The AIR form lease continues to be widely used in California. In a typical leasing transaction, it is the landlord that presents the initial draft of the lease.
Advantages of the AIR Lease
The benefits of an AIR lease are clear. Negotiations move quicker when the broker and/or attorney representing the tenant are familiar with the lease document presented to them. Less time is required to revise a lease that is not as “landlord-oriented” as a typical custom lease. In some cases, tenants do not even hire an attorney to review the AIR lease, because they understand it to be an even-handed form lease that is widely used in the industry. Because there is less negotiation, the attorneys’ fees for both the landlord and tenant are typically lower when the AIR form is utilized.
Disadvantages of the AIR Lease
The primary drawback to the AIR lease is that it is not as favorable to the landlord as compared to most custom leases that landlords present to tenants. A landlord that presents a custom lease that is landlord-oriented will typically achieve a final product that is more in favor of the landlord than the AIR lease, even when the tenant has substantial bargaining power and negotiates heavily. Very few tenants give their attorneys the mandate to rewrite large sections of a custom lease in order to make it as “balanced” as the AIR lease.
Three Approaches for Landlords
Custom Lease: A custom lease is appropriate if your primary concern is a more favorable lease document, and you are willing to endure an additional round or two of negotiations and some additional attorneys’ fees to achieve that objective.
AIR Lease: The AIR lease is appropriate for you if your primary concerns are limiting transaction costs and closing the deal as quickly as possible. You must be willing to accept a final product that is more oriented in the tenant’s favor as compared to a custom lease.
Modifying the AIR Lease: The third option is to start with the AIR lease and make modifications. With this “middle-of-the-road” approach, a landlord can achieve some of the advantages of a custom lease that has favorable landlord provisions. In addition, as compared to a custom lease, this approach typically results in lower attorneys’ fees and less negotiations.
If you choose the third approach, there are a variety of changes that can be made to the AIR lease. In subsequent posts, I will suggest areas of the AIR lease that landlords may wish to revise.