Office Leases for Law Firms: What to Plan For

Rent is a large fixed commitment for a law firm, and the lease often runs longer than any given group of partners expects to stay together. A firm can gain a practice group or lose one, merge, split or wind down. Landlords know this, and it shows up in their credit questions and guarantee requests. The partners signing today need to decide who carries the obligation if the firm that signed it looks different in a few years.

This guide covers what is specific to law firms. For general leasing questions such as net effective rent and the renewal process, see the related guides.

A smaller or younger firm is likely to be asked for personal guarantees from its partners. Before anyone signs, the partnership should agree who gives one and what happens when a guarantor leaves. How much liability each partner has under the firm's own entity structure is a question for the attorney advising the firm on its governance, and it is worth asking even though everyone in the room is a lawyer.

• Scope. Try to replace a full guarantee with a limited one, capped at a stated amount or a rolling number of months of rent.
• Several rather than joint. Ask that each partner be liable only for a share, so one partner is not left with the whole obligation.
• Burn-off. Ask that the guarantee reduce or end after a period of on-time payment.
• Departures. Ask for a process to release a departing partner, including a replacement guarantor or extra security in substitution.
• Alternatives. A larger security deposit or letter of credit may satisfy the landlord's concern, and the required amount may be negotiated to decline over time.
• Good guy structure. A guarantee that ends once the firm has vacated and paid through surrender, with proper notice, gives an exit path. Enforceability and wording are for your own counsel to check.

Settle the partners' internal agreement before the guarantee is signed. Indemnity between partners, and what a departing partner owes, belongs in the firm's partnership or operating agreement.

Assignment clauses are written to catch changes in ownership. In a professional firm, the routine admission or withdrawal of partners can look like a change of control. Read the definition, and carve out ordinary changes in the partnership. Then think through the larger events.

• ✓Does adding or losing partners trigger the landlord's consent or a recapture right?
• ✓Can the firm merge or reorganize, or transfer the lease to a successor firm, without consent or with a stated standard?
• ✓Can the firm change its name, and does the signage right allow for it at a reasonable cost?
• ✓If a group leaves, can we sublease part of the space, and may we share space with another firm or departing lawyers?
• ✓Is there a termination right at a set point, with an agreed fee based on unamortized costs?
• ✓Is there a contraction right allowing us to give back a defined part of the premises?
• ✓Is there an expansion right, such as a right of first offer, in case a lateral group joins?

Flexibility costs something, and landlords price it, but firms do obtain it. One firm described a package that included both a way out and a way to grow:

That is one firm's deal and not a benchmark. Your terms depend on your credit, your term and the market when you sign.

In Illinois, Rule 1.6(e) of the Rules of Professional Conduct requires a lawyer to make reasonable efforts to prevent inadvertent or unauthorized disclosure of, or access to, information relating to the representation of a client. The comment to the rule explains that reasonableness turns on factors such as the sensitivity of the information and the cost and difficulty of safeguards. Lawyers elsewhere should check their own state's version. What that means for your office is your call, and a lease can make it easier or harder.

• Landlord entry. Require advance notice except in an emergency, a building escort for non-emergency visits to secure areas, and a right to designate file and records rooms as restricted.
• Cleaning. Find out who cleans at night, how they are supervised, and whether you can restrict their access or handle secure rooms another way.
• Sound. Specify demising walls and conference room walls that reach the deck, door seals and sound masking where calls and client conversations could be overheard.
• Client flow. Think about how clients reach the conference rooms without passing open work areas and file storage.
• Shared space. If you are considering a shared suite or subleasing to other lawyers, consider how phones, copiers, records and reception would be separated.

Conference space is often the most visible part of a firm's office, and it can be the most expensive to build. Decide how large your largest regular meeting is, and whether occasional larger gatherings could use a building conference center or other space. Check that any shared building amenity offers the privacy you need before you rely on it for depositions or client meetings.

File storage deserves a real decision. Dense filing can raise a question about floor load, which the landlord's engineer can answer. Digitizing files or moving them offsite may free up rentable space, but consider retention duties and client expectations first. Do not sign for a file room you only need because of habit.

Office sizes, associate and paralegal seating, and hybrid schedules also change how much space you need. A test fit shows what those choices do to the rentable area, and the cost difference may be large enough to change the term or the building you choose.

Think about where your clients and courts are, how lawyers and staff commute, and what your address signals to the people you serve. Those factors differ by practice. A litigation group that is often in court may value different things than a transactional firm.

Many firms would rather stay put, and that can be the right outcome. Testing the market can still strengthen a negotiation with the current landlord. TAG represents occupiers, and for law firms we keep partner review practical: a short list of options, a clear comparison, and decisions on the points that matter to the partnership.