Commercial Property Management – Tips for Reading Commercial Property Leases

When you manage or own commercial investment property, the reading and interpretation of leases becomes common practice as you seek to protect the rental and the function of the asset for the landlord.

A solicitor prepared lease will be the best way to go when it comes to getting a lease that protects the intentions of the parties. Generic property leases are usually not sufficient in property detail or terms and conditions to comprehensively pick up the specific factors of property design and performance. 'You get what you pay for', is the phrase that comes to mind in comparing generic 'off the shelf' leases versus ones that are specifically drawn up with the landlord and property in mind.

Only 'commercial property experienced' solicitors should be sourced and trusted for the task of lease preparation. A solicitor prepared lease provides a more specific and attractive package to buyers of the property.

Buyers of the property in considering a potential purchase can read the lease and understand where the cash flow will be coming from over the remaining lease duration. It is a proven fact that well prepared leases do help the sale of the property. They are more likely to contain advantages such as:

  • A better rent review profile than the standard review that is indexed to the local consumer index
  • A specific 'make good' clause that picks up the tenant reinstatement issues relevant to the premises
  • Landlord favorable actions and protections to use in the event of a lease dispute or default
  • Clearly set out dates for rent reviews and options that give the parties plenty of time to prepare for the event and negotiate appropriately

Reading Property Leases

Every property owner or commercial property manager should be able to read and comprehensively interpret property leases. In only this way can you correctly manage the occupancy of the tenant in the future of the property.

You can not price a property for sale without a review of all leases; they could very well impact the method of sale, timing of sale, or the price that you want to set.

The lease protects the cash flow for the property. It also protects the landlord and tenant occupancy factors. A lease provides harmony in the occupancy relationship into the future.

A property lease can be quite specific to situations and dates of occupancy. When you purchase or manage a commercial property lease, the critical dates should be found and diarized for action at the right times.

Here are some ideas for you to develop in the reading of property leases.

  1. A lease will take time to read and fully review. A checklist of key issues will help you to extract the main items of interest to you. Different property types will require unique checklists to apply to the functions of that property.
  2. Details of the landlord should be legally correct and clearly displayed on lease document. This will include the registered office address for the services of notices to the landlord under the terms of a lease.
  3. Details of tenant occupancy and identity should also be clearly identified on the lease. The address of the tenant should be correct for the purposes of the serving of notices during occupancy.
  4. The description of the property and or the tenancy should be accurate and refer to the unique premises. In some cases you will find reference to a plan or certificate of title. If that is the case it should be searched and checked against the premises in occupation.
  5. When you review a lease, look for discrepancies or things that are outstanding. It is very common for property managers or landlords to overlook the exercising of lease terms and conditions.
  6. Make sure that the lease rental and current outgoings charges are in keeping with the lease terms and conditions. It is not unusual for something to be dropped or not processed in the management of the property.

Get used to reviewing leases. The more practice that you get the better you will be at seeing shortcomings and mistakes relating to the tenancy.

Source by John Highman

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