When you manage or lease a commercial property it pays to have a good filing system when it comes to the tenancy mix in every property. Every tenant should have a series of files that allow you to get to information fast and effectively. When things are happening in a tenant matter, you want to go the right file and get what you need to respond in a timely and effective way.
In properties with a lot of tenants, the filing system is highly important. That then brings me to another issue of just who looks after the files and places records and activities in the ‘right file’. If you do not file the right information, then the property management activities get difficult. When something goes wrong you simply do not know where to go, or you need a lot of time to get to an answer for the landlord or the tenant.
The trick to all of this is that you build a good property management and tenant filing system from the very start of the property management appointment.
Some may argue that you have the ability to scan documents and store them on some ‘hard drive’, and that is just fine, but the reality of the industry is that you do need some paper files to review and work with.
Here are some ideas to help you get your property management filing system up and running:
Each tenancy should have a correspondence file of current and past issues. This is where you go to look at letters and notes relating to current tenant matters. This file is also important from an historic perspective; you can go back and see what happened and how issues were agreed. This is really important where some tenants are not following the lease terms and conditions.
At the front of the tenant file, place a summary sheet of lease terms and conditions that you can quickly refer to in the case of a question or problem. This sheet should be inserted in the file at the start of any property management appointment and leasing negotiation. This information sheet should be updated as the terms of tenant occupancy change.
Any income matters of rent review, option, renewal, alterations, and rent splits should be entered into the property computer records using a standard template form of record. When this entry has been done, the form can be placed in the tenant file for future reference.
A copy of the lease and any other lease papers or licences should be held on file. Notice I said ‘copy’ and not ‘original’. It is not a good practice to keep original lease documentation in your office; if you have a fire, or if you lose the file the ramifications are not good especially if you have a lot of properties and tenants.
Any lease alterations and special billings for the tenant should be recorded on the tenants file for reference.
Good property records and tenant records will help your property management process. As your property management processes change, you can improve your systems and records.
With commercial premises, the leasing process should involve ‘Agreements to Lease’ or ‘Letters of Offer’ between the tenant and the landlord. This enables you to negotiate the final terms and conditions of the lease quite effectively.
When the final ‘Agreement to Lease’ has been achieved between the parties, then that document can be sent to the landlord’s solicitor to prepare the final and original lease documentation. The whole process is clean and straightforward.
It is always desirable to let the landlord solicitor prepare the lease and arrange for the signature of both parties. Invariably solicitors come across smaller matters of dispute which still need to be resolved between the landlord and the tenant. The solicitors are the best ones to do that for the landlord.
Whilst all premises are unique and special, the following is a checklist around which the ‘Agreement to Lease’ could be structured. Simply then add other elements special to the property as appropriate.
The name of the landlord together with contact detail
The name of the tenant together with contact detail
Description of the premises including the reference to any plans or drawings
The area of the premises
The term of lease
The lease commencement date and the end date
Option for a further term if applicable and how that option should be exercised with due regard to timeframes prior to lease expiry
Details of contributions to outgoings expected from the tenant
Details of recoverable outgoings that are normally considered as every day consumables in the premises and how they are to be recovered from the tenant. This would be cleaning, electricity, communications, and energy.
Permitted use of the premises
Details of any incentive to be provided by the landlord
Details of the make good expected from the tenant at the end of the lease term
Car parking detail
Signage detail and approvals
Air-conditioning supply and hours of operation
Access details to the premises including a statement of how the tenant will access the premises at different times
Details of works to be undertaken by the landlord prior to occupancy by the tenant
Details of approval processes that need to be observed by the tenant in any fit-out works
Rent review structure and frequency
Details of the initial starting rental
Details of the guarantees expected to be provided by the tenant as part of the agreement to occupancy
Insurance obligations of the tenant
Confidentiality agreement between the parties
Any other obligations of the tenant to be undertaken during the lease term
Any other obligations of the landlord to be undertaken during the lease term
Special terms and conditions that need to be incorporated into the lease document by the solicitor prior to the signature an agreement of the parties
Obligations of the lease with regard to legislation current in your location or the property type.
This list should not be regarded as finite given that every property is unique and special when it comes to lease negotiations. The list will however give you the main things to look for in the first instance of lease negotiation, and to which you can add the other special terms and conditions of the negotiation in the ‘Agreement to Lease’.
Any lease or tenancy negotiation should include evidence of the condition of the current premises before they are handed to the tenant. At the end of the lease term, you will then know to what condition you expect the premises to be returned to. ‘Agreements to Lease’ are standard procedures used by experienced landlords and real estate brokers.
When you have structured a document that works well for you in your location with your property types, it pays to create a number of templates which simplify the task of leasing and negotiating. Generally speaking, the ‘Agreement to Lease’ is not legally binding but it will facilitate the negotiation and move you towards the creation of a real lease where the solicitor takes over.