Working with a tenant to get them into a new space is a professional process. We have created this article to give you a framework in which you can produce and perform professional leasing services.
Gather and Control these Leasing Facts
The matters detailed below can be enhanced further subject to the type of property which you normally handle and lease in your location.
- Take the initial enquiry from the tenant. This will include the location of the property, the size of the property, the necessary services and amenities, the duration of occupancy, the structure of the tenants business, and details of the activities to be undertaken by the tenant on the property. It also pays to ask questions regards special needs of the staff on the property and the way in which they would use the property, for example, accessible car parking, or special areas for the staff such as lunchrooms, showers, and tea rooms.
- Qualify the tenant financially. This will include the level of rental, any existing occupancy and the timing of a move to new premises, details of any guarantees or guarantors which can be provided, and any history of the previous occupancy. It is helpful if you can check the details of the previous occupancy in other leased premises to ensure the stability of the tenant in any new premises that you can locate.
- Determine space requirements. The space requirements will include the overall size of the premises to lease which can be further categorised into office space, warehouse space and retail space if appropriate. You will also need to know the dimensions of storage and turnaround space in the warehouse area to accommodate deliveries on transport vehicles. Car parking is also an important part of occupancy today and many tenants require convenient and accessible car parking for their staff. Ask other questions regard any special signage and security needs which must be incorporated into occupancy.
- Identify the potential properties to inspect. Most property inspections with a potential tenant should be limited to no more than four or five properties. If you inspect too many properties, the inspection and leasing decision process becomes more difficult for them. To shortlist the appropriate properties to inspect it pays to have a portfolio of photographs of the relative premises in your office to discuss with potential tenants.
- Inspect the chosen properties. In all cases, you must inspect properties with the tenant. This is the only way you can control the information provided to the tenant and the potential closure of a successful deal. Make sure that you understand the relative property that you are inspecting and how to move through the premises in a practical way which shows the premises in its best light. Have detailed fact sheets available to provide the tenant with essential and relevant information.
- Work with the tenant’s space planner or architect to determine final suitability. When the ideal premises have been selected by the tenant, the momentum of the deal can be maintained if you get involved with the person responsible for designing the necessary fit-out. This process is productive and also helps you later when you need to explain to the landlord the final use of the premises and its design requirements.
- Identify with the tenant the works needed from the landlord as part of premises handover. In most new lease occupancy, the landlord will need to undertake certain works to the premises as part of the agreed lease deal. It is important that these works be fully documented in detail and agreed between the parties. Both parties will then know what is expected of them in the provision of the premises and the timeliness of doing so.
- Identify with the tenant the works to be considered as fitout works to be undertaken by the tenant, and seek plans and specifications for the landlord to consider and approve. As part of this discussion and consideration, you will need to decide with the landlord how the fit-out will be handled at the end of the occupancy. The landlord may require the tenant’s fit-out be removed, hence that removal activity must be fully documented in the agreement to lease and in the final lease itself. Photograph the premises and document its condition before any tenant’s works commence. This removes any disagreement between the parties as to the condition of the property at hand over. After many years of occupancy in a lengthy lease, you need substantial records of this nature to clearly outline what will be done at the end of the occupancy.
- Structure a suitable rent and lease proposal for the tenant to sign. There are a number of rental structures and lease alternatives which can be considered in a lease proposal. It is not just the level of rental paid that is important. You will need to consider things such as the commencement rent, the term of occupancy, the existence of any options for extended occupancy, the way in which the tenant will contribute towards outgoings, the rent review structures for the lease, the existence and provision of any rental incentives, and any special controls which must be applied to the tenant during the term of occupancy.
- Secure agreement with the landlord on a final lease. The final agreement to proceed with the lease is usually on an ‘Agreement to Lease’ document which fully outlines all the key lease clauses and terms of occupancy. When both parties have signed this document, the landlord’s solicitor can be instructed to complete the final lease for the signature of all parties. It should be understood that the agreement to lease is not usually regarded as binding, therefore access to the premises should not be provided to the tenant until such time as they have signed the final lease and satisfied all requirements of rental, deposit, and guarantees.
- Oversee the preparation of the agreed lease document with the landlord’s solicitor and its acceptance by all parties. This will include full signatures of all parties on the lease, collection of rent, the collection of deposits, collection or provision of guarantees, and approval of any fit-out plans. The one fatal mistake many agents make is leaving the lease document to the solicitor to prepare and assuming that it will be done in a timely manner. Best practice suggests that you maintain contact with the landlord’s solicitor to ensure that the document proceeds as planned.
- Get the landlord to commence handover works for the premises. The landlord should only commence works in the premises relating to the landlords part of the agreement, once the tenant has signed and satisfied all matters relating to the lease.
- Inspect the premises with the tenant to ensure that all matters of handover have been undertaken. It pays to keep some formal record (notes) and photographic record of the premises prior to handing over to the tenant. Given that most leases are lengthy terms of occupancy this practice will prevent any disagreement at the end of the lease.
- Provide the tenant with keys to the premises providing that all lease documents and money relating thereto has been paid. Providing keys to the tenant is only done after all documentary and monetary matters are satisfied with the acceptance of the landlord and the landlord’s solicitor. The keys should be signed for and a record kept on file.
- Get a fitout guide to the tenant for use and control of their builders in the fitout stage of occupancy commencement.
- Provide liaison between the tenant and the landlord during the phase of tenant fit-out construction. Best business practice here is to remain connected between the tenant and the landlord whilst the tenant is establishing their fit-out. This allows you to control any matters of disagreement on behalf of the landlord.
- Following satisfactory fit-out construction, inspect the premises the tenant and the landlord to ensure that all matters are as agreed and in accordance with the necessary plans and approvals for the fit-out given by the landlord.
At this point, you have successfully transacted and controlled a new tenant lease and occupancy. If you follow the professional processes above, the landlord will regard you as the agent of choice on future lease needs with other properties. Remember who your client is and serve them well.