!

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