Working with tenants to get them into a newly leased space is a detailed process. Control is essential for a positive long-term occupancy outcome.
The tenant’s leasing requirements, property design and functionality factors, and the landlord’s instructions all require balancing through the move-in procedure. Questions will arise, and record-keeping will be essential to the result.
We have created this detailed article to give you a framework to systemize and implement professional leasing services. Given the property type and your client’s priorities, you can add your leasing elements to this list.
Gather These Leasing Facts
The matters detailed below can be expanded further, subject to the property type.
Consider the types of properties you are leasing today and those getting the majority of inquiries.
Given property and client considerations, create a leasing checklist based on the factors below.
1. Enquiry Facts:
Take the initial inquiry from the tenant. This will include the location of the property, the size of the property, and the necessary services and amenities. You can also ask about the duration of occupancy, the structure of the tenant’s business, and details of the activities to be undertaken by the tenant on the property.
It also pays to ask questions regarding the special needs of the staff on the property. That would be how they would use the property. For example, accessible car parking, or particular 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. You can also explore details of any guarantees or guarantors which can be provided. Review any history of the previous occupancy.
3. Doing Full Research:
Research history. Check the details of the previous occupancy in other leased premises to ensure the tenant’s stability 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 storage and turnaround space dimensions in the warehouse area. That is to accommodate deliveries and dispatches on transport vehicles.
Car Parking Capability. Car parking is also an important part of occupancy today. Many tenants require convenient and accessible car parking for their staff. Ask other questions regard any special signage and security needs that must be incorporated into occupancy.
4. List Potential Properties:
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. 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.
Selecting the Best Property
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. Know how to move through the premises practically, showing them in their 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 tenant has selected the ideal premises, the deal’s momentum can be maintained.
Try to get involved with the person responsible for designing the necessary fit-out. This process is productive and helps you later when you must explain to the landlord the final use of the premises and its design requirements.
Identify with the tenant the work needed from the landlord as part of the handover of the premises. In most new lease occupancies, the landlord must undertake specific repairs to the premises as part of the agreed lease deal.
It is important that these works be fully documented in detail and agreed upon between the parties. Both parties will then know what is expected of them in providing the premises and the timeliness of doing so.
Determine with the tenant the work that the tenant will undertake as fitout work, and seek out plans and specifications for the landlord to consider and approve.
As part of this discussion and consideration, you must 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 to be removed.
Take photographs. Any removal activity must be fully documented in the agreement to lease and in the final lease itself.
What is the process around this? Photograph the premises and document its condition before any tenant’s work commences. This removes any disagreement between the parties as to the condition of the property at the initial handover.
After many years of occupancy in a lengthy lease, you need valid records to display what will be done at the end of the occupancy.
Creating Occupancy Documentation
Structure a suitable rent and lease proposal for the tenant to sign. Several rental structures and lease alternatives can be considered in a lease proposal. It is not just the level of rental paid that is important.
Consider things such as the commencement rent, the term of occupancy, and any options for extended occupancy.
Review how 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 critical 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.
Know that the agreement to lease is not usually regarded as binding. Therefore access to the premises should not be provided to the tenant until they have signed the final lease and satisfied all lease agreement requirements of rental, deposit, and guarantees.
Monitor and Oversee:
Oversee the preparation of the agreed lease document with the landlord’s solicitor and its acceptance by all parties. This will include complete 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 client’s solicitor to prepare; inexperienced agents assume the lease will be done on time. Best practice shows that you should contact the landlord’s solicitor to ensure the lease document proceeds as planned.
Preparing for Occupancy
- Get the landlord to commence handover works for the premises. The landlord should only commence works in the premises relating to the landlord’s 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 records (notes) and photographic records of the premises before handing them 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 have 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, with a record on file.
- Get a fitout guide for the tenant for use and control of their builders in the fitout stage of occupancy commencement. Contractor insurance will be part of the fitout guide requirements. Terms of site access and controls of works on site will also be essential. Without that, the new tenant will likely disrupt other occupants in the building.
- Provide liaison between the tenant and the landlord during the phase of tenant fit-out construction. The best business practice here is to remain connected between the tenant and the landlord while the tenant establishes 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 per the necessary lease plans and approvals for the fit-out as given by the landlord.
- Give the tenant a building manual to set the rules of occupancy and the channels of communication back to the property manager or landlord.
At this point, you have successfully transacted and controlled a new tenant’s lease and occupancy.
If you follow the detailed processes above, the landlord will regard you as the agent of choice for future lease needs and other properties. Remember who your client is, and serve them well.