Owning and leasing commercial property can be an exciting and profitable business. However, it is very important that during the course of determining which businesses you will choose to occupy an available space, you ask the right questions to ensure that your new tenant is a good fit for your property.
Oftentimes, the biggest mistake commercial renters make is assuming that the business they are leasing to is profitable. And, while this can be a reasonable assumption, it isn’t always an accurate one. Therefore, one of the first questions you should ask any potential commercial tenant is;
1) How long have you been in business? If the business is an established one, then it is reasonable to ask to see the businesses financial history to confirm their viability. If the business is a start up, you might want to reconsider or ask some more in-depth questions such as;
2) As a startup business, do you have a base of capital that you will be working from that will guarantee your lease?
In an instance of a start-up business you may want to ask for a co-signer for the lease, or you may want to limit the lease to a shorter period of time; with caveats to continue the lease or enter into a new lease agreement after you have proof that the business can make the rental payments each month.
Once you determine the financial stability of the potential tenant, then it is important to being reviewing the finer points and details. You may want to consider the following:
- Possession of the Property; When will your tenant need to take possession of the property? How long does your tenant plan on leasing the space for? Will your tenant want an option for first renewal before the property is placed on the open market? Will the lease contain an automatic renewal subject to notice by the tenant only in the event they will not be staying on?
- Lease Timelines; Will the lease take into account the time needed by the tenant to set up the business within the space allotted? If so, will this time be allotted at the same rental rate per square foot? How many months will the overall lease encompass?
- Retrofitting; Will your tenant require changes to the property to meet specific codes and regulations, for example; entrances and exits that allow for access for disabled clients, appropriate number of male, female, family style or gender neutral bathroom facilities. Who will be responsible for the cost of making these necessary changes?
- Style/Design Changes; Will the tenant want to resection the space? Will there be a need for painting or minor construction to fit the space for their business? Who will be responsible for the quality of work, cost of supplies and contractors services?
- Hours of Operation; Depending upon the area your commercial property is located you will need to be sure that the tenant’s hours of operation are within the codes and regulations for your zoning laws.
- Type of Business; While this might seem an unnecessary question, it is important to verify that the type of business that will be going into your building is legal and that it fits within the types of businesses the area is legally zoned for.
- Shared Areas; If your commercial space has a shared area, such as a lobby or cafeteria, be sure to carefully explain the rights and responsibilities for these areas to your tenant. Give the prospective tenant a written document that outlines their particular rights and responsibilities with regard to the use and maintenance of these common spaces. Be sure to inquire into the tenant’s full understanding and willingness to abide by the policies that are in place.
While this list is not exhaustive, it is a good point of reference when you are considering taking in a new commercial tenant. In order to fully protect yourself and your property, it is highly advised that you speak with professionals that deal regularly in the leasing of commercial properties such as; real estate agents, other landlords and a solicitor that specializes in the leasing of commercial properties.
If you find yourself in need of assistance with this, or any other legal issue, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 770 780.