Leasing Tips and Handover Strategies

When it comes to leasing a commercial or retail property, you will find that there are special things that should happen to keep control of the transaction and the final stages of property handover.  Eagerness produces errors and omissions from a leasing perspective.

The simple fact of the matter is that control helps us get the parties to the lease ‘across the line’.  For that very reason it pays to have a checklist approach to the leasing process and property handover.

When you get a lease negotiation underway, so many things can come into the transaction and divert the discussions and agreements.  Very commonly in the involvement of solicitors on behalf of the parties to the lease you will see that slow-down process start.

You are working for the client and they want a timely lease that is correctly executed and implemented. Always stay with the negotiation and the lease momentum to the very end.  If a solicitor has the papers on behalf of a client, chase-up the situation and see where things can go next.

Here is a checklist for the leasing of premises; it features some of the main things that are really important in leasing and a timely outcome.  You can add to the list based on your property type, and location.

  1. The correct lease documents should be prepared with accurate regard for the facts from the original lease negotiation.  Ensure that the client’s solicitor understands all of the facts and the unique elements of the property.
  2. Some lease documents are just part of the required paperwork for the lease occupancy.  At times there are other papers such as fit out agreements, disclosures, licences, and side agreements.  All of these should be correctly signed and in the order that is relative to local property laws and leasing situations.
  3. Any incentive agreements between the parties should be correctly documented and signed.
  4. Any plans and drawings that are part of the leasing agreement should be sourced and available for approvals.
  5. Any consultant reports relating to the transaction should be sourced.  Typically they are mechanical, electrical, structural, and base building.
  6. The permitted use for the premises should be clearly set and agreed between the parties.  That use will have impact on the design of the premises.
  7. Landlord approvals may be required before any building approvals are sought from the building and construction board or office.
  8. All monies to be paid under the lease should be taken at the time of handing over of all lease documents from the tenant.  Those monies should include bonds, guarantees, fit out contributions, and any other important financial commitments from the lease document.
  9. Do not under any circumstances hand over the keys to the premises until the landlord and their legal advisor have indicated that all papers and monies are correct and in order with both parties.  Importantly those documents should be signed by both parties.
  10. Document the condition of the premises before the tenant takes over.  This will be an important fact of record when it comes to the end of the lease.

When you create a lease handover checklist, you can keep the transaction on track to finality.  That then means a happy client and a good commission.

Tenant Management Tips – Lease File and Record Keeping in Commercial Property Management

womand walking in shopping centre supermarket aisle
Understand all of your tenants leases totally, so you can stay on top of all critical dates and triggers.

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

Retail Rental Tips

man pushing a shopping cart
Consider your retail rental carefully as part of your tenant mix.

The idea of lowering rents in a tenant mix strategy may not be a popular topic among shopping centre or shopping mall owners, but cash flow is still cash flow.

There is great value in communicating with your tenants and understanding their reality, as well as your own. Again, deal with each rental renegotiation on the specific circumstances of that lease. Know too, however, that a rental reduction, if necessary, may be recaptured in the following ways:

  • Percentage rent increase. If the tenant’s sales are off during a bad economy, presumably they will go up when times get better. The landlord can then recapture from a lower base rent via increased overage rent.
  • Deferred rent. If the tenant is having trouble, consider lowering the rent, with a deferred lump-sum payment at a specified date or on a stair-stepped basis to ultimately bring the rent back up to an acceptable level.
  • Term extension. As a trade-off for a reduced rent for a quality tenant, ask for a lease extension with gradual escalations. This will help assure long-term occupancy and profitability.
  • Advertising. Require that the tenant agree to spend a substantial percentage of any rental reduction toward advertising and promotion, in an attempt to increase sales.