3. Landlord’s work and obligations: The landlord is customarily responsible for, among other things, providing utilities for the building, maintaining both the interior and exterior of the building, and making any necessary repairs at the office building. However, the firm should be aware of exactly what the obligations of the landlord are and when the landlord is obligated to provide such services. For example, most leases provide that the landlord will be required to provide HVAC services during normal business hours, but not during off-hours or on holidays. Before entering the lease, the firm should make sure that the hours in which the landlord is going to provide HVAC services are compatible with the firm’s business and that there is a mechanism for obtaining HVAC services, at a reasonable rate, during off-hours or on holidays.
Similarly, if the landlord cannot provide such services, whether through its fault or that of a third party, such as a utility company, the firm should make sure that it is protected from any business interruption by a rent abatement clause and /or business interruption insurance.
4. Assignment and subletting: Assignment and subletting provisions are common in commercial leases and generally spell out the manner in which the tenant can pass off all or a portion of the leased premises to another tenant. In much the same way that the renewal option discussed earlier gives the tenant the right to protect itself in the event that future business needs change, so do assignment /subletting provisions. In reviewing the assignment /subletting
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provision(s) in the lease, the firm should ensure that, although landlord approval is required prior to any assignment or sublease, such approval will not be unreasonably withheld or delayed.
5. Nondisturbance agreements: In the event that the landlord’s mortgage on the office building is foreclosed, in many states, junior leasehold interests are wiped out. This effectively means that any buyer at a foreclosure sale is under no obligation to honor the existing leases in the building. To protect itself from exposure if there is a foreclosure on the building, the tenant should insist on a nondisturbance clause, which essentially provides that any buyer at a foreclosure must honor the terms of the existing lease and the tenant’s rights thereunder.
ATTORNEYS.
In addition to the real estate agent, the professional services
firm should consider retaining legal counsel to assist in negotiating the lease.
Although it may not be necessary to retain counsel while the office search is being conducted, once a choice has been made, the firm should retain counsel to help ensure that the business terms of the deal, as ref lected in the RFP
and the landlord’s response(s) thereto, are accurately ref lected in the lease.
While there is a certain degree of overlap between the services being provided by the real estate broker and the real estate attorney, on average, the real estate attorney should possess a greater familiarity and understanding of all of the terms of the lease than the real estate broker. Retaining real estate counsel will invariably add to the cost the professional services firm incurs in leasing commercial office space; however, such costs are nearly always outweighed by the value that the real estate attorney adds to the lease negotiation process. Chapter 19, Legal Counsel covers the process of selecting an attorney by the professional services firm in detail.
Finalizing and Executing the Lease
Negotiating and finalizing a commercial office lease can take a significant amount of time, and the firm should be prepared to spend several weeks reviewing and negotiating the draft lease. It is important that the firm leave itself sufficient time to fully negotiate the lease and, if necessary, break off such negotiations and look elsewhere for office space. If the landlord is aware that the firm has to move out of its present office by a particular date or that the firm has few or no other options, the landlord will have a real advantage in bringing the lease negotiations to a close.
Nonetheless, once an agreement has been reached on the final terms of the lease, the firm and the landlord will execute the lease. If the firm has agreed to make prepaid rental and security payments, such payments are often due at the time the lease is executed. Thereafter, and depending on any finish-out that needs to be conducted in the premises, the firm should be in a position to take possession of the premises and begin its tenancy.
Real Estate and Facilities
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Office Design, Finish-Out, and Furniture
In addition to selecting an office and negotiating a lease, the firm should spend significant time in planning the office design, finish-out, and furnishings. Each of these components, among others, is of critical importance in both obtaining and maintaining client relationships. As one recent article noted with regard to law firms:
Clients, particularly corporate entities, are conf licted in their perception of law firms. They want the legal practice they hire to be at the forefront of their profession, yet they expect the markers that signify solidity and stability.
In response, some law firms have chosen to look more like their customer base.
In San Francisco, for example, those [firms] targeting dot-com companies abandoned wood paneling and private offices for light, open, airy spaces. This approach furthered a perception of niche expertise, but the risks became painfully apparent in the technology downturn.
What a law firm’s offices look like is an issue because clients regularly visit.
In contrast to management and technology consultants, which often do the bulk of their work at the client’s site, law firms host their customers.
To be most effective, the appearance of a firm’s offices must match the image, or brand, clients receive in advertising, personal meetings, and other encounters with the firm. That appearance should ref lect a firm’s expertise without being so closely aligned to a market segment that it loses other business.6
Office design, finish-out, and furnishings not only are important from an external, client-related perspective but also play a crucial role in helping to form and foster the internal culture within a firm. Employee moral, motivation, health, and productivity can all be impacted by the foregoing factors, and as a result, the firm should pay careful consideration to each of these topics when planning for and setting up the professional services firm office.
Although the firm can and should analyze these and other factors on its own, the firm should also consider hiring a space planner/interior designer to assist in this very important phase of relocating to new office space. In much the same way that the real estate agent and attorney can provide valuable assistance and insight into the search for office space and the negotiation of the lease, the space planner can save the firm time and money by coming up with innovative ideas and solutions to the firm’s office design and furniture needs.
Office Design
There are generally two types of office plans that the professional services firm can adopt: the closed office plan and the open office plan. A balance can be difficult to achieve, as noted by Gregg Hlavaty of Benson Hlavaty Architects: “The most prevailing dichotomy in office space design—and the one most difficult to achieve—is to provide work spaces which are both open and
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interactive, but also allow for privacy and contemplation.” Examples of these two types of f loor plans are shown in Exhibit 18.2.
CLOSED FLOOR PLAN.
Traditionally, professional services firms have
opted for the closed office plan, which generally provides more privacy for professionals. This type of office plan is predominated by exterior and interior offices of various sizes and internal walls that separate different groups or sections within the firm. Although the closed office plan affords the firm a greater degree of privacy, it is also more expensive than alternative f loor plans.
OPEN FLOOR PLAN.
The open plan is usually a more cost-efficient layout
that promotes a more social work environment. An open office plan is most often predominated by a large open area that is divided up into individual or Exhibit 18.2
Floor Plans
Real Estate and Facilities
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Exhibit 18.2
Continued
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shared workstations by a series of partitions of varying heights. Although privacy is sacrificed in an open environment (and thus is probably not an option for some professional services firms, such as law firms, that put a high premium on privacy), open offices are effective in fostering interaction because professional and administrative are not isolated in individual private offices.
Additionally, open f loor plans often force people in the office to interact with one another more often than they might in the closed office environment. Indeed, some open office plans incorporate common walkways that force professionals in the firm to go out of their way to reach a destination (e.g., the restroom or kitchen), which can also be beneficial in encouraging spontaneous interactions. While these informal interactions may be deemed by the firm as more of a distraction than a benefit, such brief discussions can be healthy and help promote a greater sense of cohesion among the professionals and staff at the firm. Because the open plan has few boundaries and high visual access, however, the office can be very busy and may be distractive to some employees.