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Commercial Property Managers – How to Analyses a Lease and Tenancy Mix

When you manage Commercial Rent Arrears Recovery property you must know how to check out the leases for the property and the tenancy mix. Every lease should be regarded as unique and on that basis will require careful review.

What you are looking for in doing this are the things that impact occupancy, risk, and cash flow. The landlord and the tenant will be affected differently and will place their own priorities on the lease. The property manager is the person that has to be on top of the lease in all respects.

Here are some of the big things that are high priorities in lease analysis.

The tenant contact person should be clearly identified. This is a great help when things are active in the property or the tenancy. This tenant contact person is to be fully briefed on matters of any current property activity and records should be kept in that regard.

Lease and plan identifiers should be consistent across the property. This means that a multi-tenant building will have consistency in tenant location and description. This helps a lot when you are keeping records of events and in communicating to the tenant or the landlord.

The area of the premises in the lease should be cross referenced to the plans for the property and the surveys that may exist. Understand the difference between net lettable area and gross lettable area. Also identify the common areas and how they function.

Common area usage is to be described in the lease. Each lease will say what can and cannot be done in the common areas.

Services and amenities for the property would normally be described in the lease. The lease will also detail how the services and amenities may be used.

The Outgoings to be paid for the premises by the tenant during occupation will be described in the lease. A good lease is one that allows the landlord to recover many outgoings for the property. Importantly the property manager understands the outgoings recovery process and implements it as detailed in the lease.

The initial term of the lease and the term of any extra period of option are important dates in the lease. The dates have to be monitored so that any trigger points are observed and the necessary notices served. Some leases have a “time is of the essence provision”, so be careful with these dates. Many a property manager has been caught out by missing dates under the lease. The outcome is likely to be long lasting and costly.

Rent reviews during the lease term are important dates to be observed for both the landlord and the tenant. The income budget of the building should be structured around strategies and assumptions with the rent reviews. All the more reason to keep the rent reviews under control and all the notices served given the type of the rent review underway.

Current rent payments and any rent arrears have to be administered strictly by the lease. In only this way can you take matters to the legal level of response when required?

Rent guarantees and bonds could very well apply in the lease. The paperwork from that should be found and kept in a safe place, so they can be auctioned or drawn on as required.

Any rental or lease incentives should be documented and kept with the lease so adjustments and claims are implemented accurately.