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Commercial Real Estate
Apr 29, 2022

What You Need to Know Before Signing a Commercial Lease - Part Two

Sponsored Content provided by Lannin Braddock - Broker & COO/Co-Founder, The Braddock Group, LLC

We went over the first three (3) things to know before signing that lease, but wait, there’s more! We covered the term, the rent, and the other money items you would need to know and budget for in your new space. Now let’s discuss what to know once you’ve moved in! If you need a refresher, check out the other article here before you dive into part two.
 
Repairs & Maintenance (and who is responsible)

Generally Landlords are responsible to keep in good repair the roof, foundation, structural supports, exterior walls (but this oftentimes does not include the glass of a storefront), and the common areas. All other things, including HVAC (heat and air condition), are typically the responsibility of the tenant to maintain and repair. In fact, some landlords will require a tenant to have a preventative maintenance contract on HVAC, and they will request a copy of that contract to keep on file. Things as little as light bulbs to plumbing fixtures, to water heater repairs usually lay at the feet of tenants to repair. This is probably the most common confusing part for tenants. You can find what your lease specifically states in sections often referred to as “Repairs by Landlord” and “Repairs by Tenant.” It is also important to note that Landlords may require approval of the use of contractors if those repairs are over a certain dollar amount. Do not forget if the improvements are relatively new, many contractors provide a warranty period.

A question we often hear is, “How do I construct my space to work for what my business is?” 

Tenant Improvements (sometimes referred to TI’s) is construction work done to a space to make it workable for the tenant's business. Oftentimes the question arises as to whose responsibility it is to make these improvements to the space. Ultimately the responsibility does fall to the tenant, but not always soley. This should be a lengthy discussion in negotiation, if you are a tenant who needs work done to the space to make it work correctly and profitably for your business. 

Sometimes landlords will offer and negotiate an allowance to give to the tenant to help with the improvements. It’s important to note that this allowance is only to assist, not cover the entire scope of work, and that it doesn’t usually allow for you to buy furniture or decorative items to spruce up your space. This allowance is for adding walls, replacing or adding flooring, plumbing work, or adding or improving upon existing electrical wiring. 

If the tenant is allowed to choose contractors and subcontractors for the work, make sure you have the required paperwork to give to your landlord. Landlords will want to see license/insurance/bonded paperwork from the contractors/subcontractors, estimates and scope of work. If you’re being reimbursed, definitely make sure you're keeping records of all the paid bills to submit for reimbursement. If you can, it may be helpful to hire a project manager to assist with the budget, the contractors and stay organized on all the paperwork, timelines, and communication between, tenant/contractor and tenant/landlord during the tenant improvement period. 
 
These last two became a subject of a lot of questions during 2020, many businesses that moved into a “work from home” situation were still on the hook to pay for their space.  Should your business move out before the end of your lease, the next two items are something to pay close attention to.

Subletting/Assignment:

The first thing to know about either subletting or assigning your space is whether or not the landlord allows either circumstance to happen. Read your lease, there will be a section in the lease usually titled; “Subletting/Assignment.”  

Subletting by definition is: the leasing of part or all of the property held by a tenant, as opposed to a landlord, during a portion of his or her unexpired balance of the term of occupancy. If subletting is allowed, the lease in place will remain the same and the tenant is still liable for the lease, the property, and all that it covers...even financially liable.

Assignment by definition: an act of making a legal transfer of a right, property, or liability. Assignment is legally transferring the lease to another entity, whereby the old tenant is usually completely released of any legal or financial obligation, once lease has commenced under the new tenant. 

Tenant Obligations upon termination:

At the end of the lease, when either party has chosen not to renew, it is important to understand the tenant’s obligations. Such examples may be returning the space to its original condition, or prior to the tenant upfits (as discussed in number 4). Sometimes landlords will require the tenant to bring the space back to its original state which can be a costly process. Removing any and all signage from the building is usually a tenant expense as well. 

Once the decision to not renew has been made the landlord usually has the right,within a certain amount of time before the end of the lease, to put the space up for rent, and may put “For Rent” signs in the window and bring prospective tenants through to show the space, even though the tenant is still operating in the space. 

To get started finding the perfect space, email or call Lannin at: 
[email protected] & 910.508.3886


Lannin Braddock is the COO and co-founder of The Braddock Group. As COO, Lannin is responsible for all operations and processes within the organization. She brings 15 years of Commercial Real Estate experience, including new development, sales, leasing and project management. She has served as the property manager for over 1 million square feet of retail, medical, office, and industrial commercial real estate. 


 
 

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