Commercial Lease Drafting for Nonprofit Organizations: Unique Tenant and Landlord Considerations; Pitfalls to Avoid

Description

Commercial leases generally contain certain rights and provisions common to most agreements. However, practitioners face a different set of challenges and considerations when drafting leases involving nonprofit organizations and should understand what these are so as to mitigate risk and liability for their clients.

Nonprofit commercial leases require certain threshold considerations including the type of lease needed based on the mission of the organization and how it is funded. For instance, an organization may need to be in a particular location to serve a specific community, or the organization's purpose may require certain types of real estate depending on how it will be used (e.g., assisting children, animal welfare, providing food for the hungry). Additionally, the organization may receive only a certain amount of funding for a given time.

Furthermore, while nonprofit commercial leases may contain terms found in typical commercial leases, mission-oriented considerations require careful drafting. Boilerplate language will not suffice. For example, when drafting terms related to permitted uses, counsel should understand if/how local zoning laws allow for the uses intended by the nonprofit and draft accordingly. Or when drafting terms related to alterations to the property, counsel should consider how improvements made by the nonprofit using its own financial resources could possibly create an issue where any improvements are considered to be an inurement or private benefit. Given the budgetary constraints of nonprofits, counsel will want to consider an ADR provision that minimizes costs and time involved in case of any dispute.

Listen as our expert panel guides practitioners through unique considerations and pitfalls involved in drafting commercial leases for nonprofit organizations. The discussion will include threshold considerations, key terms, and best practices for limiting risk for each party to the lease.