When you work in the leasing segment of the commercial real estate industry, it is wise to have some form of checklist that can help you with new leases and tenant negotiations. There are so many things to do as part of a lease negotiation, that a checklist will help you stay on track with the important issues relative to the transaction.
When it comes to negotiating most leases, a tenant will be eager to get access to the premises and establish occupancy. In some cases they may apply pressure on you as the landlord or property manager to gain an early occupancy access as part of the preparation of the premises for business and trade. It is important here to remember that the tenant should never be given early access until all obligations under the lease negotiation are fully satisfied and legally correct. Far too many tenants have changed their mind or attempted to change the rules after occupancy has been given.
A property or tenancy lease is created for one very good reason; that is to reflect the full and complete intentions of the parties to the ongoing use of the premises. Until such time as a lease exists in a legal and correct form, the tenant should not be given access to the premises. If they want to do any ‘measuring up’ as part of the fit out design and planning process, then they should do so in the presence of the property manager or landlord. Keys should not be given to the tenant as part of that activity.
Here is a checklist that will help you when it comes to establishing ‘move in procedures’ with a tenant today. You can add to this list or change it subject to the property type and the landlord that you work with.
- There are significant differences and complexities between office, industrial, and retail lease structures. It is recommended that the landlord gets a specific lease drawn up for the property or the vacancy, and the prevailing lease situations.
- A generic lease should not be used when it comes to any quality property and long term occupancy; a generic lease is only useful in the very basic of lease or occupancy situations.
- The lease has to be correctly signed by all the parties before it is enforceable.
- Get a good deposit paid by the tenant as part of the leasing agreement.
- Ensure that the rental and the deposit have been cleared through the banking system before the tenant has been given occupancy.
- A good lease should be supported by a bank guarantee and or cash bond. That process will protect the landlord in case of tenant default.
- Have the tenant supply a set of detailed plans and drawings that apply to the potential intended fit out.
- Any landlord works should be fully identified as part of the agreement to lease. Those works should occur after the folly finalized agreement with the tenant to the lease. Any expenditure on the part of the landlord should not occur until the tenant is committed to the leasing process and the property.
- Any cash or fit out incentive resulting from the lease agreement should not be provided by the landlord until such time as the lease has been correctly signed and all rentals and deposit monies paid.
- The landlord should specify the quality of the fit out and the fittings to be installed by the tenant. There should also be a clause in the lease to protect the landlord when it comes to the necessary building and planning approvals required as part of the installation of the fit out. The tenant should provide to the landlord with a full set of plans and drawings, together with the finalised approvals from the local building authority.
- The lease should feature a ‘make good’ clause to ensure the complete and timely removal of the fit out at the end of the lease period. That removal will normally be at tenant cost and control.
You can create a leasing checklist from these above points. Modify and add to that list based on your local property market, the property types, and the prevailing market conditions. The checklist becomes even more important when you are dealing with many tenants in the one property, such as in a project leasing situation.