What does triple net or “NNN” reference mean in a commercial lease?

In a commercial lease the rents are often quoted as being triple net, or NNN. What this means is that in addition to the quoted rental rate, the tenant, under the lease, is responsible for their share of the operating expenses and real estate taxes associated with the property. Triple nets refer to 3 categories; Maintenance, Insurance and Taxes, thus the NNN (net-net-net) reference. Maintenance generally covers the maintenance of the property, including landscaping, common area utilities and property management. Because different landlord's might include or exclude certain expenses from their definition of NNN’s, it is important to ask the question to be better able to accurately predict operating expenses.

We are here to help you and your clients with all aspects of commercial property management. Please contact us for further assistance.

Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should not rely solely on this information. We encourage our clients to work with a lawyer experienced in commercial and/or residential real estate matters as they can be complicated and confusing.

What is the difference between subleasing and assigning a commercial lease?

An assignment occurs when a tenant transfers its entire interest in a leased property for the remainder of the term of the lease to another party. A sublet occurs when the tenant transfers anything less than its entire interest. When an assignment occurs, tenants are normally released from all responsibility for the lease. However, it is important to note whether the terms of an assignment actually give a full release from all responsibility. Sometimes the language will keep the original tenant on the hook if the new tenant fails to pay rent or fails to fulfill its obligations. On the other hand, with a sublease the tenant remains ultimately responsible if the subtenant fails to uphold its responsibilities.

We are here to help you and your clients with all aspects of commercial property management and leasing. Please contact us for further assistance!

LOCATION - LOCATION - LOCATION

Why does location matter so much to businesses? If you’ve decided to open a retail business in a new area, it’s important to find a real estate broker who is knowledgeable about the best areas to set up shop and draw new customers. Every city or town has its hotspots — areas where pedestrians frequently pass by, or walk through, on their way to work or school. These are the areas to target in order to have a successful retail business in a new area. Without the proper consultation and knowledge on your side, it’s easy to fall into the trap of cheap property in the wrong part of town. That is not to say that there aren’t some great opportunities in properties that cost less to rent, but there is a certain premium to be paid on customer-facing properties that actually draw customers. A local real estate broker is someone who has lived in the city you are considering, so they know exactly what works and what doesn’t. Find someone who can tell you about a property’s history: which businesses have operated from that location, which of them have succeeded and which have failed, and why the property is currently on the market. If it’s a long list of commercial and retail failure stories, you’ll know to look elsewhere for your business.

Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should not rely solely on this information. We encourage our clients to work with a lawyer experienced in commercial and/or residential real estate matters as they can be complicated and confusing.

What is this thing called "Quiet Enjoyment"?  

In a commercial lease, quiet enjoyment is the most fundamental and often misunderstood right obtained by a tenant.  The covenant of quiet enjoyment means more than just a noise-free environment.  It is an obligation that provides that the landlord will not interfere with a tenant's right of possession or tenant's enjoyment of the leased premises.  In most leases, the covenant is written in the lease document, setting out the parameters for quiet enjoyment. 

We are here to assist you and your clients.  Please give us a call should you have any questions.

 There are no warranties, express or implied, including fitness for a particular purpose, made with respect to this communication. Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should obtain the advice of an attorney well versed in these matters.

 

 

COMMERCIAL RENT CONTROL?

Is there rent control on commercial property?

Whether you're the tenant of a commercial rental space, or the landlord managing the property, rent increases can be a tricky business.  Meanwhile, no such laws prohibit a sudden rent increase for commercial properties. Instead, commercial leases are strictly governed by the original lease agreement.

 We are here to help with the management of your commercial building.

NOTHING FOUND HEREIN SHOULD BE CONSTRUED AS AN ATTEMPT TO OFFER OR RENDER A LEGAL OPINION OR OTHERWISE ENGAGE IN THE PRACTICE OF LAW. YOU SHOULD NOT RELY SOLELY ON THIS INFORMATION. WE ENCOURAGE OUR CLIENTS TO WORK WITH A LAWYER EXPERIENCED IN COMMERCIAL AND/OR RESIDENTIAL REAL ESTATE MATTERS AS THEY CAN BE COMPLICATED AND CONFUSING.

How do commercial leases differ from residential leases?

It's crucial to understand from the get-go that, practically and legally speaking, commercial leases and residential leases are quite different. Here are the main distinctions between them:

*Fewer consumer protection laws.  Commercial leases are not subject to most consumer protection laws that govern residential leases -- for example, there are no caps on security deposits or rules protecting a tenant's privacy.

*No standard forms.  Many commercial leases are not based on a standard form or agreement; each commercial lease is customized to the landlord's needs.  As a result, you need to carefully examine every commercial lease agreement offered to you.

*Long-term and binding.  You cannot easily break or change a commercial lease.  It is a legally binding contract, and a good deal of money is usually at stake.

*Negotiability and flexibility.  Commercial leases are generally subject to much more negotiation between the business owners and the landlord, since businesses often need special features in their spaces, and landlords are often eager for tenants and willing to extend special offers.

Before you sign a lease agreement, you should carefully investigate its terms to make sure the lease meets your business's needs.

 There are no warranties, express or implied, including fitness for a particular purpose, made with respect to this communication. Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should obtain the advice of an attorney well versed in these matters.

 

COMMERCIAL BUSINESS PLAN

What is a real estate marketing plan and why do you need one?  Whether you have an established marketing team or working with limited resources, developing an effective commercial real estate marketing plan can be overwhelming, especially in the highly competitive digital age. When faced with an abundance of different marketing tools and solutions, it can be all too easy to fall into the trap of spreading your game plan thin and lose focus on core objectives.

Creating a real estate marketing plan will serve as a blueprint for your property marketing efforts for a specified timeline. It will help you document and organize all key activities, efficiently manage multiple tasks, track overall progress of your project, and communicate the plan with various landlords with greater clarity.

There are no warranties, express or implied, including fitness for a particular purpose, made with respect to this communication. Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should obtain the advice of an attorney well versed in these matters.

COMMERCIAL TENANTS WITH "ISSUES"

How should a landlord and property manager deal with a problem commercial tenant?  One of the first steps is to complete a thorough, well-drafted lease that will anticipate and address most problems. The lease should spell out in detail what circumstances will constitute an event of default under the lease and should state the remedies that are available after an event of default, including immediate eviction and the recovery of damages, attorneys’ fees and other costs of enforcing the lease. 

Beyond that, the best thing a landlord can do is find and sign solvent, reliable tenants.  Landlords should conduct proper due diligence and get detailed financial statements from prospective tenants. To help ensure payment from corporate tenants, landlords also should require written personal guarantees from the individuals and their spouses who own the corporation or other entity that is the named tenant.

Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should not rely solely on this information. We encourage our clients to work with a lawyer experienced in commercial and/or residential real estate matters as they can be complicated and confusing.

Building Maintenance

 

When it comes to the maintenance of commercial property, responsibilities are divided between landlord and tenant according to the lease.  It is important that you understand your responsibilities for the repair and maintenance of the building and the premises you are leasing.  Tenants are typically responsible for internal repairs and landlord responsible for external repairs and maintenance.  In some cases, you will also be responsible for external maintenance as well. This is more likely if you are the sole occupant of a building.

Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should not rely solely on this information. We encourage our clients to work with a lawyer experienced in commercial and/or residential real estate matters as they can be complicated and confusing.

Estoppel Certificates

In commercial real estate it’s not uncommon to come across estoppel certificates, especially when a property is being sold?  What are they, and why do landlords require them?

Estoppel certificates are documents required by lenders to assure the rights of all parties involved are properly documented.  An estopped certificate is a certification from a landlord and a tenant that outlines the terms and conditions of the lease. 

Should you have a question or comment, we would love to hear from you!

Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should not rely solely on this information. We encourage our clients to work with a lawyer experienced in commercial and/or residential real estate matters as they can be complicated and confusing.

LANDLORD OR NOT?

Many people aren’t born to be landlords, and many property owners find hiring a third-party company to be very beneficial to their portfolio. The decision to hire a property manager for your properties can be a tough one.  If you have tight margins to begin with, bringing a property manager into the mix could make your properties operate at a loss. However, most people aren’t born to be landlords, and many property owners find hiring a property management company to be very beneficial to their portfolio.  Many landlords feel that their time is worth more to them than saving money by managing themselves. Landlords are willing to pay to no longer worry about the micro details and instead focus on other things such as business or family.  Property managers have more to offer than just dealing with tenant and maintenance issues. There are many laws and regulations landlords must follow that they may not even know about. Staying on top of these laws is an important, yet overwhelming, task for many, and a property manager can often insulate landlords against any liability.

Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should not rely solely on this information. We encourage our clients to work with a lawyer experienced in commercial and/or residential real estate matters as they can be complicated and confusing.

Understanding and negotiating commercial real estate leases

Understanding and negotiating commercial real estate leases can be complicated and they are very different from residential leases.  Before signing any commercial lease, you need to know what questions to ask, and how rent, load fees, and other added fees are calculated.  Armed with knowledge you can negotiate the best deal possible!  Negotiating a good deal in a commercial lease starts with asking the right questions.  Once you have answers to certain questions, you can research more about types of leases, leasing terms, negotiating commercial leases You will also be better able to plan your finances, and your negotiation strategies if you know what questions to ask.  A few questions just to start:

  • What Type of Commercial Lease is Being Offered?  The type of lease being offered is probably the most important thing to consider first because it determines how you will be charged rent. The terms of commercial real estate leases are defined by the type of commercial lease.

  • Are the Terms of the Lease Negotiable?  All commercial leases should always have at least some room for negotiation, no matter how small.  A completely inflexible landlord is generally not someone you want to lease from because "inflexible" often equates with "unreasonable."

  • What Insurance Coverage Does the Lease Require Tenants to Purchase?  Few business owners new to commercial leasing will look beyond their actual monthly rent and utility costs when determining if a space is affordable, but you also need to consider your insurance costs.  Moving from a home-based business into "brick and mortar" space will cost you more to insure your business because in addition to your own insurance needs, your landlord will probably require you to purchase insurance to protect him/her as well.

We are here to help you and your clients with all aspects of the commercial real estate market. Please contact us for further assistance!

Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should not rely solely on this information. We encourage our clients to work with a lawyer experienced in commercial and/or residential real estate matters as they can be complicated and confusing.

WE'VE DECIDED NOT TO RENEW

 Few words are more unwelcome to a property manager’s ears.  Some tenant loss is inevitable as companies expand, downsize or change their focus.  Implementing the following principles will both improve your tenants’ overall experience and prevent problems before they arise. This will keep your commercial tenants happy and will most likely improve your bottom line.

            1. Keep the property safe.  Making safety your No. 1 priority will make tenants feel secure.  Conduct regular safety inspections and be sure to communicate your safety concerns to your tenants as well.  Landscaped areas often get overlooked when it comes to safety. Inspect them regularly for tripping hazards such as eroded areas, fallen limbs and heaving pavement due to overgrown tree roots. Also, be sure shrubbery is trimmed back and your outdoor areas are well lit to deter would-be assailants.  

            2. Keep it pleasant.  A clean and well-maintained property will command higher rent and encourage tenants to stay.  Be sure to inspect your properties regularly for aesthetic as well as mechanical issues. Don’t underestimate the importance of “comfort”. Something as simple as installing a thermostat so tenants can adjust the temperature of their space will make a big difference in the level of satisfaction.

            3. Make it easy. In all interactions with tenants, consider their point of view. For you, property management is your primary business. For them, it’s an interruption.  Set up systems that make it easy for your tenants to pay their rent.  Setting up a system that automatically drafts payment is a good option.

            4. Communicate, communicate, communicate.  Much of the time when tenants are dissatisfied, it’s due to miscommunication or not understanding.  Keep your tenants in the loop about any upcoming changes and ask them how they feel their needs are being met.

Keeping these four golden principles of tenant relations—safety, comfort, convenience and communication—top of mind will help pave the way toward better tenant retention.

There are no warranties, express or implied, including fitness for a particular purpose, made with respect to this communication. Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should obtain the advice of an attorney well versed in these matters

THE WORK ETHIC

When it comes to commercial property management services and achieving your ownership goals, let us not forget how important tenant relationships are.  Some of the building’s best assets are the tenants themselves.  To increase tenant retention, we establish programs to enhance the owner’s relationship with tenants and increase camaraderie and business cooperation among adjacent tenants.  In addition to working proactively to manage lease expirations and renewals, we support future leasing efforts by routinely soliciting tenant feedback and taking action.  This opens face-to-face casual interaction improving word-of-mouth discussions among tenants and can help property marketing efforts.

We are here to help you and your clients with all aspects of commercial property management.  Please contact us for further assistance!

There are no warranties, express or implied, including fitness for a particular purpose, made with respect to this communication. Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should obtain the advice of an attorney well versed in these matters.

Assignment & Subletting – Commercial Leasing

Most commercial leases prohibit a tenant from assigning or subleasing the leased premises to another party without first obtaining the landlord’s consent.  Often, a commercial tenant will execute a lease failing to insert language that a landlord will act reasonably when a tenant requests the landlord’s consent to an assignment or sublease.  A tenant, at the very least should negotiate that a landlord’s consent to an assignment or sublease should “not be unreasonably withheld, conditioned or delayed.” 

A tenant needs to be concerned with this clause because most tenants do not realize that they could be in default under a lease simply because of (i) the death of a shareholder; (ii) the sale of the company and/or (iii) the reorganization of their company.  I have known landlords to hold up the sale/merger of a company because the landlord wants to renegotiate the lease as a condition to granting an assignment. 

A tenant should attempt to have the lease permit certain assignments or subleases without obtaining the landlord’s consent, such as assignments to an affiliate company. 

We are here to help you and your clients!

 

There are no warranties, express or implied, including fitness for a particular purpose, made with respect to this communication. Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should obtain the advice of an attorney well versed in these matters.

GO-DARK

What is a “Go-Dark” clause in a commercial lease?  Most leases require you to continuously operate your business while you are leasing space in the property and if you violate your center's hours of operation or close down completely, you could end up in default. A go-dark clause gives you the opportunity to shut down your operation without sanction from the landlord as long as you continue paying your rent.  Landlords frequently oppose granting go-dark clauses because they can lead to rolling vacancies as tenants move out to avoid being in a center with gradually shrinking traffic. One of the lease terms that a landlord may offer you instead is a go-dim clause that requires you to modify the way you operate or your operation hours to reduce your costs.  Another option that your lease may contain is a recapture clause. Recapture lease terms let your landlord take your space back and cancel your lease obligations if you go dark. While this can be valuable if you want to get out of the space, it also means that going dark could make you lose your space once and for all if the landlord recaptures it.

THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING FITNESS FOR A PARTICULAR PURPOSE, MADE WITH RESPECT TO THIS COMMUNICATION. NOTHING FOUND HEREIN SHOULD BE CONSTRUED AS AN ATTEMPT TO OFFER OR RENDER A LEGAL OPINION OR OTHERWISE ENGAGE IN THE PRACTICE OF LAW. YOU SHOULD OBTAIN THE ADVICE OF AN ATTORNEY WELL VERSED IN THESE MATTERS.

 

What is an SNDA document agreement? 

A subordination, non-disturbance and attornment (SNDA) agreement is actually three agreements in one.  The "subordination" portion permits a lender of the property to become superior to the lien of the tenant's lease.  The "non-disturbance" agreement protects the tenant as it permits the lease to stay in force so long as tenant is not in default.  The "attornment" agreement creates a contractual bond between tenant and lender in which the tenant agrees it will recognize the lender as landlord in the event the landlord defaults on the mortgage.  The SNDA language has taken on a new importance in this economic environment in which it is no longer shocking to learn that a landlord has walked away from its real estate after defaulting on the mortgage.

There are no warranties, express or implied, including fitness for a particular purpose, made with respect to this communication. Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should obtain the advice of an attorney well versed in these matters.