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Is The AIR Lease Form A Fair Document For Both Parties?

25 Jul 2016

The AIR Lease Form is an excellent tool for completing many different kinds of real estate transactions. It offers comprehensive and thoughtful leases, fair to both sides, reducing the countless hours – and dollars – that lawyers often spend closing straightforward real estate deals.

AIR, the American Industrial Real Estate Association, is the most respected industrial and commercial real estate organization in the country. Its Lease Form is created by brokers with several forms that lay out the exact provisions necessary to complete a deal, including the   Standard Offer Agreement and Escrow instructions, Single Tenant and Multi Tenant Gross and Net Leases  and Lease Addendums such as Lessee’s Options to Extend. AIR documents allow real estate transactions to be completed at a fraction of the time and cost.

The Rules of Professional Conduct created by AIR ensure ethical conduct for these straightforward transactions. AIR’s mission is to stabilize this fast-growing industry, raise professional standards and ethics, and continuously educate the professionals within the industry.

When DO you need lawyers?

While the AIR form often saves time and money, there are instances when it will not suffice – and it is necessary to retain counsel. If the transaction is specialized or ambiguous – for instance, if there are environmental issues at the property – the AIR form might not have the specific language required and lawyers are necessary. In these situations, we have found many times that using the AIR Lease template with an Addendum that addresses site specific items remains a cost-effective solution.   This allows lawyers to focus solely on the more complex issues, minimizing the time that they have to spend drafting and negotiating the body of the contract.

How Hager Pacific Uses the AIR Lease Form

Hager Pacific seeks to use the AIR Lease Form whenever possible, particularly for straightforward deals in sectors like multi-tenant industrial when negotiating several different leases for a project creates management problems.  Following the execution of the LOI with a prospective tenant, Hager Pacific is able to send the tenant a draft lease in a matter of hours.  The LOI includes language that the AIR Lease form will be used for the transaction.   Because all tenants in a project are required to sign the same Lease, which tenant brokers validate as fair and comprehensive, the management of the project is scalable and efficient.

Another example of the effectiveness of the AIR forms is our recent acquisition of a property from a Fortune 500 company. Rather than creating a PSA costing many tens of thousands of dollars for each side, the deal was completed in four to five days using the AIR form. We closed the property in 30 days: we presented the document, they commented on it, we updated it, and they signed it. This was only possible with the use of pre-negotiated documents.

In my experience, lawyers are often involved due to their relationships with the principals, not necessarily because of business needs. They can bring personal politics to a situation that can get in the way. I have seen many straightforward deals turned into legal arms races, as both sides begin negotiating on aspects that would have covered them both fairly in the AIR Lease Form.

Nine times out of ten, AIR forms can simplify your life. Employing them as a business tool will save you time, money and headache. 

This blog is produced as a resource for real estate investors by the senior management of Hager Pacific, which includes David J. HagerAdam MilsteinRobert Neal, and Jason Schirn.

 

About the Author: Adam Milstein
Adam Milstein is a managing partner with Hager Pacific Properties, overseeing the firm’s financing, disposition and property management.