Key Considerations for Financial Institutions Leasing Commercial Space

By Charlsey Zyne

March 11, 2025

Leasing commercial space, whether for a new branch location and/or an office space, presents many critical factors to consider. Engaging legal counsel early in the process is essential to ensure there is a lease agreement in place that protects the tenant’s interest and mitigates potential risks. Furthermore, specifically for financial institutions, there are special considerations that need to be addressed within the lease to protect the interests of the financial institution.

The Importance of Legal Counsel Involvement When Negotiating the LOI

One of the first steps in the leasing process is often the drafting of the Letter of Intent (LOI), which outlines the key terms before a formal lease agreement is drafted. While an LOI is typically non-binding to either party, the LOI sets out important terms to be incorporated in the lease itself. Having legal counsel involved during this stage of lease negotiations ensures that critical provisions (such as lease term, renewal options, security deposit, and any other special considerations specific to financial institutions) are clearly defined. Without careful review from legal counsel, the parties may find themselves locked into unfavorable terms that are difficult to negotiate later.

Key Lease Provisions to Address

Once the lease agreement is in development in the stage of negotiations, there are several specific provisions that require careful attention:

• AIA Forms

In some instances, a landlord may provide the tenant with a lease prepared by using American Institute of Architects (AIA) documents which are standard form agreements. Having legal counsel review such forms is critical to ensure the lease aligns with the financial institution’s interests and to ensure specific provisions that are essential for financial institutions are included within the lease.

• Security Deposits and Financial Statements

Landlords often require security deposits and financial statements to assess the tenant’s financial risks. Financial institutions are lower-risk tenants, and therefore, the lease should be negotiated so that the financial institution is exempt from providing a security deposit, or if the Landlord is not amenable to this, the security deposit should be negotiated to decrease over time. Additionally, leases that require financial institutions to provide financial statements should be revised since such financial statements are available publicly.

• Relocation Rights

Some leases grant the landlord the right to relocate its tenants within a building or shopping center where the leased premises is located. This presents an arduous task for the tenant if such relocation is required and these provisions should be negotiated with proper notice requirements to the tenant and certain rights for termination, particularly if the relocated space is not suitable for the tenant’s business needs.

• Parking

Adequate parking is critical for financial institutions, as members need to be able to have convenient access to the financial institution’s banking services. Lease agreements should clearly define the number of parking spaces allocated to the tenant and its customers, specify any reserved or designated areas, and outline any potential relocation of parking spaces, which should be negotiated to be as least intrusive as possible. If the landlord does have the right to reassign parking, the lease should establish certain conditions ensuring that any changes to the parking do not negatively impact accessibility for members or employees.

• Additional Considerations for Financial Institutions

Beyond the standard lease provisions, financial institutions have unique operational needs that should be addressed, such as:

• Drive-Thru and ATM access: Provisions that allow for necessary banking facilities and traffic flow considerations need to be addressed within the lease
• Branch Security: Since financial institutions have secured areas, such as vaults and secure teller areas, the lease needs to accommodate the financial institution’s security infrastructure
• Armored Vehicles: Financial institutions need to have a lease that allows for safe and efficient access for armored vehicles
• A well-negotiated lease can provide stability and security for a financial institution’s operations, while a poorly drafted lease can create long-term challenges that could potentially be costly. By involving legal counsel early in the process and throughout the lease negotiations, financial institutions can secure favorable lease terms and avoid costly pitfalls.