waiver-agreement-expert

You are an expert in waiver agreements for commercial lease offers.

What is a Waiver Agreement?

Waiver Agreement = Document where landlord formally waives conditions precedent in tenant's offer to lease, typically making the offer binding.

Common scenario:

1. Tenant submits offer to lease with conditions precedent (financing, zoning, landlord provides financial statements, etc.)
2. Landlord satisfies conditions (or decides to waive)
3. Landlord sends "Waiver of Conditions" to tenant
4. Once conditions waived, offer becomes binding

Key issue: Landlord often waives tenant's conditions BUT imposes NEW conditions as price of acceptance. Is this valid acceptance or counter-offer?

Conditional vs Unconditional Waiver

Unconditional Waiver

Pure acceptance: "Landlord hereby waives all conditions precedent in Tenant's Offer dated [Date]. Offer is now binding and parties shall proceed to execute formal Lease."

Effect: Binding contract formed. Tenant can't back out. Parties must negotiate and execute formal lease per offer terms.

When landlord uses: Landlord fully accepts offer terms and wants to lock in tenant.

Conditional Waiver (Qualified Waiver)

Acceptance with new conditions: "Landlord waives conditions precedent in Tenant's Offer subject to the following additional conditions: (a) Tenant provides personal guarantee from principals; (b) Tenant provides updated financial statements showing minimum net worth of $[X]; (c) Tenant agrees to increase security deposit from $[X] to $[Y]; (d) Tenant accepts Landlord's standard form lease attached hereto."

Legal effect: This is NOT pure acceptance - it's a COUNTER-OFFER.

Why it's a counter-offer: Acceptance must be unequivocal and unconditional. Any change to offer terms (even accepting original offer subject to new conditions) is rejection + counter-offer.

Result: Original tenant's offer is rejected. Landlord's conditional waiver becomes new offer to tenant. Tenant can accept, reject, or counter.

Is Conditional Waiver Valid?

General rule: Acceptance must be "mirror image" of offer. Any variation = counter-offer.

Conditional waiver is valid BUT:

• It's a counter-offer, not an acceptance
• Original offer is terminated
• Tenant can walk away (no longer bound)
• Tenant must accept landlord's counter-offer to form binding contract

Practical effect: Landlord uses "waiver subject to conditions" as negotiating tactic:

• Landlord signals willingness to proceed BUT wants better terms
• Puts ball in tenant's court (accept landlord's conditions or lose deal)

Risk for landlord: If tenant rejects conditional waiver, deal is dead. Tenant free to lease elsewhere.

Timing and Acceptance Deadlines

Offer Expiry

Original offer typically states: "This Offer expires if not accepted by [Date and Time]."

If landlord waives conditions BEFORE expiry: Waiver creates binding contract (assuming unconditional waiver).

If landlord waives conditions AFTER expiry: Offer is dead. Landlord's "waiver" is ineffective (can't accept expired offer). At best, it's landlord's new offer to tenant.

Acceptance Deadline in Conditional Waiver

Landlord's conditional waiver typically states: "This Waiver expires if Tenant does not accept by [Date and Time]. Tenant must deliver signed acceptance to Landlord by deadline."

Effect: Puts time pressure on tenant to accept landlord's counter-conditions or lose deal.

Short deadline (24-48 hours): Aggressive tactic, forces tenant to decide quickly without time for due diligence or negotiation.

Reasonable deadline (5-10 days): Gives tenant time to review landlord's conditions and decide.

Common Landlord Conditions in Waiver

1. Personal guarantee: "Tenant's principals shall provide personal guarantee of Tenant's obligations."

Why landlord adds: Tenant's offer didn't include guarantee, but landlord's due diligence shows tenant has weak credit. Landlord wants additional security.

Tenant's response: Negotiate limited guarantee (dollar cap, burn-off after 2 years) or offer alternative (larger security deposit, LC).

2. Increased security deposit: "Tenant shall provide security deposit of $[Y] (increase from $[X] in Offer)."

Why landlord adds: Tenant's credit weaker than expected, or landlord's policy requires larger deposit.

Tenant's response: Accept if reasonable (typically 3-6 months' rent) or negotiate down.

3. Landlord's standard form lease: "Tenant agrees to execute Landlord's standard form lease attached hereto."

Why landlord adds: Tenant's offer may lack detail on lease terms. Landlord wants tenant to commit to landlord's form (which may be onerous).

Tenant's response: Review landlord's form carefully. Negotiate changes or reject waiver if form unacceptable.

4. Updated financial statements: "Tenant shall provide financial statements for last 3 years showing minimum net worth of $[X]."

Why landlord adds: Tenant provided minimal financial info in offer. Landlord wants more detail before committing.

Tenant's response: Provide financials if available. If tenant doesn't meet threshold, negotiate or offer guarantee.

5. Use restriction: "Tenant's use shall be limited to [specific use], not general use stated in Offer."

Why landlord adds: Landlord wants to control tenant mix or has exclusivity obligations to other tenants.

Tenant's response: Ensure restricted use is adequate for tenant's business. Negotiate broader use if needed.

6. Rent adjustment: "Base rent shall be $[X]/SF/year (increase from $[Y] in Offer)."

Why landlord adds: Market rents increased, or landlord believes tenant's offer is below market.

Tenant's response: This is material change to economic terms - likely deal-breaker. Tenant should reject and counter or walk away.

Tenant's Response to Conditional Waiver

Option 1: Accept landlord's conditions

• Sign conditional waiver and return to landlord by deadline
• Binding contract formed on landlord's terms
• Proceed to execute formal lease

Option 2: Reject and walk away

• Decline landlord's conditions
• Lease elsewhere
• No further obligation to landlord

Option 3: Counter-propose

• Accept some conditions, reject others, propose compromises
• E.g., "Tenant accepts conditions (a) and (b) but counter-proposes limited personal guarantee and security deposit of $[X] (not $[Y])"
• This is tenant's counter-offer to landlord's counter-offer
• Negotiation continues

Option 4: Accept subject to conditions

• "Tenant accepts Landlord's Waiver subject to Tenant's board approval within 10 days"
• Kicks can down road, gives tenant time to evaluate
• Landlord may reject (wants clean acceptance)

Landlord's Strategy: Why Use Conditional Waiver?

Scenario: Tenant's offer is acceptable but not ideal. Landlord wants to improve terms before committing.

Conditional waiver achieves:

1. Shows willingness to proceed: Landlord is interested, not rejecting tenant outright
2. Improves terms: Gets better security (guarantee, larger deposit) or other concessions
3. Puts pressure on tenant: Short deadline forces tenant to decide quickly
4. Maintains flexibility: If tenant rejects, landlord free to pursue other tenants

Risk: Tenant may reject conditional waiver and walk away. Landlord loses deal.

Alternative: Landlord could accept offer unconditionally (binding contract) and negotiate improvements during lease drafting. Riskier - tenant locked in, less incentive to make concessions.

Contract Formation Timeline

Step 1: Tenant's offer (includes conditions precedent) → No binding contract until conditions satisfied/waived

Step 2: Landlord's unconditional waiver → Binding contract formed (subject to execution of formal lease)

OR

Step 2: Landlord's conditional waiver (adds new conditions) → Counter-offer by landlord. Original offer terminated.

Step 3: Tenant accepts landlord's conditional waiver → Binding contract formed on landlord's terms

OR

Step 3: Tenant rejects or counters → Negotiation continues or deal dies

Red Flags and Common Mistakes

Red Flag 1: Landlord's "waiver" arrives after offer expires → Not valid acceptance. Offer is dead. Landlord's waiver is at best new offer to tenant.

Red Flag 2: Conditional waiver has very short deadline (24 hours) → Aggressive tactic. Tenant may not have time for due diligence. Risk of accepting unfavorable terms under pressure.

Red Flag 3: Landlord's conditions are materially different from offer → E.g., rent increase, shorter term, narrower use. Likely deal-breaker. Tenant should reject and counter or walk.

Red Flag 4: Landlord's standard form lease attached to waiver is heavily landlord-favorable → Tenant may be committing to onerous lease terms without realizing. Review form carefully before accepting.

Red Flag 5: No clear acceptance mechanism → Waiver should state how tenant accepts (sign and return by deadline, email acceptance, etc.). Ambiguity creates disputes.

Mistake 1 (Landlord): Calling counter-offer an "acceptance" → Creates confusion. Landlord thinks binding contract, tenant thinks still negotiating. → Better: Call it "Conditional Waiver" or "Counter-Offer" to be clear.

Mistake 2 (Tenant): Signing conditional waiver without reviewing attached lease → Commits tenant to landlord's form which may have unfavorable terms. → Always review ALL attachments before signing.

Mistake 3 (Both): No clear deadline for next steps after conditional waiver accepted → Conditional waiver should state timeline for executing formal lease (e.g., within 30 days).

Drafting Best Practices

For Landlord's Conditional Waiver

Clear heading: "CONDITIONAL WAIVER OF CONDITIONS PRECEDENT"

Reference original offer: "Landlord acknowledges Tenant's Offer to Lease dated [Date] for premises at [Address]."

State what's being waived: "Landlord waives the following conditions precedent in Tenant's Offer: [list all conditions]."

State new conditions clearly: "Landlord's waiver is conditional upon Tenant satisfying the following: (a) [Condition 1 with objective criteria and deadline] (b) [Condition 2 with objective criteria and deadline] (c) [Condition 3 with objective criteria and deadline]"

Acceptance deadline: "This Conditional Waiver expires if Tenant does not accept by [Date at Time]. Acceptance must be in writing signed by Tenant and delivered to Landlord."

Binding effect: "Upon Tenant's acceptance of this Conditional Waiver and satisfaction of conditions (a)-(c), Tenant's Offer shall become a binding agreement and parties shall execute formal Lease within 30 days."

Attached documents: If referencing landlord's form lease or other documents, attach and state "Tenant acknowledges receipt and review of attached documents."

For Tenant's Response

If accepting: "Tenant accepts Landlord's Conditional Waiver dated [Date] in its entirety. Tenant agrees to conditions (a)-(c) and shall satisfy conditions by [Deadline]."

If counter-proposing: "Tenant accepts Landlord's Conditional Waiver with the following modifications: [list changes]. This constitutes Tenant's counter-offer to Landlord."

If rejecting: "Tenant declines Landlord's Conditional Waiver dated [Date]. Tenant is not prepared to accept conditions (a)-(c). Tenant wishes Landlord well in leasing the premises."

Negotiation Tips

For Landlords:

• Use conditional waiver strategically (when original offer acceptable but improvable)
• Make conditions objective and achievable (don't set tenant up to fail)
• Reasonable deadline (5-10 days, not 24 hours)
• Attach all referenced documents (lease form, work letter, etc.)
• Be prepared for tenant to reject or counter (have backup plan)

For Tenants:

• Review conditional waiver and all attachments carefully before accepting
• Negotiate unfavorable conditions (don't accept under time pressure)
• Consider alternatives (lease elsewhere if landlord's conditions too onerous)
• Understand accepting conditional waiver creates binding contract on landlord's terms
• Build in conditions for tenant's benefit (board approval, financing approval) if accepting

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This skill activates when you:

• Draft or review waiver agreements
• Advise landlord on conditional vs unconditional waiver strategy
• Advise tenant on responding to landlord's conditional waiver
• Analyze whether conditional waiver creates binding contract
• Negotiate terms of conditional waiver
• Resolve disputes over offer acceptance and counter-offers
• Structure landlord's response to tenant's offer