Every developer and contractor needs to be aware of circumstances through which their tenants may cost them significant amounts of money. Tenant mistakes can be extremely expensive if the developer or general contractor has to deal with the financial repercussions of people mistakes. Common tenant mistakes that may cost a fair amount of money include building renovation, tenant improvements, injury or any other causes for liability on the premises, tenant cashflow problems, tenants who do not move in on time, and tenants who misrepresent themselves during lease negotiations.
Discussed right here of these common tenant mistakes and methods developers and general contractors can avoid them.
Building renovation and tenant improvements. Most tenant leases for commercial properties will incorporate a provision or provisions that prohibit tenants from making renovations, changes, or improvements on the property without permission or approval in the owner of the property. In commercial construction projects, developers and construction management generally don't want tenants making decisions about the construction of the property without talking to them first. The reason for this is because tenants could add or renovate the home in such a way that could lower the need for the property.
This mistake may be prevented very easily, however, by reminding tenants after they sign the lease they cannot make changes on the property without asking permission from construction management and from your owners of the property. Its also wise to consult with your attorney and will include in the lease the production that if the tenant does opt to make alterations, are going to responsible for paying for the task as well as for any financial loss suffered because of the changes. This will ensure that you are legally shielded from the costs associated with tenants who make an unauthorized building renovation or tenant improvements.
Injuries about the property and other reasons for liability.In some cases, if someone else is injured about the commercial property, whether or not they are a tenant, you may end up suffering the effects. For example, if a customer of your tenant gets hurt about the premises, even if the tenant caused the injury, the landlord or home owner may be liable for the damages through the injury. And if a tenant is hurt, especially because of a construction issue or through the commercial construction process, then this general contractor or construction management may be held liable for the damages through the injuries as well.
Eventhough it must be negotiated carefully with the help of your attorney, you are able to construct certain lease provisions to limit your liability in case a tenant or a customer of a tenant is injured on the property. You can also educate your tenants about ways to stay safe and keep their customers safe around the property, and you should view the commercial construction process closely to ensure the project is being succeeded and safely.
Tenant cashflow problems. Owners of commercial property depend upon their tenants to pay for their rent and then for any other fees or costs properly. If your commercial tenant is struggling financially, maybe you have a problem collecting rent often from the tenant.
As with many other tenant mistakes, place provisions into the lease that enable you to pursue certain remedies, like eviction or monetary damages, if the tenant won't pay rent on time. However, if the commercial tenant files for bankruptcy, you must proceed with caution. When a company files for bankruptcy, all legal proceedings against them are halted. In case your tenant files for bankruptcy and you also then try to evict the tenant, you will not be successful with the eviction until the bankruptcy proceedings are no longer, usually in a few weeks. If you think the tenant will declare bankruptcy, it is beneficial for you to begin eviction proceedings against them before they file.
Not honoring the relocate date.Owners of commercial property often make an effort to schedule tenant move in’s such that the property will almost always be earning money. Although relocate dates are often negotiated if the lease is signed, sometimes tenants tend not to move in as scheduled. But by delaying the transfer date, a tenant might be costing you money, especially if part of the tenant’s rent emanates from profits they make by operating their business.
In order to avoid this from occurring, you can put a provision in the lease that imposes fees or a penalty in the event the tenant does not transfer when they promised that they would. This can just be sure you do not lose negligence the rent based on their profits should they be not prompt about getting into the commercial property that they're renting from you.
Tenants who misrepresent themselves during lease negotiations.Particularly if negotiating provisions about rent, house owners and landlords often count on the tenant’s business records to determine how much to charge for rent and any additional costs. But also in some cases, a tenant may attempt to show a potential landlord that they're more successful than they will be in order to get a desired location, or that they are less successful than they are to negotiate lower rent.
When possible, check into the business’s success yourself prior to any final decisions about leasing. In addition, add to the lease the tenant will be accountable for any misrepresentations made during lease negotiations.
Even though some most common tenant mistakes, including building renovation, tenant improvements, injuries for the property, tenant earnings problems, not honoring the scheduled move-in date, and tenants who misrepresent themselves can end up costing you money, you are able to avoid these unnecessary expenses by taking precautions. You and your general contractor and construction management should carefully write the lease, keep tenants informed, and pay alert to any renovations the tenant makes in order to avoid these issues once your commercial construction project ends and tenants commence to move onto the property.
A skilled civil engineer using more than 15 years of experience, Rami Tawasha works as a senior project manager for Constructive Solutions, Inc., an industrial general contractor based in San Mateo and San francisco bay area. Under his leadership, the firm performs services including design build to tenant improvement and renovation for corporate offices, medical facilities, building renovation, seismic retrofit, industrial and retail spaces throughout the San Francisco Bay Area.