Commercial Real Estate Tenant Issues

On November 5, 2011, in Tenant Tips, by Rob

Commercial real estate owners must be thorough when checking out potential tenants for their properties. Entering into a contract with the wrong type of tenants can prove costly to your business. Review the leasing contract carefully with the tenants you select to ensure that all parties are aware of the terms. Be willing to negotiate somewhat on the lease terms, but protect your assets by limiting your liability in certain circumstances.

Property Maintenance

Property owners must make it clear in lease agreements, their responsibilities for maintaining and improving the commercial real estate. If you do not clarify this point in the lease, tenants could make unreasonable demands that you must comply with. Explain in the lease agreement that the tenant is responsible for returning the property to its original condition at the end of the lease terms or risk losing the security deposit.

Use and Exclusivity Clauses

Tenant problems could arise if you do not build in use and exclusivity clauses into your commercial lease contract. Use clauses dictate the type of activities permitted on the premises. Illegal activities must be prohibited to protect your business from liability. Also, if you have a personal aversion to a type of business and worry about the effect on your company’s image, you have the right to forbid the tenant from performing certain activities. If you rent multiple commercial properties, the exclusivity clause prevents you from renting spaces to competing businesses in the same complex or shopping center.

Eviction Process

To protect yourself in the case of tenant issues, build in eviction clauses into your leasing contract. For instance, commercial leases typically give the owner the right to evict a tenant if he violates the lease terms. The violation must be remedied within three to ten days or the eviction process can commence. Non-payment of rents could also launch the eviction process and require tenants to settle rents or be removed from the property.

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