Today we see many vacant tenancies in commercial and retail property in most cities and locations. So when we have a tenant come to us with a request to lease premises it is very easy to jump at the opportunity without clear thinking and lease planning.

If you as a real estate agent take any lease offer without due regard for the long term and the performance of the property, you can create long term discomfort for the landlord. Every lease should be a ‘clear fit’ to in the plans of the landlord and the operations of the property.

One of the most important things to do from the outset of lease negotiation is to understand the identity and credentials of the tenant. You need to know that they are of substance legally and financially.

Here is a checklist that can apply to the leasing of commercial and Retail Property. You can add to the list depending on the types of property and the location in which you operate.

  1. At the initial approach from the tenant, find out what they require by way of premises and location. This will include the area of the tenancy, location of the property, size of property, internal improvements and services, and budget rental. Clearly they must tick all the boxes before they are given detailed information regards the property in question.
  2. At this point it is wise to understand the identity or the company structure that will be the potential tenant under the terms of the new lease that may be negotiated. Find out if they are coming to you from another property and if they have a history of occupancy that proves and shows legality and credibility as a tenant. If they are coming to you from another property, there may be a timing of property changeover that could be critical to the leasing process.
  3. Take them to the property and give them a comprehensive inspection of the improvements, services, and amenities. The inspection process should also involve a more detailed qualification of the tenant and their property needs.
  4. It is normal to seek some form of guarantee or bond to support and give substance to any lease negotiation. It is not unusual to ask for an amount that is equivalent to three months rental plus outgoings that apply to the tenancy. In some circumstances you may need to ask for more. The object here is to give the landlord something to draw upon in times of lease default.
  5. At the commencement of lease negotiation, everything should be done in writing between the parties. That means the terms and conditions should be reflected in a heads of agreement which can then be taken to a solicitor for the preparation of a lease.
  6. It is common for the tenant to ask for some form of incentive in the new lease. In preparation for this situation, you should have gathered information regards other market rentals and lease incentives that exist in the local area. If you give them and incentive, then make sure it is in balance with other lease transactions locally.

When you set and follow the rules in every lease negotiation, you will achieve a better outcome for the landlord. A good lease helps the sale process when it is to occur and optimises the income for the landlord.

Leave a Reply