Acquiring commercial real estate can be an exceptionally sound, low-risk investment – that is, until the first unruly tenant causes extensive damage or fails to pay the rent on time. As a commercial landlord, there are several nuances to negotiating and managing commercial rental agreements – and working with experienced real estate attorneys is a vital part of the process.
Below are five things to know as a commercial landlord to help avoid unnecessary strife, hassle, and expense:
#5: Timing is everything – Commercial leases are generally longer in duration than the average one-year residential lease, and for good reason. As a commercial lessor, the last thing you want to worry about is filling the space every 12 months, which could be exceedingly difficult for a niche industry requiring certain equipment and compliance.
By contrast, however, be careful with agreeing to a 20-year lease, particularly if the tenant is relatively new in business or unknown in the community. Sometimes, a five- or seven-year lease agreement fits the bill and protects both sides evenly.
#4: Background checks – Commercial leases can involve monthly rent payments upwards of five figures, meaning a tenant must be solvent, productive and creditworthy. Much like the residential leasing process, commercial landlords should implement measures to weed out potentially problematic tenants before signing an agreement.
In this regard, a simple credit check can quickly reveal significant problems with debt or default – suggesting that it is probably time to look for another tenant.
#3: Beware of compliance and regulation – Particularly in the manufacturing industry, a landlord can quickly face major fines and penalties from the state and federal governments for failing to meet safety and environmental standards – even if the tenant is the one causing the issue. If you are unsure whether this will be an issue for your property and potential tenant, contact a Ft. Lauderdale real estate lawyer well ahead of time.
#2: Anticipate corporate structure changes – Over the length of a lease, it is not unheard of for a business to change hands, merge with another company, or expand through acquisition. However, with a total change in ownership could come a congruent change in business operations, which could in turn affect the property under the leasehold.
By working with a real estate attorney, you can be sure to plan for this type of issue by including language to address the rights, duties and obligations of both sides in the event of a restructuring.
#1: Maintain consistency – Once a commercial lease is in place, its terms should be followed consistently by both sides. Allowing for one late payment one month will quickly lead to a late payment the next month and, ultimately, a haphazard payment schedule that will be difficult to unravel in the event of litigation.
The same advice holds true if the tenant is constantly committing infractions in violation of the lease terms, or otherwise engaging in conduct explicitly prohibited in the agreement – no matter how minor. To this end, a comprehensive lease agreement should include terms involving the number of infractions or penalties allowed before eviction will take place – and be sure to keep careful records detailing each incident.
Ft. Lauderdale Real Estate Attorneys Can Help
If you are considering a commercial lease and would like advice as to how to best approach the relationship, please do not hesitate to contact the Law Office of Michael L. Feinstein today!