Lease Agreement Addendum for LA Industrial Company

Applicant: Industrial Company

Company type: Import/Export, City of Industry

Applying For: Lease Agreement Addendum

Time: 1 Week

Challenges:

• Tensions were high between the company and the landowner
• Extremely low budget for mediation
• The company required the space to continue operation, they were afraid to lose everything
• Landlord wanted them out so they could sign more long-term leases

BACKGROUND

Building a business in America is one of the adjacent tenants of the American Dream. But building and running your own business can be a daunting task. You are constantly faced with changing markets, shifting patterns, and new situations that you can’t be prepared for because they’re too unique to foresee coming ahead of time. However, having your own business can be one of the most rewarding accomplishments of one’s lifetime. You gain your independence, you are regularly rewarded for your hard work, and you have something to be proud of. Thus, it can be extremely frustrating when something as simple as a lease agreement threatens to undo literal years of blood, sweat, and tears. That is where we found our client, an Import/Export company in the City of Industry. As the end of their lease agreement with their landlord was nearing, the company wanted to extend the agreement by a couple of months. The landlord preferred that they just leave, so instead of uncertainty about when his property would become available again, he could just start shopping it around now knowing exactly when it would be empty again. The company was not prepared to move that quickly however, and they needed the space for a variable amount of months before being able to move into a new space. They had been in negotiations over the lease agreement for over six months before they decided to bring in outside mediation.

KEYS TO SUCCESS

Unfortunately, both sides let tensions build and negotiations get frustrating before deciding to bring in a mediator. When people allow emotion to run too far into their business dealings, it becomes difficult for either side to see what should be an obviously reasonable answer in front of them. Another problem of waiting to bring in a mediator was that it restricted both the time and budget involved. Both sides needed a resolution quickly and for very little money, given the uncertainty of the entire situation. However, because our firm is well-versed in mediation, we were confident that we could iron out an agreement that everyone would be happy with.

“What we had here was a case of both sides not knowing what they didn’t know. One side, the company, didn’t know how long they would want to stay. The other side, the landlord, didn’t know what to offer to make it fair for both sides. So we started with consulting with our client, the company, which we did a few times, and then we had a consultation with both parties involved. From there, it was simply about putting reasonable numbers in front of businessmen, something they deal with on a regular basis.” – Joseph Tsang, Attorney

We began with consulting our client, the company, to find out their wants and needs. From them we learned how much this lack of agreement and the threat of eviction wasn’t just scary, it was life-threatening to their business. They needed the warehouse they were in to survive, they had physical goods that needed storage. They knew they would be moving into a different space eventually, but they could not guarantee when that would be.

What also happened when we consulted with our clients was we came to understand that a lot of what was going on was just a simple misunderstanding of goals between the two parties. The landlord was afraid he was going to have an interminable situation on his hands, a company who would want to negotiate every few months to extend their lease in relatively small increments. The landlord wanted not only to increase the lease agreement but would naturally want people who would agree to longer overall commitments. The company did have a variable amount of time they wished to spend in the landlord’s space, but it was always their intention to leave soon, allowing the landlord the freedom that he wanted.

When we got both parties to sit down for a group consultation, we made sure we had an acute understanding of what both parties wanted, what their goals were and what their major issues were. That helped us strip away the emotion and the tension that had been building for more than half a year. Part of our mediation services is just simply building trust with all parties to show that we are not here to build a win-lose scenario, we are here to help everyone come out winners. Once we were able to prove to the landlord that we would be fair in our draft of an extended lease agreement, much of the tension melted away.

OUTCOME

We were able to draft a document that extended the original agreement by a few months, the time that our client would definitely need in that space, but provided escalators in the cost of the monthly agreement for our client if they tried to stay in that space longer than the new agreement would allow. The escalators were an incentive for the landlord, because the escalators essentially were going to allow him to charge more than he could charge at a monthly rate even to new tenants. Once we were able to strip away the emotions and tensions of the situation and put a document with concrete numbers in front of both sides, the mentality of business took over. Both sides negotiated, changed numbers as they saw fit, and were able to come to an agreement in less than a week after hiring our firm. Our client’s import/export company was safe to continue operation, and everyone was pleased with the outcome.