Today we see many vacant leases on commercial and retail properties in most cities and locations. So when we have a tenant approach us with an application to lease a space, it’s all too easy to jump at the opportunity without clear thinking and lease planning.
If you, as a real estate agent, accept any lease offer without regard to the long term and performance of the property, you may create long-term inconvenience for the landlord. Each lease must be a “clear fit” in the owner’s plans and property operations.
One of the most important things to do early in the lease negotiation is to understand the tenant’s identity and credentials. You need to know that you are of substance legally and financially.
Here is a checklist that can be applied to commercial and retail property leasing. You can add to the list based on property types and the location in which you operate.
- In the initial approach to the tenant, find out what they need in terms of premises and location. This will include the lease area, property location, property size, internal improvements and amenities, and the rental budget. Clearly, they must check all the boxes before receiving detailed information about the property in question.
- At this point, it is wise to understand the identity or structure of the company that will be the potential tenant under the terms of the new lease that is negotiated. Find out if they come to you from another property and if they have an occupancy history that proves and shows legality and credibility as a tenant. If they are coming to you from another property, there may be a change of ownership moment that could be critical to the leasing process.
- Take them to the property and give them a complete inspection of the improvements, services and amenities. The inspection process should also involve a more detailed qualification of the tenant and the tenant’s property needs.
- It is normal to look for some type of guarantee or bond to support and give substance to any lease negotiation. It is not uncommon to ask for an amount equal to three months’ rent plus any charges applied to the lease. In some circumstances, you may need to ask for more. The object here is to give the landlord something to fall back on in times of breach of the lease.
- At the beginning of the lease negotiation, everything must be done in writing between the parties. That means the terms and conditions must be reflected in an agreement header that can then be taken to a lawyer for the preparation of a lease.
- It is common for the tenant to ask for some type of incentive in the new lease. In preparation for this situation, he should have gathered information about other market rents and rental incentives that exist in the local area. If you give them an incentive, make sure it balances with other lease transactions locally.
When you set and follow the rules at every lease negotiation, you’ll get a better outcome for your landlord. A good lease helps the sales process when it is going to occur and optimizes the income of the lessor.