Find out the costly mistakes do avoid when starting the commercial relocation process as well as how the commercial real estate markets have faired given the current economy.
It is all included in this months issue of the Tenant Buyer’s Bottom Line Secrets- January 2010 Newsletter Edition
Tenant Improvements: Now you see them, now you don’t. If improvements are to be made to the leased premises prior to the tenant’s occupancy, the tenant must understand the economic impact of such improvements and know what it will get. Understand that getting such improvements is increasingly difficult in today’s economy given that landlords cannot secure tenant improvement financing like they used to. Here are some important tilps:
Make certain that the obligation to pay rent and other charges do not begin until the tenant improvements are complete.
Determine whether the landlord will be designing and constructing the tenant improvements at its sole cost (a “turnkey” arrangement) or whether the landlord will be giving the tenant an allowance, with either the tenant or landlord designing and constructing the improvements (an “allowance” arrangement).
Before entering into the lease, in an allowance arrangement, the tenant should have final space plans and estimates for the work so that the tenant is not exposed for the cost of improvements in excess of the landlord’s allowance or, at the very least, will know how much it will have to pay.
In both turnkey and allowance arrangements, the tenant must be certain to work with a competent broker and space planner to make certain that the space will be built out to satisfy the tenant’s needs
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Where the landlord does the design work, reserve the right to look at, review and approve all designs and materials utilized, and the right to make changes up through the design stage of the tenant improvement design documents.
Additionally, in an allowance arrangement, make sure that the allowance will not be used up for base building work, such as bathrooms located in common areas, asbestos abatement, or sprinkler systems.
Agreement should be made as to the disposition of the landlord allowance if the actual tenant improvements cost less than the allowance. The landlord would like to keep the unused portion of the allowance, but the tenant should attempt to get the landlord to apply the allowance to the costs of other work that is the responsibility of the tenant under the lease or work letter, pay it to the tenant, off-set it against future rent, or allow the tenant to use some portion of it.
Negotiate remedies for landlord-caused delay and carefully define and limit the consequences of tenant-caused delay.
If you are not sure what you are doing, get help! See your attorney or tenant rep broker!
Unfortunately The process of moving your company began the moment the decision was made to move and will not be complete until every invoice is paid, every scratch is mended, and everybody is settled into your new facility.
I suggest that the move be broken down into eight easy to manage phases:
1. Inventorying all items to be moved, refurbished or sold.
2. Developing an action plan for the move.
3. Preparing RFP’s and obtaining estimates from the movers and firm bids from other vendors.
4. Selecting a moving company and other vendors to be used in the move.
5. Educating your employees about the move.
6. Packing and preparing your furniture, equipment and contents for the move.
7. Supervising the actual move.
8. Post move follow up.
A question I am often asked with respect to leasing commercial property is how one can know if the landlord is paying his bills.
Think about it for a second, if the landlord fails to pay his mortgage, taxes, utility bills or any similar related expense, those vendors who have not been paid can (and will) take legal action. That action can be anything from foreclosure, to disconnection of services.
So what can a tenant do?
Enter a good real estate attorney. Assuming the tenant used a tenant rep broker to assist him with the transaction, that broker would have negotiated important lease terms in the form of a request for proposal and received a written answer. The mechanisms in that letter would state how the final lease should be prepared in order to protect that tenant.
Once the broker received the lease which was drawn using the business points negotiated in the request for proposal letter and it response, he would have made informal lease comments and incorporated them with the comments of the tenant. These comments are then given to the tenants real estate attorney for proper legal review and manipulation.
I have NEVER been through that process with a tenant where important lease terms did not need to be changed. It is at this point where the real estate attorney will ensure that the necessary protection is in that lease document prior to signing.
If the landlord will not accept these important changes, then the good tenant broker will have an alternative property to consider before making their final decision.
This process is important given the economic environment today. How bad would it be for the tenants business to get locked out of the property until payments can be brought current?
