In commercial property management, the lease documentation is fundamental to the performance of the property. As part of this process, the property manager and real estate agent have to read and interpret all lease documentation regularly.The interpretation of a property lease is firstly undertaken at the start of the property management process so you can completely understand the big issues such as those following:
The rights and obligations of the tenant.
The rights and obligations of the landlord.
The performance of the property both physically and financially.
Critical dates and how they relate to the term, duration, and expiration of the lease.
How the tenancy is defined and must perform for the occupant.
A property lease will usually be drawn up by a solicitor on behalf of the landlord and can be issued to a single tenant in a single building, or a single tenant in a multiple tenant occupancy building. It doesn’t matter how difficult it may seem for you as the property manager to read and understand a lease, the simple fact is it has to be done. The more you do this, the easier it becomes.Every property lease should be regarded as unique and potentially different. Do not assume that all the leases in one building are all the same, because they will not be. Individual terms and conditions can be different and you have to see that, whilst recording the differences for future action.The best way to read commercial leases is to have a checklist of relevance to the property type and your real estate market. This means that you should have separate checklists for:
Industrial property
Office Property
Retail Property
Other special unique property
To read and interpret a single lease takes a reasonable amount of time and perhaps a few hours if the document is very detailed. If you are reviewing a large number of leases in a complex building, you will find that the checklist process is invaluable as a commercial property management tool. The checklist will keep you on task to identify critical issues and differences relating to lease occupancy and property performance.The best property managers understand the importance of lease documentation in strengthening property performance. The better the leases and the tenant mix, the stronger the chance of selling the property when the need arises. Good leases mean a good property in most situations.Every new property and building brings with it a unique lease document requiring review. The rents paid under a lease may be gross or net rent, and the outgoings paid by the tenant will be defined. All of this is part of financial performance for the investment.Importantly when the lease is taken through this analysis process, critical dates and matters relating to the tenant occupancy are transferred to a diary reminder system that gives you the property manager an alert at the right time and hence sufficient notice to respond to or activate important lease issues such as:
The lease rent reviews,
Lease term options,
Refurbishment situations
Relocation matters
Arrears response and controls
Tenant occupancy obligations
These are just some of the main issues that apply in the reading and interpretation of a commercial property lease. Take the time to refine your checklists for this very process so that the matter becomes easier and more accurate; you can then become the expert commercial or retail property manager.