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.

Enforceable or is it?

Who needs to sign a commercial lease in order to make it enforceable? 

Just as in other legal contracts, corporate authority and the enforceability of the signatories must be considered when negotiating a lease.  The question of who must sign a lease in order for it to be enforceable is a question of state law and the terms of the governing documents of the business leasing the rental.  Unless a tenant can provide proof that the person signing the lease is in fact authorized to do so, a landlord is at risk of a claim that the lease was not dully authorized and is therefore not binding.

It is also important to confirm that the tenant entity is in good standing in the state where it was formed and is qualified to do business in the state in which the premises are located.

We are here to help you and your clients!

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 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 a more troublesome 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. 

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 PROPERTY MANAGEMENT

When it comes to commercial real estate management services and achieving your ownership goals, let us not forget how important tenant relationships are.  Most firms quantify asset value on a balance sheet.  We take a holistic approach to real estate management, realizing that some of the building’s best assets are the tenants themselves.  In order 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.

SEATTLE MULTI-FAMILY REGULATION

In 2015, the City of Seattle passed an ordinance requiring owners of certain multi‑family properties to provide advance notice to the City prior to listing the property for sale (the “Ordinance”). This Bulletin outlines the Ordinance and provides information on brokers’ disclosure obligations arising from the Ordinance.
 
The Ordinance requires owners of multi-family properties containing five or more units, where at least one of the units is affordable to a household earning 80% or less of area median income, to notify the City of their intent to sell their property at least sixty (60) days prior to advertising the property for sale or listing it with a listing service. A penalty of up to $500.00 may be assessed against owners who fail to comply. Information about whether a property is subject to the notice requirements in the ordinance and where to send the required notice is available at www.seattle.gov/housing/intent-to-sell. The Ordinance is codified at Seattle Municipal Code Sections 29.907.030 and 29.907.100.

Brokers should provide their sellers with written notice of the Ordinance’s requirements, and should refrain from offering to pay the fine for non‑compliance. Ignorance of the notice requirement will not immunize a broker from a potential claim for failing to notify a seller of the Ordinance. While it is ultimately the seller’s choice to comply with the Ordinance, it would be best for brokers to have written confirmation of the disclosure to the Seller and imprudent for a broker to advise against compliance.

 Brokers should provide their sellers with written notice of the Ordinance’s requirements, and should refrain from offering to pay the fine for non‑compliance. Ignorance of the notice requirement will not immunize a broker from a potential claim for failing to notify a seller of the Ordinance. While it is ultimately the seller’s choice to comply with the Ordinance, it would be best for brokers to have written confirmation of the disclosure to the Seller and imprudent for a broker to advise against compliance.

“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”

 

Negotiating a commercial lease with a large national company as the tenant

For most landlords when negotiating a lease with a tenant the procedure is routine.  A broker calls with a potential tenant, the landlord does some due diligence and sends over its fine-tuned landlord/attorney-drafted lease, the parties negotiate and the lease is signed with some modest modifications. When a national retail or service company comes calling, the rules of the game can change.  A national tenant brings with it instant name recognition and the prospect of increased foot traffic for the landlord's other tenants.  Many landlords may find themselves willing to do whatever it takes to sign a lease with this national tenant, even one who essentially wants to play by its own rules.  Unfortunately, along with these potential benefits, a national tenant also brings with it a tenant-drafted and tenant-slanted lease. If the decision is made to work with the national tenant's lease, careful reading and creativity are required.  Although it is unlikely that landlords will be able to completely re-work a national tenant's lease to the point where it is pro-landlord, keeping key negotiating provisions in mind should help landlords minimize the risks inherent in reaping the benefits of leasing to a national tenant.

We are here to help you and your clients with all aspects of the commercial property management market. 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

Buying A Commercial Building?

Regardless of your reason, if you choose to be a landlord, there are resources available to you, including those provided by local real estate boards, real estate networking groups, and property management software.  If you are purchasing commercial property - especially of a type with which you are either somewhat or completely unfamiliar, and/or if you are looking to manage a large portfolio of properties, you are likely better off employing the services of a property manager or property management firm in order to reduce potential liability. 

We are here to help you and your clients with all aspects of the commercial property management market. 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.