Working with Landlords https://www.leaseref.com/taxonomy/term/70 en Certificate of Occupancy: A Complete Guide https://www.leaseref.com/blog/certificate-occupancy-complete-guide <div data-history-node-id="505" class="node node--type-blog node--view-mode-rss ds-2col-stacked-fluid clearfix"> <div class="group-header"> <div class="field field--name-node-title field--type-ds field--label-hidden field__item"><h2> Certificate of Occupancy: A Complete Guide </h2> </div> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field__item"><time datetime="2019-08-26T12:00:00Z" class="datetime">August 26, 2019</time> </div> </div> <div class="group-footer"> <div class="field field--name-field-blog-image field--type-image field--label-hidden field__item"> <img src="/sites/default/files/2019-08/certificate-of-occupancy.jpg" width="1000" height="721" alt="certificate of occupancy" typeof="foaf:Image" /> </div> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><h1><span><span><strong><strong><span><span>Certificate of Occupancy: A Complete Guide</span></span></strong></strong></span></span></h1> <p><span><span><span><span><span><span>If you have bought or built a home or residential investment property, you might be familiar with a Certificate of Occupancy. As a commercial tenant who has leased property, you might think you don't need to worry about these certificates. This is a mistake.  If your landlord doesn't have a Certificate of Occupancy, you might face costly consequences.  This guide provides a broad overview of what you need to know about a Certificate of Occupancy as a business tenant.  After discussing the purpose of the certificate, we will discuss when property owners need Certificates of Occupancy, where they get them and the requirements for getting them.  Finally, you will learn what to do if the property your renting fails a required inspection and the consequences for landlords and tenants when a current Certificate of Occupancy isn't on file for a property.</span></span></span></span></span></span></p> <h2> </h2> <h2><span><span><span><strong><strong><span><span>What Is a Certificate of Occupancy?</span></span></strong></strong></span></span></span></h2> <p><span><span><span><span><span><span>A certificate of occupancy is a legally required document which each property owner must have for every property they own, and it is provided to them by the tenants. This essential document includes the following information:</span></span></span></span></span></span></p> <ul><li><span><span><span><span><span><strong><em><span><span>Structural use of the property. </span></span></em></strong><span><span>A Certificate of Occupancy states the classification of a property. Depending on the state or city which the property resides, a property might be classed as residential, retail, commercial, industrial, or mixed use.  Different property classes intend to make sure a property is used for its intention.  When you are renting retail space, you should ensure your Certificate of Occupancy matches your use to prevent problems.  If you rent a residential space to conduct business, you can run into legal issues later on.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><strong><em><span><span>Suitability of the structure for occupancy.</span></span></em></strong><span><span> A Certificate of Occupancy also serves as proof that the structure has complied with codes and standards related to its condition.  Depending on the building, it will need to be safe and suitable for commercial tenants or for a retail store and its customers.  Structures which are not suitable for occupancy are dangerous.  Not only is it illegal to occupy the space, but failure to comply could lead to injury or death.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><strong><em><span><span>Compliance with building codes. </span></span></em></strong><span><span>A Certificate of Occupancy shows that those who built or modified the structure have complied with all commercial building codes.  If you have complaints about violations, you can double-check the Certificate of Occupancy to ensure you are in compliance with all codes.</span></span></span></span></span></span></span></li> </ul><h2> </h2> <h2><span><span><span><strong><strong><span><span>When Do I Need a Certificate of Occupancy?</span></span></strong></strong></span></span></span></h2> <p><span><span><span><span><span><span>Each city or town has different requirements or rules for when a property owner or lessee needs a certificate of requirement.  You will likely need one in the following situations.</span></span></span></span></span></span></p> <ul><li><span><span><span><span><span><strong><em><span><span>New construction.  </span></span></em></strong><span><span>If you are leasing a space in a building you are waiting to be constructed, it's typically the case that the property owner must apply for a Certificate of Occupancy.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><strong><em><span><span>Remodeling.  </span></span></em></strong><span><span>Most cities, towns, and villages require property owners to pull a building permit when they remodel.  Anytime an owner needs to pull a permit, especially for a commercial property, it's likely the owner or you will also need to apply for a Certificate of Occupancy.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><strong><em><span><span>Expansive construction.  </span></span></em></strong><span><span>Property owners who make additions to a structure, especially those which impact fire exits, or perform any major construction typically require a Certificate of Occupancy.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><strong><em><span><span>Converting a property.</span></span></em></strong><span><span>  When a property owner intends to change a property from one use to another, he or she will typically need a Certificate of Occupancy.   Some examples might be a large home getting converted to office space, a historic home getting converted to a boutique hotel or, or an industrial warehouse getting converted to studio apartments.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><strong><em><span><span>Changing owners.  </span></span></em></strong><span><span>Warehouses and industrial property, retail property, and other commercial property require a new Certificate of Occupancy when a new owner takes over the property.</span></span></span></span></span></span></span></li> </ul><h2> </h2> <h2><span><span><span><strong><strong><span><span>Where Do I Get a Certificate of Occupancy?</span></span></strong></strong></span></span></span></h2> <p><span><span><span><span><span><span>Property owners and tenants who need to obtain a Certificate of Occupancy need to visit their local government.  The issuing agency varies based on whether the building is located in a large city or a small town, but typically an application for a Certificate of Occupancy goes through a housing department or building department.  Property owners must request the certificate before they begin any construction or modifications on a structure.  Yet, the issuing government entity will not grant a property owner or lessee a Certificate of Occupancy until associated fees have been paid and the structure has passed all necessary inspections. In some jurisdictions, the issuing agency might issue a temporary Certificate of Occupancy for a limited amount of time, giving property owners and tenants some time to get all the inspections they need.</span></span></span></span></span></span></p> <h2> </h2> <h2><span><span><span><strong><strong><span><span>Requirements for Obtaining a Certificate of Occupancy</span></span></strong></strong></span></span></span></h2> <p><span><span><span><span><span><span>As a commercial tenant, you might be in a situation where you must wait for your landlord to obtain a Certificate of Occupancy, or you might be overseeing construction or a build out with the permission of your landlord.  They cannot receive their certificate until the property passes one or more inspections.  The issuing government entity or agency hires licensed inspectors to approve or deny a Certificate of Occupancy after determining whether the property owner is in compliance with all codes.  Depending on the exact situation in which a property owner requests a Certificate of Occupancy, and city-specific and state-specific requirements, their property might have to undergo one or more of the following inspections:  </span></span></span></span></span></span></p> <ul><li> <p><span><span><span><span><span><strong><em><span><span>Fire Inspection.</span></span></em></strong><strong>  </strong><span><span>A fire inspection might include different things depending on whether the structure is new or existing construction.  Inspectors will typically look at fire proofing between walls and in ceilings and ensure that any construction related fire hazards are addressed.  This might include adding more drywall in an area or ensuring fire exits are adequate in number and placement for a building.  Fire inspectors also check for carbon monoxide detectors, smoke detectors, and fire extinguishers.  Not only do commercial property owners need these items in their buildings, but these items must be in proper working conditions. </span></span></span></span></span></span></span></p> </li> <li><span><span><span><span><span><strong><em><span><span>Electrical Inspection.  </span></span></em></strong><span><span>If a building is newly constructed or has had electrical work done during remodeling, the property owner will need to pass an electrical inspection to obtain a Certificate of Occupancy.  In new construction scenarios, two electrical inspections typically occur—one before adding insulation and covering walls and a final inspection.  Electrical inspectors check for quite a few things.  If you are overseeing construction in your office space you should be aware of some of the big electrical checkpoints.  Inspectors will ensure: </span></span></span></span></span></span></span> <ul><li><span><span><span><span><span><span><span>you have the proper sized electrical boxes for the amount of wires and devices which are placed in the box.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>electrical boxes are securely fastened and flush with the wall.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>wire straps are attached to the sheath and not the wires.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>at least eight inches of usable wire length extends from the box allowing enough room for connection and some extra room for future changes.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>you have grounded things properly, sometimes requiring the use of isolated ground receptacles.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>outlet and switch heights are consistent by measuring them.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>wires have been anchored properly by being attached to wall studs.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>cables are run through the center of wall studs.</span></span></span></span></span></span></span></li> </ul></li> <li><span><span><span><span><span><strong><em><span><span>Plumbing Inspection.  </span></span></em></strong><span><span>Like electrical work, newly constructed buildings or those having plumbing work will need to pass one or more plumbing inspections to obtain a Certificate of Occupancy.  Plumbing inspectors are primarily concerned with the flow water to and from the building.  Some most important things a licensed plumbing inspector checks include: </span></span></span></span></span></span></span> <ul><li><span><span><span><span><span><span><span>The location where water enters the building.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>The type of material used for water pipes and the condition of the pipes.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>The presence of leaks around the water meter.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>The level of water pressure.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>The flow, leakage, and hot and cold water connections of each fixture</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>The correct hook-up and operation of a hot water heater, with special attention to proper air supply and venting when the water heater is gas-operated.</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>The drainage of sinks, showers, or tubs.</span></span></span></span></span></span></span></li> </ul></li> <li><span><span><span><span><span><strong><em><span><span>Building inspection.  </span></span></em></strong><span><span>Some counties, cities, and towns require a property owner to have a building inspection prior to receiving a Certificate of Occupancy.  Building inspectors check work not related to plumbing, electrical, or fire codes.  Building inspectors might also see other issues and refer property owners to other types of inspectors, when an issue might interfere with the property's suitability.  Some examples of things which a building inspector checks for, include: </span></span></span></span></span></span></span> <ul><li><span><span><span><span><span><span><span>Framing</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>Foundation</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>Drywall installation</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>Siding</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>Roofing</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>Stairs</span></span></span></span></span></span></span></li> </ul></li> <li><span><span><span><span><span><strong><em><span><span>Special inspections</span></span></em></strong><span><span> might include the following: </span></span></span></span></span></span></span> <ul><li><a href="/blog/americans-disabilities-act-ada-commercial-real-estate"><span><span><span><span><span><span><span>ADA Compliance</span></span></span></span></span></span></span></a></li> <li><span><span><span><span><span><span><span>Elevator Inspections</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>Mold &amp; Mildew inspections and/or remediation</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>Inspections for toxic substances such as asbestos and lead-based paint</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>Termite and other pest inspections and/or remediation</span></span></span></span></span></span></span></li> <li><span><span><span><span><span><span><span>Sewer inspections when applicable</span></span></span></span></span></span></span></li> </ul></li> </ul><h2> </h2> <p><a href="/how-it-works" target="[objectObject]"><img alt="certificate of occupancy commercial lease" data-entity-type="file" data-entity-uuid="c08af40f-a665-4deb-ba05-72883ed59782" src="/sites/default/files/inline-images/lease-ref-home-page_5.PNG" /></a></p> <p> </p> <h2><span><span><span><strong><strong><span><span>Failing an Inspection for My Certificate of Occupancy</span></span></strong></strong></span></span></span></h2> <p><span><span><span><span><span><span>If a tenant owner fails one or more of the previously listed inspections, the issuing authority will not grant them a Certificate of Occupancy.  The inspector(s) who find problems with a property typically provide the owner with a list of issues which need to be corrected or addressed so the property complies with all safety and building codes at a municipal, county, and state level.  Property owners typically have an assigned amount of time to make corrections, such as 30 days, 60 days, or 90 days, depending on the location.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Once the tenant ensures all repairs and additions have been made, they can call the appropriate inspector for a new inspection.  This might result in additional fees depending on local policies.  Once a property passes all required inspections, it qualifies for a Certificate of Occupancy.  If you are overseeing construction for your landlord, keep in mind that it can take weeks or months to get an inspector to come out a second time depending on what city you are are located in.  It's in your best interest to make sure contractors don't cut corners and do things right the first time to avoid second and third visits. </span></span></span></span></span></span></p> <h2> </h2> <h2><span><span><span><strong><strong><span><span>Consequences for Not Obtaining a Certificate of Occupancy</span></span></strong></strong></span></span></span></h2> <p><span><span><span><span><span><span>Some property owners play with fire and do not get the required permits, inspections, or a Certificate of Occupancy.  It's difficult to get away with this when new construction or major construction projects occur, but some try to skip the process with smaller projects or build outs.  While this might save money for your landlord in the short run, it can be very costly for everyone involved in the long run.  First, property owners risk fines and additional fees when they don't get a Certificate of Occupancy.  In some jurisdictions, fines might accrue daily from the day the owner should have had the certificate.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Without a Certificate of Occupancy, the city or town where the property lies can legally issue a vacate order at any time.  If you are renting from a property owner who hasn't gone through the proper channels, this could cost you dearly.  Not only loss in revenue, but the additional expense in finding additional office space, moving, and have to acquire new clients or customers in a new location can hurt your bottom line.  Although being forced to vacate isn't likely your fault, it can also carry heavy social consequences for your business.  Existing and potential customers might assume you aren't doing business on the up-and-up, or you are struggling financially.  Either situation can damage your company's reputation.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Further, if safety issues lead to an accident, property owners also risk being named in a personal injury lawsuit.  If a customer suffers harm in your space, and you knew about the issue, your business might also be liable for damages in a personal injury lawsuit.  It's always in your best interest to make sure the building where you rent space for your business has an updated Certificate of Occupancy.  In some states, you can even withhold your rent if your landlord doesn't have a current certificate.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Finally, some cities consider the failure to obtain a Certificate of Occupancy as a misdemeanor crime, allowing them to punish those who don't comply.  Some municipalities might force community service or up to 60 or 90 days in jail, depending on local laws.  As previously mentioned, fines and the opportunity to fix the oversight are the most common response to those who don't follow the rules.  Yet, repeat offenders can expect to face the full penalties associated with applicable laws.</span></span></span></span></span></span></p> <p> </p> <p>Welp.  We hope you enjoyed this article :-).  If you have any more questions about your commercial lease, we are here to help.  Find out more about us here:</p> <p> </p> <div class="video-embed-field-responsive-video"><iframe width="854" height="480" frameborder="0" allowfullscreen="allowfullscreen" src="https://www.youtube.com/embed/5HLicSHB2Hc?autoplay=0&amp;start=0&amp;rel=0"></iframe> </div> </div> <div class="bottom-links"> <div class="field--taxonomy-terms clearfix field field--name-field-blog-tags field--type-entity-reference field--label-above"> <div class="field__label">Post Tags</div> <div class="field__items"> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/70" class="taxonomy-term" hreflang="en">Working with Landlords</a></div> </div> </div> </div> </div> </div> Mon, 26 Aug 2019 12:20:24 +0000 Jeff 505 at https://www.leaseref.com Commercial Lease Rules and Regulations https://www.leaseref.com/blog/commercial-lease-rules-and-regulations <div data-history-node-id="502" class="node node--type-blog node--view-mode-rss ds-2col-stacked-fluid clearfix"> <div class="group-header"> <div class="field field--name-node-title field--type-ds field--label-hidden field__item"><h2> Commercial Lease Rules and Regulations </h2> </div> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field__item"><time datetime="2019-08-19T12:00:00Z" class="datetime">August 19, 2019</time> </div> </div> <div class="group-footer"> <div class="field field--name-field-blog-image field--type-image field--label-hidden field__item"> <img src="/sites/default/files/2019-08/commercial-lease-rules-and-regulations.jpg" width="1000" height="667" alt="commercial lease rules and regulations" typeof="foaf:Image" /> </div> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><h1><span><span><span>Rules and Regulations in Commercial Leases</span></span></span></h1> <p class="MsoBodyText"><span><span><span>All <a href="/blog/types-commercial-lease-agreements-know"><strong>types of commercial leases</strong></a> come with the commercial lease rules and regulations as an addendum to the commercial lease.  </span></span></span></p> <p class="MsoBodyText"><span><span><span>They are always very similar and they are designed to ensure you act as a good corporate citizen and neighbor.  </span></span></span></p> <p class="MsoBodyText"><span><span><span>Here is an example of a commercial lease rules and regulations clause, taken from a recent lease in San Mateo, California:</span></span></span></p> <p class="MsoBodyText"> </p> <h3><span><span><strong>RULES AND REGULATIONS</strong></span></span></h3> <p> </p> <ol><li><span><span><span>Public Areas.  The sidewalks, entrances, concourse, lobbies, elevators, and public corridors shall be used only as a means of ingress and egress and shall remain unobstructed at all times.  Landlord, within its sole discretion, may allow tenants to use portions of the public areas, either on a temporary or permanent basis according to the terms of tenants’ individual leases.</span></span></span></li> </ol><ol start="2"><li><span><span><span> Service Areas.    Loading dock and other service areas shall not be used by tenant for storage but shall be used only for the purpose intended.  </span></span></span></li> </ol><ol start="3"><li><span><span><span>Garbage.  The Project follows “green” practices and procedures, which may change from time to time,  implemented by local recycling and waste removal companies.  Currently garbage shall be disposed of as follows:</span></span></span></li> </ol><ol><li> <ol><li><span><span><span>All food waste/garbage including “trimmings” from commercial food preparation activities shall be disposed of in clear plastic bags in the compostable recycling bins provided by Landlord.</span></span></span></li> <li><span><span><span>Cans, glass and plastic shall be rinsed out and disposed of in recycling bins provided by Landlord.</span></span></span></li> <li><span><span><span>All cardboard boxes shall be broken down and disposed on in a location designated by Landlord</span></span></span></li> <li><span><span><span>All used cooking grease shall be disposed of in the recycling bin provided by Landlord.  All trap grease shall be disposed of in a separate bin provided by Landlord for proper disposal.</span></span></span></li> <li><span><span><span>Any remaining non-recyclable trash shall be bagged in plastic bags and disposed of in dumpsters designated by Landlord.</span></span></span></li> </ol></li> </ol><ol start="4"><li><span><span><span>Deliveries.  All deliveries shall be made at the rear entrance to Tenant’s Premises if available or as designated by Landlord.  Delivery vehicles shall park and load/unload in the appropriate designated locations and shall not block fire lanes, entrances, or driveways.  All deliveries shall be made through Landlord’s designated locations and during delivery hours designated by Landlord from time to time so as not to negatively impact other tenants’ business.  Tenant and Tenant’s personnel shall use the appropriate cart or hand-truck equipped with rubber wheels so as to reduce the potential for damage to floors.  Pallets and pallet jacks may not be brought into the Premises or into any building within the Entire Development.</span></span></span></li> </ol><ol start="5"><li><span><span><span>Signs.  No sign, placard, picture or advertisement, name or notice shall be inscribed, displayed, printed or affixed on or to any part of the outside or inside of the premises without prior written consent of Landlord; and Landlord shall have the right to remove any such objectionable sign, placard, advertisement, name or notice without notice to and at the expense of Tenant.  </span></span></span></li> </ol><ol start="6"><li><span><span><span>Heavy Equipment.   Tenant shall not place or install in the Premises any equipment which exceeds the maximum weight designated by Landlord’s structural engineer.  Tenant shall provide Landlord with the size, weight and proposed location of all unusually heavy equipment which Tenant proposes to install in its Premises.  Landlord’s structural engineer may prescribe specific locations for unusually heavy equipment or may prohibit such equipment without additional structural reinforcement which shall be performed by Landlord’s contractor at Tenant’s expense.    </span></span></span></li> </ol><ol start="7"><li><span><span><span>Odors, Vibrations and Noises.  Tenant shall not expel from its Premises any excessive and noxious odors other than those emitted in the normal course of business similar to Tenant’s business.  Tenant shall not attach any loud speakers to the exterior of the Premises or play live or recorded music at a level that is objectionable to other tenants, customers or Landlord.  Tenant shall not open doors and windows if Tenant is providing amplified entertainment within the Premises, e.g. music or other entertainment that has been approved by Landlord.  Landlord shall have the right to remove the source of any noise that is objectionable to other tenants, customers or Landlord.  </span></span></span></li> </ol><ol start="8"><li><span><span><span>Exterior Equipment.  Tenant shall not install any equipment on the exterior of the Premises including the roof thereof without Landlord’s prior written consent, which shall not be unreasonably withheld or unduly delayed.  Equipment shall include, but not be limited to, compressors, exhaust equipment, heating and air conditioning and like equipment, antennas, satellite dishes or other communication or data devises.</span></span></span></li> </ol><ol start="9"><li><span><span><span>Vending Machines.  Tenant shall not operate or permit to be operated on the Premises any vending machines or similar devises (including without limitation telephones, ATM’s, amusement devises or machines for sale of beverages, food, candy, cigarettes, lottery tickets or other goods) without prior written permission of Landlord. </span></span></span></li> </ol><ol start="10"><li><span><span><span>Parking.  Landlord may designate specific areas of the property for employees parking, in which case Tenant shall instruct and require that its employees park only is such designated areas.  Tenant’s employees shall observe all posted parking regulations including but not limited to timed zones.  Tenant shall not, at any time, park or permit to be parked, any recreational vehicles, inoperative vehicles or equipment in any portion of the Project.</span></span></span></li> </ol><ol start="11"><li><span><span><span>Closing Precautions.  Tenant shall see that the doors of the Premises are closed and securely locked before leaving the Premises and Tenant shall exercise extraordinary care and caution that all water faucets or water apparatus are entirely shut off before Tenant, Tenant’s employees or invites leave the Premises, and that all electricity, gas or air shall likewise be carefully shut off, so as to prevent waste or damage.  </span></span></span></li> </ol><ol start="12"><li><span><span><span>Compostable Foodware.  Tenant is required to use compostable foodware for all food service.  Landlord reserves the right to impose a fine of $50.00 per day for Tenant’s failure to observe this requirement.  </span></span></span></li> </ol><ol start="13"><li><span><span><span>Waiver.  Landlord may waive any one or more of these Rules and Regulations for the benefit of a Tenant, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the Tenants of the Public Market.</span></span></span></li> </ol><p> </p> <p><span><span><span>Looking for some more help with your commercial lease?  Maybe we can help...</span></span></span></p> <p> </p> <div class="video-embed-field-responsive-video"><iframe width="854" height="480" frameborder="0" allowfullscreen="allowfullscreen" src="https://www.youtube.com/embed/5HLicSHB2Hc?autoplay=0&amp;start=0&amp;rel=0"></iframe> </div> <p class="MsoBodyText"> </p></div> <div class="bottom-links"> <div class="field--taxonomy-terms clearfix field field--name-field-blog-tags field--type-entity-reference field--label-above"> <div class="field__label">Post Tags</div> <div class="field__items"> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/70" class="taxonomy-term" hreflang="en">Working with Landlords</a></div> </div> </div> </div> </div> </div> Sun, 18 Aug 2019 16:02:42 +0000 Jeff 502 at https://www.leaseref.com Americans with Disabilities Act (ADA) in Commercial Real Estate https://www.leaseref.com/blog/americans-disabilities-act-ada-commercial-real-estate <div data-history-node-id="497" class="node node--type-blog node--view-mode-rss ds-2col-stacked-fluid clearfix"> <div class="group-header"> <div class="field field--name-node-title field--type-ds field--label-hidden field__item"><h2> Americans with Disabilities Act (ADA) in Commercial Real Estate </h2> </div> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field__item"><time datetime="2019-08-17T12:00:00Z" class="datetime">August 17, 2019</time> </div> </div> <div class="group-footer"> <div class="field field--name-field-blog-image field--type-image field--label-hidden field__item"> <img src="/sites/default/files/2019-08/ada-commercial-real-estate.jpg" width="1000" height="620" alt="Americans with disabilities act (ada) in commercial real estate" typeof="foaf:Image" /> </div> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><h1><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>ADA: Americans with Disabilities Act for Commercial Real Estate</span></span></strong></span></span></h1> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">When looking to <a href="/blog/6-tips-negotiating-killer-commercial-lease"><strong>negotiate a commercial lease</strong></a> you are going to run into an Americans with Disabilities Act (ADA) compliance clause – something you may have never heard of before. This clause will prove to be quite valuable for both the tenant and the landlord, and if followed correctly, will prevent a lawsuit in which you can both be held liable. This is especially important due to the fact that commercial real estate lawsuits in regards to the ADA have been increasing.</span></span></span></p> <p> </p> <h3><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">What is the ADA?</span></strong></span></span></h3> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">The ADA, otherwise known as the Americans with Disability Act, is a federal law enacted with a purpose to protect the rights of any individual with disabilities. It is broken down into 5 separate sections, which are as follows:</span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">              Title I: Employment</span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">              Title II: Public Entities</span></span></span></p> <p><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">              Title III: Places of Public Accommodations</span></strong></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">              Title IV: Telecommunications</span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">              Title V: Miscellaneous Provisions</span></span></span></p> <p> </p> <h3><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">What are Public Accommodations?</span></strong></span></span></h3> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">In the case of real estate, we need to delve into Title III – the protection of individuals with disabilities against discrimination in places of public accommodations.</span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">In order to understand how this affects real estate, we need to first break down what can be considered a public accommodation. </span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">The ADA lists 12 categories in which business can fall under including hotels, bars/restaurants, stores, office buildings, entertainment centers, movie theaters, museums, galleries, retail stores, and more – all of which fit perfectly into the category of commercial real estate. The facility must also include operations that affect commerce (travel, trade, traffic, transportation, communication) in order to be considered a public accommodation.</span></span></span></p> <p><span><span><em><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Exceptions:</span></em></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">As per usual there are some exceptions. For example, if a restaurant has an employee-only bathroom, that bathroom is not considered a public accommodation, while the rest of the restaurant is. Offices that are inside of private residences (a home office) are also not covered under the ADA.</span></span></span></p> <p><img alt="ada shopping mall lease" data-entity-type="file" data-entity-uuid="8da13e05-f61e-41c6-b79a-e0b96c0b334d" src="/sites/default/files/inline-images/americans-disability-act-shopping-mall-lease.PNG" /></p> <p> </p> <h3><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">What is considered ADA compliant?</span></strong></span></span></h3> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Now to the main question – what is considered ADA compliant? </span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">The requirements of the ADA state that individuals with disabilities must have equal access to any goods, services, or facilities of a place of public accommodation – these goods and services must not be different or separate from those of an individual without a disability.</span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">In order for this to be true, a facility, or in this case the building, must have the necessary elements or make the necessary changes</span></span></span></p> <ul><li><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">access to an elevator (if a building is more than 3 stories or more than 3,000 square feet per story)</span></span></span></li> <li><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">policies for the acceptance of service animals, auxiliary aids or mobility devices</span></span></span></li> <li><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">any removal or alterations of structural barriers that previously exist</span></span></span></li> <li><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">installation of ramps</span></span></span></li> <li><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">making of curb cuts</span></span></span></li> <li><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">widening doors</span></span></span></li> <li><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">rearranging any furniture or telephones</span></span></span></li> <li><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">installation of grab bars in bathroom stalls</span></span></span></li> <li><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">ensuring there is always an accessible path</span></span></span></li> </ul><p><br /><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">It is important to remember that it is required to make changes to buildings that were constructed prior to 1990, when the ADA was first enacted.</span></span></span></p> <p> </p> <p><img alt="ada was enacted in 1990" data-entity-type="file" data-entity-uuid="2ea0fa72-55ea-41dc-ad24-03b787d17075" src="/sites/default/files/inline-images/ada-enacted-1990.PNG" /></p> <p> </p> <h3><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Who is responsible for paying for reasonable modifications and accommodations?</span></strong></span></span></h3> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">In generally, if it is an accommodation such as providing parking spots that are close to the unit or allowing service pets then the landlord is required to pay for this. If it is a modification (a structural change) that the tenant is requesting, then the tenant is required to pay. This is especially true if the changes are expensive and the landlord does not want to provide them.</span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Keep in mind though – the landlord may ask the tenant to <a href="/article/restoration-expensive-exit-cost-most-tenants-have"><strong>return the space back to its original state at the end of the lease</strong></a>. If the tenant is going forward with the modifications themselves, they must also ensure that the landlord accepts the contractors that are chosen by the tenant.</span></span></span></p> <p> </p> <p><img alt="ada-restore-changes-end-of-lease" data-entity-type="file" data-entity-uuid="4b8ddc9c-581b-4b90-81cb-5ed2048820cf" src="/sites/default/files/inline-images/ada-restore-changes-end-of-lease.PNG" /></p> <p> </p> <h3><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Americans with Disabilities Act Sample Clause</span></span></span></h3> <hr /><p><span><span><em><span><span>Landlord, at Landlord’s expense, shall be responsible for causing the Common Areas of the Building to comply with the Americans with Disabilities Act as of the Rent Commencement Date, as may be amended from time to time, and the regulations promulgated pursuant to such Act (“ADA”). Tenant shall be responsible for causing the Demised Premises to comply with ADA. If, because of any installations made by Tenant in the Demised Premises, it becomes necessary for Landlord to modify any portions of the Common Areas of the Building to comply with the ADA, then such cost shall be borne by Tenant. If, because of any subsequent changes or amendments to the statute, rules or regulations of the ADA after the Rent Commencement Date, Landlord is obligated to alter the Common Areas, Landlord may seek reimbursement of the costs and expenses of such alterations by including such costs and expenses in the Operating Expenses and by amortizing the costs of such alterations as capital improvements pursuant to Paragraph 3 of this Lease.</span></span></em></span></span></p> <hr /><p><span><span><span>In this case, the tenant is responsible for ensuring that the property is ADA compliant as well as any payments associated with changes that need to be made.</span></span></span></p> <p> </p> <h3><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Who can be held liable – the landlord or the tenant?</span></strong></span></span></h3> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Landlords, tenants, and property managers can all be held liable in the case of the building not being ADA compliant. It is important as a tenant to ensure that it clearly states in your lease who is in charge of payment and the general responsibility of confirming that the space follows are necessary ADA requests.</span></span></span></p> <p><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">However, even if the lease states that the tenant is responsible for making any changes to the space, the landlord can still be held liable for noncompliance at the end of the day. </span></span></span></p> <p> </p> <h3><span><span><strong><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Concluding ADA Tips:</span></strong></span></span></h3> <ol><li><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Before signing your lease, ensure that both you and the landlord are in agreement with who is responsible for making any necessary changes to the property. </span></span></span></li> <li><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Do not assume that the building you are going to lease is already ADA complaint – always cross check the rules with what the space has.</span></span></span></li> <li><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Get a second opinion on your property If you do not feel confident about it being ADA compliant.</span></span></span></li> </ol><p> </p></div> <div class="bottom-links"> <div class="field--taxonomy-terms clearfix field field--name-field-blog-tags field--type-entity-reference field--label-above"> <div class="field__label">Post Tags</div> <div class="field__items"> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/70" class="taxonomy-term" hreflang="en">Working with Landlords</a></div> </div> </div> </div> </div> </div> Sat, 17 Aug 2019 11:01:43 +0000 Jeff 497 at https://www.leaseref.com 5 Commercial Lease Tenant Obligations That Cause Disputes https://www.leaseref.com/blog/5-commercial-lease-tenant-obligations-cause-disputes <div data-history-node-id="490" class="node node--type-blog node--view-mode-rss ds-2col-stacked-fluid clearfix"> <div class="group-header"> <div class="field field--name-node-title field--type-ds field--label-hidden field__item"><h2> 5 Commercial Lease Tenant Obligations That Cause Disputes </h2> </div> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field__item"><time datetime="2019-08-08T12:00:00Z" class="datetime">August 08, 2019</time> </div> </div> <div class="group-footer"> <div class="field field--name-field-blog-image field--type-image field--label-hidden field__item"> <img src="/sites/default/files/2019-08/commercial-lease-tenant-obligations-that-cause-disputes.jpg" width="1000" height="666" alt="commercial lease tenant obligations that cause disputes" typeof="foaf:Image" /> </div> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><h1><span><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>5 Commercial Lease Tenant Obligations That Cause Disputes</span></span></span></span></span></h1> <p><span><span> </span></span></p> <p><span><span>Tenant-landlord disputes are not uncommon in commercial buildings. A lot of the disagreements between commercial lease tenants and landlords stem from a lack of clarity regarding maintenance and repair obligations. As a business owner who is currently trying to relocate, you are likely aware of these types of these commercial lease issues. Neither party wants to put large amounts of capital into maintaining and fixing commercial property. However, each party is responsible for certain fees and tasks. Continue reading to discover the most common maintenance and repair commercial lease tenant obligations.</span></span></p> <p><span><span> </span></span></p> <h3><span><span><strong>Cleaning Nonstructural Elements</strong></span></span></h3> <p><span><span>Firstly, one of the most popular commercial lease tenant obligations is cleaning nonstructural elements. Depending on your type of commercial lease, you could be responsible for cleaning and upkeeping the entire space. </span></span></p> <p><span><span>These nonstructural elements typically include carpets, lighting and wall coverings. </span></span></p> <p><span><span>However, they can extend to bathroom and kitchen appliances when applicable. Keep in mind that your responsibility for cleaning these nonstructural features should be limited to the space you rent. </span></span></p> <p><span><span>If your landlord wants to include nonstructural element cleaning for the entire building in your lease, you need to put your negotiation hat on and achieve a more tenant-friendly clause. </span></span></p> <p><span><span>Most tenants are solely responsible for cleaning nonstructural elements within their office spaces. </span></span></p> <p><span><span> </span></span></p> <h3><span><span><strong>Damages Made By The Tenant</strong></span></span></h3> <p><span><span>Another common commercial lease tenant obligation is to pay for damages made by the tenant. </span></span></p> <p><span><span>If you break a window in your office, you need to pay for it to either be fixed or replaced. The same goes for tenants who break fixtures elsewhere on commercial property. </span></span></p> <p><span><span>When a tenant damages a painting hanging on the wall in the building hallway, they need to pay for it. You cannot expect the landlord to pay for the damages you make. Your landlord and your neighboring tenants alike expect you to take responsibility for your actions. </span></span></p> <p><span><span>For this reason, you need to prepare for this commercial lease tenant obligation upon moving into your new workspace.  Landlords will typically require at least one month of <a href="/article/deposits-what-you-need-know"><strong>security deposit</strong></a> to cover any damages, in addition to an obligation to <a href="/blog/personal-guarantees-commercial-leases-complete-guide"><strong>sign a personal guaranty agreement</strong></a>.</span></span></p> <p><span><span> </span></span></p> <h3><span><span><strong>HVAC Repair Costs</strong></span></span></h3> <p><span><span>Additionally, most tenants are responsible for HVAC repair costs in one way or another. </span></span></p> <p><span><span>After all, the HVAC system in a commercial building directly impacts every tenant. Without a functioning heating, ventilation and air-conditioning system, tenants cannot comfortably work in their commercial leased spaces. </span></span></p> <p><span><span>For this reason, tenants are usually responsible for at least a portion of the payments when their building's HVAC system breaks. Landlords typically share responsibility for these costs or push them all onto the tenants. </span></span></p> <p><span><span>Since the repair costs are often expensive, tenants should negotiate well to avoid paying the entirety of HVAC repairs. Prepare to negotiate this commercial lease tenant obligation.  </span></span></p> <p><span><span> </span></span></p> <h3><span><span><strong>Repair Costs Included In Operating Expenses</strong></span></span></h3> <p><span><span>Business owners who carefully negotiate their operating expenses minimize their commercial lease tenant obligations. Inspect the operating expenses portion of your commercial lease carefully. Many tenants attempt to shift certain maintenance and repair obligations over to the landlord when they cannot afford the costs. </span></span></p> <p><span><span>If the repairs are listed in those tenants' operating expenses, they are still responsible for the costs. If you want to ensure that you are not obligated to pay for expensive and seemingly unfair repair costs, hire a professional for <a href="https://www.leaseref.com"><strong>commercial lease advice</strong></a>. They can carefully review the <a href="/article/base-rent-vs-net-rent-vs-minimum-rent-vs-gross-rent"><strong>operating expenses</strong></a> section of your commercial lease and limit your responsibilities. </span></span></p> <p><span><span> </span></span></p> <h3><span><span><strong>Workspace Improvements</strong></span></span></h3> <p><span><span>Workspace improvements are one of the most popular commercial lease tenant obligations. </span></span></p> <p><span><span>Business owners in every industry need to add to their commercial spaces. </span></span></p> <p><span><span>For instance, if you want to turn a plain space into a trendy coffee shop, you will need to make improvements. You will likely need to install a counter and put in shelving behind that counter. </span></span></p> <p><span><span>Although doing so can be costly, you are responsible for the expenses of your build out unless negotiated otherwise. Keep in mind that many landlords assume <a href="/article/restoration-expensive-exit-cost-most-tenants-have"><strong>ownership of certain workspace improvements after tenants move out</strong></a>. Prepare yourself for the costs and the outcomes of this commercial lease tenant obligation. </span></span></p> <p> </p> <h3><span><span>Conclusion </span></span></h3> <p><span><span>In order to avoid disputes with your landlord, learn what your commercial lease tenant obligations are before signing on the dotted line. You will likely be responsible for cleaning nonstructural elements in your office space. Tenants need to pay for any damages they make in their offices or within their commercial buildings. Landlords typically either share the responsibility for HVAC repairs or require tenants to pay for them fully. Since you are financially bound to the repairs included in the operating expenses section of your lease, you need to look into that section before signing a lease. Finally, tenants are responsible for workspace improvements as well. Prepare for your tenancy by keeping these commercial lease tenant obligations in mind. </span></span></p> <p> </p></div> <div class="bottom-links"> <div class="field--taxonomy-terms clearfix field field--name-field-blog-tags field--type-entity-reference field--label-above"> <div class="field__label">Post Tags</div> <div class="field__items"> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/70" class="taxonomy-term" hreflang="en">Working with Landlords</a></div> </div> </div> </div> </div> </div> Thu, 08 Aug 2019 10:56:22 +0000 Jeff 490 at https://www.leaseref.com Tenant Improvement Allowance: A Complete Guide https://www.leaseref.com/blog/tenant-improvement-allowance-complete-guide <div data-history-node-id="453" class="node node--type-blog node--view-mode-rss ds-2col-stacked-fluid clearfix"> <div class="group-header"> <div class="field field--name-node-title field--type-ds field--label-hidden field__item"><h2> Tenant Improvement Allowance: A Complete Guide </h2> </div> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field__item"><time datetime="2017-05-09T12:00:00Z" class="datetime">May 09, 2017</time> </div> </div> <div class="group-footer"> <div class="field field--name-field-blog-image field--type-image field--label-hidden field__item"> <img src="/sites/default/files/2019-08/tenant-improvement-allowance.jpg" width="1000" height="667" alt="tenant improvement allowance" typeof="foaf:Image" /> </div> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><h1><span>What is a Tenant Improvement Allowance?</span></h1> <p><iframe frameborder="0" height="50" src="//drive.google.com/file/d/1TAIWlge1eWJN774ON9PFxVyysB9I-5Lb/preview" width="400">&amp;#13;</iframe></p> <p><span>In a commercial lease negotiation, a tenant improvement allowance (also referred to as a TA, TIA, TI allowance and leasehold improvement allowance or cash allowance) is an agreement from the landlord to compensate the tenant for all or a portion of the funds required to construct the commercial space.<span>  </span></span></p> <p><span>It is typically expressed in a per square foot dollar amount, such as $30.00 per square foot of rentable area, and it applies to all construction related work and professional fees, but does not typically include furniture, technology, cabling and relocation costs.<span>  </span></span></p> <p> </p> <div class="video-embed-field-responsive-video"><iframe width="854" height="480" frameborder="0" allowfullscreen="allowfullscreen" src="https://fast.wistia.com/embed/iframe/nw0swutxhd?autoplay=1"></iframe> </div> <p> </p> <h2><span>TI Allowance: How it Works</span></h2> <p><span>Typically the tenant must spend their own money first on the build out costs and the tenant improvement allowance is provided as a re-imbursement.<span>  </span>The payments can be progress payments as work is completed during your <strong><a href="/article/4-tips-smooth-commercial-tenant-fixturing-period">tenant fixturing period</a></strong>, or it can be in one lump sum at the end of the tenant's construction.<span>  </span></span></p> <p><span>This is a common misunderstanding for commercial tenants...they must pay for all the work and construction materials up front and therefore must have the cash to do so.</span></p> <p><span>For example, in the case of a 2,500 square foot premises, and a $40 per square foot tenant improvement allowance, typically the tenant must cover the cost of the $100,000 in construction costs and then submit receipts to be paid after the space is fully or substantially complete.  </span></p> <p><span>Therefore you must have the cashflow to pay your contractor and the trades during the project before you get paid back by the landlord.    </span></p> <p> </p> <p><img alt="leasehold-allowance-reimbursement.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/leasehold-allowance-reimbursement.PNG" /></p> <h2>Tenant Improvement Allowance Tutorial</h2> <p>We took all of the leases we have received in the past 6 months (mall leases, office leases, industrial leases, kiosk leases, restaurant leases, you name it), and we consolidated it into one video tutorial to provide you real world examples of tenant improvement allowance clauses.  So if you are currently negotiating a commercial lease with a tenant improvement allowance (or if you are still at the letter of intent stage), this video will be extremely valuable for you!</p> <p> </p> <div class="video-embed-field-responsive-video"><iframe width="854" height="480" frameborder="0" allowfullscreen="allowfullscreen" src="https://fast.wistia.com/embed/iframe/wrwze9ouai?autoplay=0"></iframe> </div> <p> </p> <p> </p> <h2><span>Cash Allowance vs Tenant Improvement Allowance</span></h2> <p><span>If cash flow is an issue, we suggest converting the tenant improvement allowance to a cash allowance, paid upon a firm and binding negotiation, or upon execution of the lease.<span>  </span>That way you will have the funds upfront and can spend the funds without having a cash flow issue.<span>  </span></span></p> <h3> </h3> <h3><span>Example of a Cash Allowance Lease Clause from a lease we just reviewed in Los Angeles, California:</span></h3> <hr /><p><strong><span>The Landlord agrees to pay to the Tenant a cash allowance of thirty dollars ($30.00) per square foot of Rentable Area to the Tenant upon execution of the Lease.<span>  </span>Said allowance shall apply towards construction of leasehold improvements and expenses related to construction, such as (but limited to) building permits, design fees, mechanical drawings, electrical drawings, professional fees and space planning fees.<span>  </span></span></strong></p> <hr /><h2> </h2> <h2>What is the definition of a tenant improvement?</h2> <p>Before we get too far into this topic, let's review the definition of a tenant improvement.  It is any addition, alteration or improvement to a leased premises.  It is mostly concerning the interior of the premises, but can include items outside of the useable area of the space as well.  It is important to draw a line between the landlord's base building systems of the property (such as HVAC units on the roof), and also tenant fixtures which go one step beyond a tenant's typical possessions (such as furniture).  </p> <p>Here is an example of a restaurant lease from Canada that specifically denotes the trade fixtures:</p> <p><strong><em><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Tenant acknowledges that the following items constitute fixtures that are required to be surrendered with the Premises pursuant to this Section 2.4 and do not constitute trade fixtures:  Sinks and related plumbing; built-in stoves and stove hoods; built-in freezers and refrigerators, and all other items that are installed in or affixed to the Premises such that they cannot be removed without causing material damage to the walls or floors of the Premises</span></span></em></strong></p> <h2> </h2> <h2><span>How Much Tenant Improvement Allowance Is Required?</span></h2> <p> </p> <p><span>This completely depends on the condition of the existing space, how much landlord's work will be going into the premises, and what finishes you desire.<span>  </span></span></p> <p><span>Local construction costs will vary, as will local professional fees.<span>  </span>There are also more economies of scale on larger spaces.<span>  </span></span></p> <p><span>For instance, a 10,000 square foot office with 3 offices and the rest open area will have a much lower per square foot cost than a 2,000 square foot office with 3 offices.<span>  </span></span></p> <p><span>To provide a very general overview, here are some sample office space build outs:</span></p> <h3> </h3> <h3><strong><span>Basic office build out (average tenant allowance required: $30 - $40 per square foot):</span></strong></h3> <p><img alt="basic-tenant-build-out.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/basic-tenant-build-out.PNG" /></p> <h3> </h3> <p> </p> <h3><strong><span>Upgraded Office Build Out (average tenant allowance required: $41 - $53 per square foot):</span></strong></h3> <p><img alt="upgraded-office-build-out.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/upgraded-office-build-out.PNG" /></p> <h3> </h3> <p> </p> <h3><strong><span>Premium Office Build Out (average tenant allowance required: $54+ per square foot):</span></strong></h3> <p><img alt="premium-office-build-out.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/premium-office-build-out.PNG" /><span> </span></p> <p><span>Disclaimer: prices are meant to be a guideline and many factors will affect actual build out costs.<span>  </span></span></p> <h2> </h2> <h2><span>How Much Tenant Improvement Allowance Can be Negotiated?</span></h2> <p><span>The amount of a TI allowance really comes down to four simple factors:</span></p> <h3> </h3> <h3><span>Creditworthiness of the Tenant</span></h3> <p><span>Your ability to pay back the amount of the allowance and probability of paying the rent for the entire duration of the lease is the top factor.<span>  </span>Your <a href="https://en.wikipedia.org/wiki/Credit_rating_agency" target="_blank">credit rating</a>, time in business and the long-term viability of the business are all factors the landlord will consider against the risk of providing the TI allowance.<span>  </span></span></p> <p> </p> <p><img alt="credit-rating-affects-ti-allowance.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/credit-rating-affects-ti-allowance.PNG" /></p> <h3> </h3> <p>If your business does not have a great credit rating, you may have to make some compromises to get a larger tenant improvement allowance.  It will likely include some kind of combination of a larger deposit, a security deposit, a letter of credit, a <strong><a href="/blog/personal-guarantees-commercial-leases-complete-guide&#10;">personal guarantee</a></strong> (stay away from this if you can), giving up free rent, or simply agreeing to pay more rent.  </p> <p> </p> <h3><span>Supply and Demand in the Commercial Real Estate Market</span></h3> <p><span>As a general rule, landlords keep their <strong><a href="/article/base-rent-vs-net-rent-vs-minimum-rent-vs-gross-rent">net rental rates</a></strong> rather stable and then increase or decrease incentives, such as tenant improvement allowances and free rent, when the market moves from a landlord's market to a tenant's market and vice versa.<span>  </span></span></p> <p><span>For example, imagine a commercial space for lease in Florida at $25 per square foot with a $10 TI allowance included within the rent may increase to a $20 allowance in a softer market, and may be reduced to nothing in a landlord's market, all the while the $25 in rent remains the same.<span>  </span></span></p> <p><span><span>Further leverage can be gained if you have the right <strong><a href="/blog/lease-abstracting-complete-tenant-guide">commercial lease advice</a></strong> from the beginning.  </span></span></p> <h3> </h3> <h3><span>The Condition the Commercial Space is In</span></h3> <p><span>If the space is simply in sub-standard condition and not marketable, a landlord is forced to provide an above market tenant improvement allowance to compensate, as any tenant interested in renting the space would make such a demand.<span>  </span></span></p> <h3> </h3> <h3><span>The Size of the Landlord</span></h3> <p><span>The larger the commercial landlord, the more likely they will provide a large TIA.  This is most often the case since larger landlords have bigger pockets.  <span>  </span></span></p> <p><span><span>Smaller landlords typically have less money, and a lower risk tolerance so they are less likely to play the role of banker for you.  </span></span></p> <p><img alt="what is a leasehold improvement" data-entity-type="file" data-entity-uuid="39c2f071-d576-409b-95de-afc23607dc4f" src="/sites/default/files/inline-images/what-is-a-leasehold-improvement.PNG" /></p> <h2> </h2> <h2> </h2> <h2><a href="https://www.leaseref.com" target="[objectObject]"><img alt="lease ref helps with tenant improvement allowance" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/lease-ref.PNG" /></a></h2> <h2> </h2> <h2> </h2> <h2><span>Improvement Allowance Amortization</span></h2> <p><span>Tenant improvement allowances are not free.<span>  </span></span></p> <p><span>Although landlords recover their funds through the lease term, there is no guarantee that they will receive all of the funds back due to lease defaults, bad debts and bankruptcies.<span>  </span></span></p> <p><span>So the landlord prices in an interest rate to compensate for their risk.<span>  </span>It is normally 8% - 10%.</span></p> <p> </p> <p><img alt="tenant-inducement-interest-rate.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/tenant-inducement-interest-rate.PNG" /></p> <p> </p> <p><span>Although the tenant pays back the allowance during the lease term and it is just part of the rental payment, the tenant could have leased the premises for a lower rent if there was no tenant improvement allowance.<span>  </span></span></p> <p><span>For example...a space that is available for lease at $20 per square foot with an allowance of $10 per square foot would be an equal trade off for the landlord if a tenant rented the space for $17.50 with no allowance (on a 5 year term).<span>  </span></span></p> <p><span>That is because although the landlord receives a higher rent in the TI allowance scenario, since they had to pay out the TI allowance, it brings the net effective rent down from $20 to $17.50.<span>  </span></span></p> <p><span>What this means is that if you have the cash to pay for the construction yourself, you will be saving the 8%-10% that the landlord will be charging.<span>  </span></span></p> <p><span><span>Here is a useful tenant improvement allowance amortization video that shows the amortization factor, and the impact on signing a 5 year lease vs a 10 year with with the same TI dollars in the deal:</span></span></p> <p> </p> <div class="video-embed-field-responsive-video"><iframe width="854" height="480" frameborder="0" allowfullscreen="allowfullscreen" src="https://fast.wistia.com/embed/iframe/8g4mpd728b?autoplay=0"></iframe> </div> <h2> </h2> <h2> </h2> <h2><span>Should I Spend my Own Money?</span></h2> <p><span>This really just comes down to figuring out how you should put your money to best use.<span>  </span></span></p> <p><span>Although the landlord charges 8%-10% interest and you could borrow money at a lower interest rate, that also cuts into your ability to use money for other purposes.<span>  </span></span></p> <p><span>If you can instead use a line of credit and get a higher than 10% return by putting that money to use in your business through more inventory, sales reps, higher marketing spend, product development, etc. then you will be better off to put that money to use in that manner.<span>  </span></span></p> <h2><img alt="tenant improvement" data-entity-type="file" data-entity-uuid="178ae9f9-173f-4537-803f-2c32213cefca" src="/sites/default/files/inline-images/tenant-improvement.PNG" /></h2> <h2><span>What the TIA Applies To</span></h2> <p><span>The improvement allowance will apply to leasehold improvements and the definition can normally be found in your lease.<span>  </span>It includes (but is not limited to) flooring, walls, doors, glass sidelights, paint, specialized lighting like pot lights, specialized ceilings like drywall ceilings, glass entry doors, cabinetry and millwork.<span>  </span></span></p> <p><span>Make sure your clause also includes other costs that are necessary for the construction process: permits, consultant fees, mechanical drawings, electrical drawings, space plan fees, interior design fees, landlord supervision fees, construction management fees, and waste disposal fees. </span></p> <p><img alt="ti allowance" data-entity-type="file" data-entity-uuid="bec2b9f7-6c7f-416e-92c2-434b74831810" src="/sites/default/files/inline-images/ti-allowance.PNG" /></p> <p><span>Unfortunately the TI allowance does not typically cover furniture, trade fixtures or equipment - so don't be spending the money on air conditioners, appliances, computers, desks and chairs.  </span></p> <h2> </h2> <h2>Do I Need a TI Request Letter?</h2> <p>The best way to request a TI money is to include it in your letter of intent or offer to lease. </p> <p>If you trigger your option to renew, you will not receive a TI allowance as the right to extend makes the lease move forward but it will not include a leasehold allowance.  So instead of formally exercising your option to renew, you will want to just work out a new deal that includes a request for a tenant improvement allowance.</p> <p><img alt="allowance meaning" data-entity-type="file" data-entity-uuid="f39f36f5-904f-4f78-a940-40e0bfbd40a7" src="/sites/default/files/inline-images/allowance-meaning.PNG" /></p> <p> </p> <h2>Do I have to get my landlord's approval on my improvements?</h2> <p>Yes.  Your landlord will want to know what changes you are making, as they could affect other tenants and the next tenant that will lease your space.  </p> <p>Be sure that the approval process obligates the landlord to provide their permission reasonably and timely, such as this sample clause:</p> <hr /><p><strong><em><span><span><span><span>Review and Approval.  The Space Layout Drawing (as defined in Section 2.1 below), the Store Design Drawings (as defined in Section 2.2 below) and the Construction Drawings and Specifications (as defined in Section 2.3 below) shall be prepared by Tenant’s Architect and submitted to Landlord for Landlord’s approval, which approval shall not be unreasonably withheld or unduly delayed.  </span></span></span></span></em></strong></p> <hr /><h2> </h2> <h2>What Happens to the TI if I Default?</h2> <p>Going out of business, failing to pay rent, or defaulting on your commercial lease does not mean that you do not owe the ti dollars back to the landlord.  </p> <p>Usually the amount of the tenant allowance will be stated in a personal guarantee and will be part of fulfilling the performance of the lease.  </p> <p>The landlord may also have an inducement recapture clause, such as this one:</p> <p> </p> <hr /><p><em><span><span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Any agreement for free or abated rent or other charges, the cost of leasehold improvements for Tenant paid for or performed by Landlord, or for the giving or paying by Landlord to or for Tenant of any cash or other bonus, inducement or consideration for Tenant entering into this Lease, all of which concessions are herein referred to as “Inducement Provisions”, shall be deemed conditioned upon Tenant’s full and faithful performance of all of the terms, covenants and conditions of this Lease. Upon default of this Lease by Tenant, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Landlord under such an Inducement Provision shall be immediately due and payable to Tenant to Landlord, notwithstanding any subsequent cure of said default by Tenant. The acceptance by Landlord of rent or the cure of the default which initiated the operation of this paragraph shall not be deemed a waiver by Landlord of the provisions of this paragraph unless specifically so stated in writing by Landlord at the time of such acceptance. </span></span></span></em></p> <hr /><h2> </h2> <h2>How Does a Furniture Allowance Work?</h2> <p>Furniture allowances are more rare than tenant allowances, as landlords do not retain the value of the furniture as they do with physical alterations and improvements within the premises.</p> <p>There are no rules or standards with furniture allowances - it would typically only be offered by a landlord if the tenant has a high credit score.  Whatever you can negotiate - go for it.</p> <p> </p> <h2>How Does a Moving Allowance Work?</h2> <p>Moving allowances are a bit more common than furniture allowances, as every tenant will need to move into their new space, and not every tenant will need new furniture. </p> <p>They are also less expensive than furniture - typically no more than $5 per square foot, so a landlord may be more inclined to offer a moving allowance as an incentive for a tenant to sign the <a href="/letter-intent-commercial-lease"><strong>letter of intent</strong></a> or <a href="/blog/types-commercial-lease-agreements-know"><strong>lease</strong></a>.</p> <p> </p> <h2>How Does a Carpet Allowance Work?</h2> <p>This is common for new leases where the tenant's work will just be carpet and paint, and for most spaces that will be in the ballpark of $6 per square foot for good quality carpet tiles. </p> <p>It is also prevalent on commercial lease renewals in which the renewing tenant wants to freshen up the space. </p> <p>In the letter of intent or on the proposal to renew the landlord may refer to the allowance as a carpet allowance to be more specific than a general tenant improvement allowance which could be spent on other improvements.</p> <p> </p> <h2>Is Paint a Leasehold Improvement?</h2> <p>You bet.  Much like the carpet allowance, your leasehold allowance could just be a paint allowance, though it is such a small cost (typically in the range of $1 per square foot or less), that it is extremely rare to see a tenant allowance just expressed as a paint allowance. </p> <p>In the case of making good on the alterations (removing the improvements and additions), it would be very rare for landlord to require you to sand and prime any any drywall for the next tenant since painting is such a straight forward leasehold improvement that it is expected the next tenant will just pick their colors and easily find a painter (plus after the leas term, most spaces require a new paint job anyway).</p> <p> </p> <h2>How Much Can a Contractor Ask for Up Front?</h2> <p>This is completely dependent on what can be negotiated between you and the general contractor (GC).  It is not uncommon to provide a construction deposit to at least cover the first payroll period and to diligently reimburse the contractor for materials in the form of progress payments.  It is not uncommon for the landlord to also require a construction deposit in the lease (for example, $5,000).  </p> <p><img alt="tenant improvements" data-entity-type="file" data-entity-uuid="9495336c-e465-4ecb-8931-2093338abaf0" src="/sites/default/files/inline-images/tenant-improvements.PNG" /></p> <p> </p> <h2>Can I install Tenant Improvements on the Roof?</h2> <p>Most leases allow for you to have access to the roof, but only under the landlord's direct supervision and permission and often the landlord reserves the right for their contractors to be the ones doing the work.  The primary concern is that it is an expensive and dangerous part of the building.  You installing an HVAC unit without factoring in the load bearing capacity of the roof could lead to structural issues, or perhaps your installation could compromise the moisture barrier and that could lead to leaks and mold for your and other tenants.</p> <p> </p> <h2>Can I Make Structural Changes with my TI Allowance?</h2> <p>As with the roof example, the landlord will typically reserve the right to be in charge of structural, mechanical and base building systems of the property.  That will typically mean that they reserve the right to use their own contractor for this part of your construction project.  Your TI dollars still count toward these changes.  Be sure that the lease obligates the landlord to be financially responsible for the maintenance of structural elements of the building during the lease term.</p> <p> </p> <h2>Construction Insurance: What is Normal?</h2> <p>You will need to speak with your insurance provider about your construction insurance.  </p> <p>Most leases require commercial general liability insurance, including products and completed operations coverage and contractual liability coverage, providing on an occurrence basis limits of not less than $2M per occurrence and $3M general aggregate, naming the landlord insured parties as an additional insureds.</p> <p><img alt="what is a ti" data-entity-type="file" data-entity-uuid="3d9f4793-a14d-41fd-8c0e-db6797632e53" src="/sites/default/files/inline-images/what-is-a-ti.PNG" /></p> <p> </p> <h2><span>Tenant Improvement Allowance vs Landlord Turnkey</span></h2> <p><span>The advantage of a tenant improvement allowance instead of having the landlord provide the suite in a "turnkey" (fully built by the landlord) condition is that you are in control of the construction project...which has three elements...money, time and accountability.<span>  </span></span></p> <h3> </h3> <h3><span>Money</span></h3> <p><span>While the landlord will have experience in building out space, there is a real disadvantage with this approach...cutting corners.<span>  </span></span></p> <p><span>Since the landlord is providing a full build out within the negotiated rent, the landlord can benefit from using the least expensive materials possible to improve profits.<span>    </span></span></p> <p><span>For example, if the turnkey calls for the landlord to carpet the premises but no specific details are provided on the quality (for example, 32 ounce commercial grade carpet tile), then the landlord has an incentive to use the lowest quality carpet - something you may not have opted for if you were in control of the budget and installation.<span>  </span></span></p> <p> </p> <p><img alt="disadvantages-landlord-turnkey.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/disadvantages-landlord-turnkey.PNG" /></p> <p> </p> <p><span>The same is true for labor.<span>  </span></span></p> <p><span>The landlord may be using the cheapest labor available and the quality of the leaseholds will reflect that.<span>  </span></span></p> <p><span>On the other hand, if you were in charge of hiring the labor you can choose the quality of the workers.<span>  </span></span></p> <p><span>The tenant improvement allowance approach allows you to be in control of how the budget is spent, so you can both install quality leasehold improvements where you want (for instance the reception area and the boardroom), and you can also decide where to cut corners for yourself (such as a lower quality carpet in the back-office areas).<span>  </span></span></p> <h3> </h3> <h3><span>Time</span></h3> <p><span>While a landlord will have experience in building space, if you have the landlord provide a turnkey, you may not receive regular status updates on the progress of the construction timeline.<span>  </span></span></p> <p>In a landlord turnkey, you are at the mercy of the landlord to get the construction done in time for the commencement date.  Is the date fixed or floating?  Is there a penalty for failing to deliver on time? </p> <p>For example, two days of free rent for every day the landlord is delayed.  </p> <p>What about a flat out right to cancel the lease if the landlord is late? </p> <p>Many leases have a tenant termination right if the landlord is 60 days late. </p> <p><img alt="interior build out cost per square foot" data-entity-type="file" data-entity-uuid="f9400fea-9afa-42e2-ba16-15e4d6bf9e28" src="/sites/default/files/inline-images/interior-build-out-cost-per-square-foot.PNG" /></p> <p><span>If you have a TI allowance that you are spending, then you will receive regular construction updates as you are paying your project manager or construction manager.</span></p> <p><span><span>It is also a good idea as the tenant to inspect the premises from time to time.   </span></span></p> <h3> </h3> <h3><span>Accountability</span></h3> <p><strong><span>What happens if there are construction defects?<span>  </span></span></strong></p> <p><span>If you hired a construction manager or project manager, you can hold back payment until you are satisfied with their work.<span>  </span></span></p> <p><span>Usually a landlord turnkey clause was assembled by the landlord, without any wording to hold them accountable for their work.<span>  </span></span></p> <p><span><span>It is normal to hold back 10% of the budget until you do a final walk through with punch list (a list of items that still need to be finished). </span></span></p> <p> </p> <p><img alt="leasehold-payment-holdback.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/leasehold-payment-holdback.PNG" /></p> <p> </p> <p><span>Tenants normally do not involve a construction person to review their landlord turnkey clause, and even if they did, that construction professional does not have any incentive to provide any wise advice as they are not going to be involved in the project.<span>  </span></span></p> <p><span>If you proceed with a landlord turnkey, ensure that it at least has some wording to ensure the landlord will construct the leasehold improvements in a good and workmanlike manner, in congruence with other first class properties in the neighborhood.<span>  </span></span></p> <p><span>You may even want to put in wording that that allows you to withhold rent until the turnkey construction is to your satisfaction (though most landlords will be reluctant to agree to such wording).</span></p> <p> </p> <h2><span>Hidden Costs in a Tenant Improvement Allowance</span></h2> <h3> </h3> <h3><span>Landlord Supervision and Overhead Fees</span></h3> <p><span>A TI allowance clause is usually pretty basic.<span>  </span>It states the dollar amount and usually when and how it gets paid.<span>  </span></span></p> <p><span>What is missing, and is typically in a separate clause in the lease, is the fee the landlord will charge to inspect the work as you construct the space.<span>  </span></span></p> <p><span>It is normally 3% - 5% of the construction budget.<span>  </span></span></p> <p><span>Here is an example of a lease we just reviewed for 20,000 square feet in Houston, Texas:<span>  </span></span></p> <p> </p> <hr /><p><em><strong><span>In addition to any other payment contained in this Article, Tenant shall pay to Landlord, on demand, a fee equal to the lesser of: 50<span> cents per square foot </span>of the Square Feet in the Premises, and 10% of the cost of completing the Tenant's Work (as evidenced by a sworn statement as to cost accompanied by receipted invoices) for coordination services provided by Landlord during Tenant's construction of its Tenant's Work.<span>  </span></span></strong></em></p> <hr /><p> </p> <p><span>In this case the landlord is willing to take the lesser of the two calculations, but it is still a $10,000 cost that could have been waived if the tenant knew to ask to have it removed.<span>  </span></span></p> <p> </p> <p><img alt="tenant-improvement-allowance-supervision-fees.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/tenant-improvement-allowance-supervision-fees.PNG" /></p> <p> </p> <p><span>Most landlords will agree to removing this supervision or overhead fee, so it is worth inserting this clause into your <strong><a href="/glossary-category?title=letter+of+intent&amp;field_term_target_id=All">letter of intent</a></strong> or <strong><a href="/glossary-category?title=offer+to+lease&amp;field_term_target_id=All">offer to lease</a></strong>:</span></p> <p> </p> <hr /><p><strong><em><span>The Landlord agrees that there shall be no overhead or supervision fees associated with inspecting the Tenant's construction of Leasehold Improvements.<span>  </span></span></em></strong></p> <hr /><h3> </h3> <h3><span>Sales Tax</span></h3> <p><span>If your state or province has sales tax, is it included or excluded from the calculation.<span>  </span>In a recent example from Toronto, Ontario, Canada, the harmonized sales tax is 13% in that Province.<span>  </span></span></p> <p><span>The landlord worded the tenant improvement allowance to be $30 per square foot inclusive of sales tax.<span>  </span>However, the tenant's construction budget was close to $30 per square foot PLUS taxes.<span>  </span></span></p> <p> </p> <p><img alt="tenant-improvement-allowance-include-sales-tax.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/tenant-improvement-allowance-include-sales-tax.PNG" /></p> <p> </p> <p><span>The wording on the TI allowance needed to be changed so the tenant would actually have enough funds from the landlord to match the budget.<span>  </span></span></p> <h3> </h3> <h3><span>Unionized Labor</span></h3> <p><span>Before signing a lease, be sure to ask the landlord if they require unionized labor.<span>  </span>If so, that has to be a consideration for selection of your trades and sub-trades, as unionized labor will increase your construction budget significantly.<span>  </span></span></p> <h3> </h3> <h3><span>Use of Landlord's Contractors</span></h3> <p><span>Ensure that your tenant improvement allowance can be spent on contractors of your choosing.<span>  </span></span></p> <p><span>Usually the landlord will have wording in the lease that stipulates that your contractors have to be approved by the landlord and they have to be bonded and insured.<span>  </span></span></p> <p><span>Some leases go a step further and state that you must use contractors from the landlord's list of approved contractors.<span>  </span></span></p> <p> </p> <p><img alt="approved-contractor-list.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/approved-contractor-list.PNG" /></p> <p> </p> <p><span>This can be a game changer for you, as the landlord's list may only have very expensive contractors and you want to hire people that are less expensive.<span>  </span></span></p> <p><span><span>If you have a strong relationship with your contractor, try to get your contractor on the landlord's list of approved vendors - especially if you have some leverage (for example, you have not signed the lease yet).  </span></span></p> <h3> </h3> <h3><span>Tenant Improvement Allowance Does Not Usually Equal the Construction Budget</span></h3> <p><span>The biggest mistakes tenants make when it comes to a tenant allowance is underestimating what the total cost will be.<span>  </span>This is because you are guided by commercial real estate agents into this process.<span>  </span></span></p> <p><span>Their incentive is to lease space.<span>  </span></span></p> <p><span>So they tell you the "build out cost" in terms of just the raw construction cost.<span>  </span></span><span>They often omit the other fees, which are usually 10-20% of the total budget, and are always a significant percentage on smaller jobs.<span>  </span></span></p> <p> </p> <p><img alt="build-out-costs.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/build-out-costs.PNG" /></p> <p> </p> <p><span>For example, here is a construction budget for a tenant improvement allowance of $10 per square foot on a 7,000 square foot space.<span>  </span></span></p> <p><span>However, "consultant fees" are not included and this case it added up to another $10 per square foot (building permits, mechanical drawings, electrical drawings, interior design fees):</span></p> <p> </p> <p> </p> <p><img alt="construction-budget-not-including-consultant-fees.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/construction-budget-not-including-consultant-fees.PNG" /><span> </span></p> <p> </p> <p><span>Keep in mind that the TI allowance is a set amount and if the construction budget increases, the allowance does not, so you end up paying the difference from your own pocket. </span></p> <h3> </h3> <h3><span>Making Good</span></h3> <p><span>Although this is typically a separate clause entitled "Makegood Provision" or "Restoration Provision", be sure to attempt to remove this clause.<span>  </span>It is the tenant's obligation to restore the premises to a base building condition (otherwise known as a concrete shell, or "raw" condition) at the expiry of the lease.<span>  </span></span></p> <p> </p> <p><img alt="making-good-raw-space.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/making-good-raw-space.PNG" /></p> <p> </p> <p><span>In some cases a landlord will charge a tenant to make good on the space (typically a $5 - $10 per square foot charge), and not complete the demolition work.<span>  </span></span></p> <p><span>Be sure to have a clause that is entitled "No Makegood" and have it state that the Tenant shall not be required to restore or make good the Premises to base building condition, and the Landlord agrees to accept the Premises in an as-is condition at the expiration of the Lease.<span>  </span></span></p> <p><span><span>Office and industrial leases more commonly have makegood provisions that get removed.  Retail can be tricky as the next user may have a totally different use (it is not as easy to re-lease hair salons and dentist offices as it is office space).  </span></span></p> <p><span>You can find out more about the makegood clause <strong><a href="/article/restoration-expensive-exit-cost-most-tenants-have">here</a></strong>. </span></p> <p> </p> <h3>A Hidden Deadline for Submitting Your Request for TI Reimbursement</h3> <p>Many leases have a 6 or 12 month deadline, and it is a clause that is typically buried in most commercial leases.  Here is an example:</p> <hr /><p><strong><em>If all of the conditions set forth above have not been satisfied within one hundred eighty (180) days from the Rent Commencement Date, Tenant shall be deemed to have forfeited the right to any unpaid portion of the Tenant Allowance. </em></strong></p> <hr /><p>In this case, if you think you have some tenant allowance left in the reserve tank and you can do work some time after the 6th month of the lease, you would be mistaken. </p> <p>Likewise, if you get busy and don't submit your approval for reimbursement, the entire leasehold allowance is at risk.</p> <p> </p> <h3>Permanent Leasehold Improvements vs Fixtures</h3> <p>There can be a lot of confusion on what is considered a leasehold improvement or not.  Therefore you could be counting on the TI allowance being able to cover items such as a built in retail check out counter, removable shelving, audio/visual equipment for a boardroom, point of sale equipment, removable restaurant equipment such as ovens and stoves, telephone equipment, satellite dishes, specialized sprinkers, and security systems.  </p> <p>It is always best to assume the worst and specifically big ticket specialty items up front in the lease.</p> <p> </p> <h2><span>What Happens to the Unused Balance of the TI Allowance?</span></h2> <p> </p> <p><span>Since the TI allowance clause is normally drafted by the landlord, it never addresses what happens to the unused portion of the allowance.<span>  </span>Since the landlord has agreed to pay those costs, the tenant should reap the full benefit, even if the final construction spend did not equal the allowance provided.<span>  </span></span></p> <p> </p> <p><span>Therefore, tenants need to insert:</span></p> <p><strong><span>Any unused portion of the tenant improvement allowance shall be credited towards rent falling due under the lease.<span>  </span></span></strong></p> <p> </p> <p>Here is an example from Los Angeles, California of how we modified a tenant improvement allowance clause at the Letter of Intent (LOI) stage (it is important to do this before you get to the lease signing stage):</p> <p> </p> <div class="video-embed-field-responsive-video"><iframe width="854" height="480" frameborder="0" allowfullscreen="allowfullscreen" src="https://fast.wistia.com/embed/iframe/kyt7n6ppli?autoplay=0"></iframe> </div> <p> </p> <p><span>We recently reviewed a lease in New York in which this clause existed.<span>  </span>The TI allowance was $12 per square foot and the tenant is 4,000 square feet.<span>  </span>They dug up the receipts and discovered that they only spent $8 per square foot.<span>  </span></span></p> <p><span>So there was $16,000 worth of value that was not realized, and if they had the wording above, they would have received that in free rent.<span>  </span></span></p> <p> </p> <p><img alt="unused-ti-allowance-applied-rent.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/unused-ti-allowance-applied-rent.PNG" /></p> <h2> </h2> <h2> </h2> <h2><span>Who Owns the Leasehold Improvements?</span></h2> <p> </p> <p><span>Almost without exception, the leasehold improvements are property of the landlord upon installation.<span>  </span></span></p> <p><span>This is because when you move out the landlord usually wants to lease the space to the next tenant with little to no renovation required.<span>  </span>If the next tenant just needs to freshen up the space with carpet and paint, then it is a win-win for both of those parties.<span>  </span></span></p> <p><span>There is also little value in you owning the leaseholds - you cannot take out carpet or drywall and be able to re-install it in your next space. <span>  </span></span></p> <p> </p> <p><img alt="who-owns-leasehold-improvements.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/who-owns-leasehold-improvements.PNG" /></p> <h2> </h2> <h2>Accounting and Tax Treatment of a Tenant Improvement Allowance</h2> <p> </p> <p>The TIA is depreciated by the party that conducts the work.  </p> <p>The current tax rule is that tenant improvements are to be recorded on <a href="http://www.investopedia.com/ask/answers/062315/what-process-building-owner-depreciating-leasehold-improvements-property.asp" target="_blank">straight-line depreciated over 15 years</a>.  </p> <p>Since rules regarding depreciation change frequently, it is best to consult with an accountant or tax professional. </p> <p> </p> <p><img alt="accounting-tax-treatment-tenant-improvement-allowance.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/accounting-tax-treatment-tenant-improvement-allowance.PNG" /></p> <h2>Tenant Conditions of Payment (Reimbursement)</h2> <h3>Documents the Tenant Must Submit to the Landlord:</h3> <p>You will need to follow the landlord's guidelines in order to be compensated (reimbursed).  The following are the generally accepted steps in typical retail, office and industrial leases:</p> <p>1.  A sworn construction statement signed by the tenant and General Contractor.  This confirms the total cost of labor and materials and a cost breakdown by subcontractor.</p> <p>2.  The construction contract with all change orders (last minute changes to the original plan).  </p> <p>3.  Certificate of substantial completion from the Architect, certifying that the work is complete or substantially complete and in compliance with the Tenant's Plans there were approved by the landlord.</p> <p>4.  Drawings (sometimes they will get specific and ask for an autocad file, or the PDF file must be printable to 8.5 x 11 paper).</p> <p>5.  Certificate of occupancy (which is your rubber stamp, provided by the city in which the premises is).</p> <p>6.  Original unconditional and final lien waivers from all contractors, subcontractors and material suppliers (this allows the landlord to know that everyone has been paid and nobody will invoke a lien on the building).</p> <p>7.  All receipts and invoices.</p> <p> </p> <h3>Timing on Getting Paid the Tenant Improvement Allowance</h3> <p>Most leases provide the landlord to pay you within 30 to 60 days after the following conditions are met:</p> <p>1.  Execution of the lease by both the tenant and landlord (you should modify this to just you - the landlord could delay execution of the lease simply to delay payment of the leasehold allowance).</p> <p>2.  The commencement date (be careful - what if you negotiated a long fixturing period), or the rent commencement date (also be careful - what if you negotiated a long free rent period?).  Remember that since a tenant allowance is a reimbursement, you are spending the money up front so prompt payment by the landlord will help with your cashflow.</p> <p>3.  Opening by the tenant of its business in the whole of the Premises.</p> <p>4.  Delivery of a statutory declaration of a senior officer of the tenant that the work is substantially complete, with no contractor liens.</p> <p> </p> <h2>Can I Ask for Progress Payments?</h2> <p>Progress payments in commercial leases are when you get the TI allowance in more than one lump sum payment at the end of the construction (for example, if you are able to submit receipts once per month during the construction period).  </p> <p>It is rare (typically only reserved for tenants in the 100,000 square foot range that are spending more than $50 per square foot on the construction).  We certainly have not seen any tenant be successful in achieving this for shopping mall leases, storefronts, and small retail, office and industrial leases.</p> <p><img alt="what are leasehold improvements" data-entity-type="file" data-entity-uuid="9fa8a716-9c50-4d11-9d7d-8058470eca8a" src="/sites/default/files/inline-images/what-are-leasehold-improvements.PNG" /></p> <p> </p> <h2><span>Tenant Improvement Allowance - Sample Lease Clause</span></h2> <p> </p> <p><span>What TIA guide would be complete without a sample lease clause?<span>  </span></span></p> <p><span>So here you go (from a recent restaurant lease from Chicago, Illinois):</span></p> <hr /><p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">The Landlord shall provide to the Tenant a tenant improvement allowance equal to Twenty Five Dollars ($25.00) + applicable sales taxes per square foot of Rentable Area of the Premises (the "Tenant Improvement Allowance") to be applied toward the cost of the Tenant's Work to be completed in the Premises.<span>  </span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">The Tenant Improvement Allowance shall be paid to the Tenant (or the Tenant's contractor(s) directly should the Tenant so direct the Landlord in writing) following the completion of the Tenant's Work and upon receipt by the Landlord of invoices from the Tenant's contractor for the improvements to the Premises, provided that:</span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>1.<span>      T</span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">he Lease has been fully executed the by Landlord and the Tenant;</span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>2.<span>      T</span></span></span><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">he Tenant delivers to the Landlord a statutory declaration providing that there are no construction liens or other encumbrances registered or otherwise outstanding against the Premises or the Building in respect of the Tenant's Work and that the Tenant has made payment for all materials and all labor supplied in respect of the completion of the Tenant's Work in the Premises.</span></p> <hr /><h3><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Good luck negotiating the best tenant improvement allowance clause you can get!</span></h3> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Are you still a little stuck?<span>  </span>We are here to help.<span>  </span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US">Feel free to call us, email us or upload your lease for an <strong><a href="https://www.leaseref.com/">online commercial lease review</a></strong> and we can review the entire lease for a one-time fee.<span>  </span></span></p> <p><span lang="EN-US" xml:lang="EN-US" xml:lang="EN-US"><span>Watch this super serious video that outlines our process of analyzing and reviewing tenant improvement allowance clauses:</span></span></p> <p> </p> <div class="video-embed-field-responsive-video"><iframe width="854" height="480" frameborder="0" allowfullscreen="allowfullscreen" src="https://fast.wistia.com/embed/iframe/shueekaldg?autoplay=0"></iframe> </div> <p> </p> <p> </p> <p> </p> <p><img alt="jeff-at-lease-ref.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/jeff-at-lease-ref.PNG" /></p></div> <div class="bottom-links"> <div class="field--taxonomy-terms clearfix field field--name-field-blog-tags field--type-entity-reference field--label-above"> <div class="field__label">Post Tags</div> <div class="field__items"> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/72" class="taxonomy-term" hreflang="en">Negotiating</a></div> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/70" class="taxonomy-term" hreflang="en">Working with Landlords</a></div> </div> </div> </div> </div> </div> Tue, 09 May 2017 16:40:25 +0000 Jeff 453 at https://www.leaseref.com My Landlord Wants to Demolish My Building. Can He Do That? https://www.leaseref.com/blog/my-landlord-wants-demolish-my-building-can-he-do <div data-history-node-id="450" class="node node--type-blog node--view-mode-rss ds-2col-stacked-fluid clearfix"> <div class="group-header"> <div class="field field--name-node-title field--type-ds field--label-hidden field__item"><h2> My Landlord Wants to Demolish My Building. Can He Do That? </h2> </div> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field__item"><time datetime="2017-05-30T12:00:00Z" class="datetime">May 30, 2017</time> </div> </div> <div class="group-footer"> <div class="field field--name-field-blog-image field--type-image field--label-hidden field__item"> <img src="/sites/default/files/2017-04/demolition.jpg" width="1000" height="563" alt="demolition of a commercial building " typeof="foaf:Image" /> </div> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><h2>Do landlords have demolition rights for their commercial buildings?</h2> <p>It depends.  Landlord demolition rights should exist in every commercial lease template.  As a landlord why would you not want to have the right to redevelop?   </p> <p>But the odds of a landlord redeveloping are vary wildly.  </p> <p>Which of these buildings do you think a landlord would want to demolish? </p> <p> </p> <p><img alt="air-rights-for-commercial-buildings.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/air-rights-for-commercial-buildings.PNG" /></p> <p> </p> <p>Obviously the building on the right has much more upside for a landlord to demolish and redevelop. </p> <p>The building on the left is already maximizing its density and air rights...in other words, it has maxed out on its potential.  Since it is so high, it has an enormous amount of square feet and has maximized revenue for that landlord. </p> <p>It would not make any sense to demolish the bigger building only to build another building of the same size or slightly larger. </p> <p>The smaller building has only 2 storeys and if it is zoned for more density, then the landlord has an opportunity to build higher and make more money.  On top of that, the parking lot is not making any money, and a high-rise building with underground parking would maximize site coverage, and allow for underground, paid parking. </p> <p>Make sense?  Why would a landlord NOT want to have the right to demolish and redevelop?  It is how you make millions in commercial real estate. </p> <p>So how many small buildings have leases that allow for a landlord to cancel leases and redevelop?</p> <p>We reviewed 873 leases for buildings that are less than 100,000 square feet.  We found that 772 of those leases specifically had a landlord's right to cancel the lease in order to demolish the building. </p> <p> </p> <p><img alt="percentage-of-commercial-leases-with-demolition-clauses.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/percentage-of-commercial-leases-with-demolition-clauses.PNG" /></p> <p> </p> <p>Here is typical wording that we found:</p> <hr /><p><strong>The Landlord has the right to cancel the Lease if, in its sole discretion, it elects to repurpose, redevelop or substantially renovate all or part of the Building.  The Landlord shall provide six (6) months' prior written notice to the Tenant.  </strong></p> <hr /><p>Here is the good news. </p> <p>If your lease does not have a demolition clause AND you have a <a href="/article/renewing-your-commercial-lease-what-you-need-know">right to renew</a>, then you can handcuff your landlord from being able to redevelop. </p> <p>Check out our case study on how a client leveraged their <a href="/case-study/missing-600000-clause">LACK of a demolition clause into $600,000 worth of incentives</a>. </p> <p>They had a 10 year lease, with a right to renew for 5 years and the landlord realized they did not have a cancellation clause in that lease.  Woops! </p> <p>Here is the bad news. </p> <p>Any smart landlord would never agree to removing a demolition clause if it already exists in their standard lease form. </p> <p>We just came across in which we were approached by an 18,000 square foot branch office of a Fortune 1000 tech company in Toronto.  They are in a six-storey brick and beam building.  Their landlord owns 6 office buildings. </p> <p>The landlord realized that across all of his buildings he does not have any demolition rights.  Did you know that Toronto is currently the condo capital of North America?</p> <p> </p> <p><img alt="office-building-to-be-demolished.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/office-building-to-be-demolished.PNG" /></p> <p> </p> <p>So the landlord absolutely refused to renew the lease without the introduction of the demolition clause. </p> <p>Here is the wording that was introduced:</p> <hr /><p><em>The Landlord desires to remodel or demolish the Building or any part thereof, to an extent that renders continued possession by the Tenant impracticable, the Tenant shall, upon receiving two hundred and forty (240) days prior written notice from the Landlord (the "Demolition/Remodel Notice Period"):</em></p> <p><em>(a)          surrender its tenancy, including any unexpired remainder of the Term; and</em></p> <p><em>(b)          vacate the Leased Premises and give the Landlord vacant possession as if the Second Extended Term had expired on the date set out in the Landlord's notice.</em></p> <p><em>For further clarity, the definition of "remodel" in this clause shall only include any activities that a) render the Building uninhabitable by Tenant and other tenants of the Building, b) are for the purpose of substantially altering the Building and c) do not require the full demolition of the Building. </em></p> <hr /><p>The tenant did not get anywhere with trying to remove the clause and the landlord genuinely refused to compromise on this topic. </p> <p>So we recommended a compromise...ask for compensation in the event the landlord triggers the cancellation. </p> <p> </p> <p>Here is what we suggested:</p> <p>1.       Ask for the clause to only apply to the second extension term.  There were other tenants on long term deals that did not have these demolition clauses anyway, so why not try to delay this landlord right for as long as possible?</p> <p>2.       Extend the 240 days to an entire year.  Given the size of the tenant and how few options there are available in their submarket, having a full year is much more tenant-favorable. </p> <p>3.       Seek compensation.  There are no hard and fast rules on what this should be, but come up with a number that helps offset or completely covers moving and construction costs. </p> <p>The landlord agreed.  To all three requests. </p> <p>The simple reality is that when millions or tens of millions of dollars are on the line for a landlord, losing your tenancy is likely a risk most landlords are willing to take. </p> <p>But since they are making a lot more money by demolishing and redeveloping, your landlord or next landlord may be willing to provide you financial compensation as a horse trade for you agreeing to accept the demolition right. </p> <h3>Good luck with your lease negotiation and getting out your landlord demolition clause! </h3> <p><img alt="commercial-lease.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/commercial-lease.PNG" /></p> <p> </p></div> <div class="bottom-links"> <div class="field--taxonomy-terms clearfix field field--name-field-blog-tags field--type-entity-reference field--label-above"> <div class="field__label">Post Tags</div> <div class="field__items"> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/72" class="taxonomy-term" hreflang="en">Negotiating</a></div> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/70" class="taxonomy-term" hreflang="en">Working with Landlords</a></div> </div> </div> </div> </div> </div> Thu, 20 Apr 2017 01:31:28 +0000 Jeff 450 at https://www.leaseref.com My New Landlord is Delayed in Providing Possession. What can I do? https://www.leaseref.com/blog/my-new-landlord-delayed-providing-possession-what-can-i-do <div data-history-node-id="439" class="node node--type-blog node--view-mode-rss ds-2col-stacked-fluid clearfix"> <div class="group-header"> <div class="field field--name-node-title field--type-ds field--label-hidden field__item"><h2> My New Landlord is Delayed in Providing Possession. What can I do? </h2> </div> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field__item"><time datetime="2017-04-06T12:00:00Z" class="datetime">April 06, 2017</time> </div> </div> <div class="group-footer"> <div class="field field--name-field-blog-image field--type-image field--label-hidden field__item"> <img src="/sites/default/files/2017-04/delayed-possession-commercial-space.jpg" width="5669" height="5669" alt="delayed possession commercial space" typeof="foaf:Image" /> </div> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><h1>My New Landlord is Delayed in Providing Possession.<span>  </span>What can I do?<span>  </span></h1> <p>Most tenants negotiate a commercial lease on the landlord's standard form, which does not state any penalty for delayed possession.<span>  </span>Many tenants do not think about the recourse or even the possibility of delay.<span>  </span></p> <p>First, let's examine why a landlord would be delayed in providing occupancy:</p> <p><span><span>1)<span>      </span></span></span>An existing tenant in the space has not vacated.<span>  </span>In most cases this is due to some kind of delay on relocating to their new space (such as construction taking longer than expected).<span>  </span>In this instance the landlord would be receiving an <a href="/article/overholding-staying-month-month-tenant">overholding penalty</a> and they may be incentivized to keep getting that bonus rent.<span>  </span></p> <p><span><span>2)<span>      </span></span></span>There is a delay in the landlord's construction or demolition of the space to make it ready for your occupancy.<span>  </span></p> <p>What is worse is that for many tenants there costs they have to incur in the meantime, such as paying employees, and marketing and advertising costs.<span>  </span></p> <p>We recently helped a dentist in Washington, DC.<span>  </span>The space she wanted was next to a coffee shop and the landlord was renting out the unit to the coffee shop for extra storage space.<span>  </span>The coffee shop committed to moving to a new building to be built, but the construction completion date was not a hard date.<span>  </span></p> <p>The dentist was in a position to be patient with the space as it was the best option by far in the market, so there were no big costs to incur.<span>  </span>However, the way the landlord had worded the lease, he could proceed with the lease as of July 1, or as of January 1 of 2017.<span>  </span></p> <p>The landlord also wanted the <a href="/article/deposits-what-you-need-know">security deposit</a> up front.<span>  </span></p> <p>Our suggestion was to come up with a formula that would incentivize the landlord to provide vacant possession of the space by imposing a growing penalty.<span>  </span></p> <p> </p> <p>Here is how it read:</p> <p><strong>For every month of delayed possession from the Commencement Date, the Landlord shall provide two months of Gross Free rent, to be applied after the existing free rent period as mentioned in clause 2.</strong></p> <p> </p> <p>We also suggested that the security deposit be altered from being delivered "upon <strong>execution of the lease</strong> by the Tenant" to "upon <strong>possession of the Premises</strong> by the Tenant".<span>  </span></p> <p>Finally, there was a clause indicating that the tenant had the right to cancel the lease but it was 6 months after the original commencement date.<span>  </span>We suggested that we shorten that to just two months after the commencement date, which provides a bit more anxiety and incentive for the landlord to ensure the space can be ready as soon as possible.<span>  </span></p> <p>For your case, you will have to review the lease and see what it says with respect to the landlord's commitment to delivering the premises on time so you can begin <a href="/blog/what-difference-between-fixturing-period-and-free-rent-period">fixturing</a> and applying the <a href="/blog/tenant-improvement-allowance-complete-guide">tenant improvement allowance</a>, and what recourse you have if that does not happen.<span>  </span></p> <p>If it is silent on these steps and they have not delivered on their promise to deliver possession of the space then your landlord would be default of the lease and the contract would be null and void.<span>  </span>You would then have a case to seek compensation from the landlord for what this has cost your business.<span>  </span></p> <p>Normally these things can be worked out without lawyering up, as long as both parties are acting reasonably.<span>  </span>Good luck with resolving this issue and let us know if you need an <a href="http://www.leaseref.com/">online commercial lease review company</a> to help you!</p> <p><img alt="commercial-lease.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/commercial-lease.PNG" /></p></div> <div class="bottom-links"> <div class="field--taxonomy-terms clearfix field field--name-field-blog-tags field--type-entity-reference field--label-above"> <div class="field__label">Post Tags</div> <div class="field__items"> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/72" class="taxonomy-term" hreflang="en">Negotiating</a></div> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/70" class="taxonomy-term" hreflang="en">Working with Landlords</a></div> </div> </div> </div> </div> </div> Thu, 06 Apr 2017 21:18:15 +0000 Jeff 439 at https://www.leaseref.com What is included in a landlord's base building shell? https://www.leaseref.com/blog/what-included-landlords-base-building-shell <div data-history-node-id="435" class="node node--type-blog node--view-mode-rss ds-2col-stacked-fluid clearfix"> <div class="group-header"> <div class="field field--name-node-title field--type-ds field--label-hidden field__item"><h2> What is included in a landlord&#039;s base building shell? </h2> </div> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field__item"><time datetime="2017-04-02T12:00:00Z" class="datetime">April 02, 2017</time> </div> </div> <div class="group-footer"> <div class="field field--name-field-blog-image field--type-image field--label-hidden field__item"> <img src="/sites/default/files/2017-04/landlord-base-building-shell.jpg" width="1000" height="444" alt="base building shell" typeof="foaf:Image" /> </div> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><h1>What is included in a landlord's base building shell?</h1> <p>This is very important question as most commercial tenants overlook these details and then some construction items end up being a tenant cost.<span>  </span>Different landlords will offer different base building shells, so the following are just general guidelines.<span>  Be sure that you are clear on what the your landlord is delivering to you before you start spending your <strong><a href="/blog/tenant-improvement-allowance-complete-guide">tenant inducement allowance</a></strong>.    </span></p> <h3> </h3> <h3>Demising the Space</h3> <p>If the premises is <strong><a href="/article/4-ways-demising-your-space-could-be-nightmare">to be demised</a></strong>, ensure that the landlord will divide the space, complete with a floor plan, and that the demising wall is not just drywall - it is a fire rated demising that that rises up to the concrete ceiling of the space - not just up to the T-bar ceiling.<span>  </span></p> <h3> </h3> <h3>Flooring</h3> <p>It is normal for the landlord to remove the existing flooring - carpet, carpet tile, hardwood flooring and any type of tiles.<span>  </span>You should receive the space with a polished concrete floor (or hardwood floor in the case of a "post and beam" building (otherwise known as loft space)).<span>  </span></p> <h3> </h3> <h3>Ceiling</h3> <p>For conventional office buildings, the landlord typically provides a dropped T-bar ceiling.<span>  </span>These are the tiles that you see in most office buildings that form a uniform ceiling, usually at 8 or 9 feet above the floor.<span>  </span>You can push the tiles up and see that the lights are suspended from the concrete above the tiles.<span>  </span>This ceiling solution hides wires, pipes and cabling.<span>  </span></p> <p> </p> <p><img alt="what-is-t-bar-ceiling.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/what-is-t-bar-ceiling.PNG" /></p> <h3> </h3> <h3>Window Shades</h3> <p>A landlord typically states that "building standard window dressing" will be provided.<span>  </span>Ensure you inspect whatever type of blinds that means.<span>  </span>There are some buildings that do not come with blinds, so ensure that you ask what types of blinds or shades are included.<span>  </span></p> <p> </p> <p><img alt="base-building.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/base-building.PNG" /></p> <h3> </h3> <h3>HVAC</h3> <p>It may be useful to have an HVAC (heating, ventilation and air conditioning) specialist advise you on what you should be looking for.<span>  </span>The lease should have a "comfortable use" clause, and sometimes get specific enough to state temperature ranges that the landlord must be able to achieve.<span>  </span>You will want to know about VAV (variable air volume) so you can control the volume of air.<span>  </span></p> <p>HVAC units are typically measured in tons, meaning the amount of air they can process (for example, 5 ton HVAC units vs 10 ton units).<span>  </span>The important elements are the tonnage of the HVAC units, their age, and that they can meet current <a href="https://www.ashrae.org/" target="_blank">ASHRAE standards</a> (they are the association who governs indoor air quality).<span>  </span></p> <h3> </h3> <h3>Duct Work</h3> <p>Most landlords state that they will provide you the space with HVAC duct work that allows air flow for an open concept plan.<span>  </span></p> <p><img alt="HVAC-open-plan.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/HVAC-open-plan.PNG" /></p> <p>This is fair, as it provides a baseline - they will cover the cost of the bare minimum, and if you are 100% open concept then there is no extra duct work cost.<span>  </span>If you are building multiple offices, additional duct work has to be added to supply air to those offices</p> <h3> </h3> <p><a href="https://www.leaseref.com" target="[objectObject]"><img alt="base building" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/base-building_0.PNG" /></a></p> <p> </p> <p> </p> <h3>Lighting</h3> <p>Be sure to remember what the landlord-s base building light are.<span>  </span></p> <p>Most conventional office buildings are T5 fluorescent tube lighting.<span>  </span>If the previous tenant of the space had specialty lighting installed and you like it, be sure to state that the landlord will retain that lighting.<span>  </span>Does the clause state how many bulbs per square foot will be installed, or is there a measurement on the illumination of the space?<span>  </span></p> <p> </p> <p><img alt="lighting.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/lighting.PNG" /></p> <h3> </h3> <h3>Power Capacity</h3> <p>Does it state a watts per square foot promise?<span>  </span>For example, two watts per square foot for general tenant power, 1 watt per square foot for lighting and 2 watts per square foot of spare capacity for a total power capacity of 5 watts per square foot.<span>  </span></p> <p>Additionally you should have a clause that says that the landlord warrants that they can deliver electrical capacity to suit your floor plan (which shows the number of work areas).<span>  </span></p> <p> </p> <p><img alt="what is a shell building" data-entity-type="file" data-entity-uuid="baa943bc-4711-41ce-bfaf-d6180ee8bdab" src="/sites/default/files/inline-images/what-is-a-shell-building.PNG" /></p> <p> </p> <h3>Sprinklers</h3> <p>Is the building sprinklered?<span>  </span>If so there should be mention that the sprinklers are working and up to current building codes, and that all sprinklers are the same make and type. </p> <p> </p> <p><strong>Other Items for the Rest of the Building:</strong></p> <h3>Washrooms</h3> <p>Are they barrier free and in compliance with all current accessibility codes?<span>  </span>What are the finishes for the vanities and sinks?<span>  </span>Was it negotiated that they would be upgraded?<span>  </span>Are they hands-free, with infrared controls on basins and urinals?<span>  </span>Are the toilets water saving with dual flush options?<span>  </span></p> <h3>Telecommunications</h3> <p>There should be a list of existing telecommunications providers that service the building.<span>  </span></p> <h3>Elevators</h3> <p>It should state the number of elevators, age and model.<span>  </span>You can find out more information about elevators <a href="http://www.neii.org/" target="_blank">here</a>.<span>  </span></p> <h3>Live and Dead Floor Loading</h3> <p>Dead load factor allows you to understand how strong the floors are and their ability to withstand heavy equipment.<span>  </span>Live loading is the number of people you can have on the floor.<span>  </span></p> <h3>Emergency Power Supply</h3> <p>Is there a back up generator for the building?<span>  </span>If so, it should state its capacity in kilowatts, and the length of time it can provide power (for example, 8 hours of fuel).<span>  </span></p> <p>Best of luck with your negotiation and if you want us to review your offer to lease and your landlord's base building shell schedule, we are happy to help with an <strong><a href="/">online commercial lease review</a></strong>. </p> <p><img alt="commercial-lease.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/commercial-lease.PNG" /></p></div> <div class="bottom-links"> <div class="field--taxonomy-terms clearfix field field--name-field-blog-tags field--type-entity-reference field--label-above"> <div class="field__label">Post Tags</div> <div class="field__items"> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/74" class="taxonomy-term" hreflang="en">Design and Construction</a></div> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/70" class="taxonomy-term" hreflang="en">Working with Landlords</a></div> </div> </div> </div> </div> </div> Sun, 02 Apr 2017 14:30:07 +0000 Jeff 435 at https://www.leaseref.com My commercial landlord went bankrupt. Can I stay in my space? https://www.leaseref.com/blog/my-commercial-landlord-went-bankrupt-can-i-stay-my-space <div data-history-node-id="434" class="node node--type-blog node--view-mode-rss ds-2col-stacked-fluid clearfix"> <div class="group-header"> <div class="field field--name-node-title field--type-ds field--label-hidden field__item"><h2> My commercial landlord went bankrupt. Can I stay in my space? </h2> </div> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field__item"><time datetime="2017-04-03T12:00:00Z" class="datetime">April 03, 2017</time> </div> </div> <div class="group-footer"> <div class="field field--name-field-blog-image field--type-image field--label-hidden field__item"> <img src="/sites/default/files/2017-03/commercial-landlord-bankrupt.jpg" width="1000" height="455" alt="landlord went bankrupt" typeof="foaf:Image" /> </div> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><h1>My commercial landlord went bankrupt.<span>  </span>Can I stay in my space?</h1> <p>We wrote a more detailed post on it here: <a href="/blog/what-snda-and-why-should-commercial-tenants-care">SNDA - What is it and why should tenants care</a> - complete with a video.  <span>  </span><span>  </span></p> <p>The main thing is that you should be fine if the new landlord does not want to redevelop the commercial property.<span>  </span>The lender is your temporary commercial landlord now.<span>  </span>They likely will not hold on to the building - they will find a buyer as soon as they can.<span>  </span></p> <p>If you are in a building that is not making the best use of the property, the new owner could be purchasing the building for the purpose of redeveloping.<span>  </span></p> <p>For instance, a 2 storey building on a large lot in a redeveloping area could be more profitable if the property was demolished and a multi-floor building is constructed on the land.</p> <p>If that is the case, you may be in trouble.<span>  </span>You likely have a clause in your lease that covers you in the event of a sale of the building, but a bankruptcy would require an SNDA - subordination and non-disturbance agreement.<span>  </span>And that agreement is between you and the landlord's lender.<span>  </span></p> <p>In the case of an accidental ownership by the lender due to the landlord's bankruptcy typically allows for the lender and subsequent new owner to be able to do with the property what they please.<span>  </span></p> <p>Our advice would be to talk to the other tenants in the building and get an <a href="https://www.leaseref.com/">online commercial lease review</a>.<span>  </span></p> <p>If any of them were able to successfully get an SNDA agreement, that can block the new owner's ability to redevelop.<span>  </span>Therefore a neighboring tenant's agreement could save the day for all the tenants in the building.<span>  </span>You should also engage with the lender and find out as early as possible what their intentions are with the building.<span>  </span>You may be able to help entice them to find a buyer who is motivated to keep the property with all of the leases intact.<span>  </span>It would also be advisable to speak with a bankruptcy attorney as early as possible.<span>  </span></p> <p><span>Here is the video we created on SNDA agreements:</span></p> <p><iframe allowfullscreen="" frameborder="0" height="340" src="https://player.vimeo.com/video/208009251" width="640"></iframe></p> <p> </p> <h3><span>Now you know what to tell your colleagues when they tell you: my landlord went bankrupt.  </span></h3> <p><img alt="commercial-lease.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/commercial-lease.PNG" /></p></div> <div class="bottom-links"> <div class="field--taxonomy-terms clearfix field field--name-field-blog-tags field--type-entity-reference field--label-above"> <div class="field__label">Post Tags</div> <div class="field__items"> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/72" class="taxonomy-term" hreflang="en">Negotiating</a></div> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/70" class="taxonomy-term" hreflang="en">Working with Landlords</a></div> </div> </div> </div> </div> </div> Fri, 31 Mar 2017 22:35:53 +0000 Jeff 434 at https://www.leaseref.com What is an Estoppel Certificate? https://www.leaseref.com/blog/what-estoppel-certificate <div data-history-node-id="426" class="node node--type-blog node--view-mode-rss ds-2col-stacked-fluid clearfix"> <div class="group-header"> <div class="field field--name-node-title field--type-ds field--label-hidden field__item"><h2> What is an Estoppel Certificate? </h2> </div> <div class="field field--name-field-blog-date field--type-datetime field--label-hidden field__item"><time datetime="2017-03-30T12:00:00Z" class="datetime">March 30, 2017</time> </div> </div> <div class="group-footer"> <div class="field field--name-field-blog-image field--type-image field--label-hidden field__item"> <img src="/sites/default/files/2017-03/estoppel%20certificates.jpg" width="1000" height="667" alt="What is an estoppel certificate" typeof="foaf:Image" /> </div> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><h1>What is a tenant estoppel certificate?</h1> <iframe frameborder="”0”" width="400" height="50" src="https://drive.google.com/file/d/1bSVC1NOAj55IwfJRS3-4a0SqYrZHFlLk/preview"> </iframe> <p>An estoppel certificate in commercial real estate is a summary of the pertinent clauses found within a lease, and verified by signature of the tenant.<span>  </span>The purpose of such an estoppel letter is to allow the landlord to confirm to potential purchasers the high-level details of each commercial lease for the property, so they can make a more informed decision about purchasing the building.<span>  </span></p> <p><span>The estoppel certificates signed by the tenants of the property verify the future cash flow, length of lease terms, and any outstanding claims and defaults.  </span></p> <p> </p> <h3>Who pays for the estoppel certificate?</h3> <p>It is always a cost to the landlord, since they are the party that benefits from the completion and verification of the estoppel certificate.<span>  </span></p> <p>Most landlords will also make the process as frictionless as possible, by filling in the key details so the tenant only needs to verify the items, and not fill them in.<span>  </span></p> <p> </p> <p><img alt="estoppel-certificates-who-pays.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/estoppel-certificates-who-pays.PNG" /></p> <h3> </h3> <h3> </h3> <h3>Who benefits from the estoppel certificate?</h3> <p>The landlord benefits as he is able to sell the building more quickly and for a maximum price with completed estoppel letters, and the purchaser can make a more informed decision.<span>  </span></p> <h3> </h3> <h3>Risks to the Tenant In Signing an Estoppel Certificate</h3> <p>As signing the estoppel is a representation of material items within your lease, it is crucial that your lease be reviewed to ensure the estoppel agreement is accurate.<span>  </span></p> <p>If you sign the estoppel certificate and it contains false information, that validation in the estoppel letter could override rights you have in the lease.<span>  </span></p> <p> </p> <p><img alt="estoppel-certificate-overrides-lease.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/estoppel-certificate-overrides-lease.PNG" /></p> <p> </p> <p>For example, if you have an exclusivity right but the estoppel certificate says there is no exclusivity in your lease, then that accidental confirmation could eliminate that exclusivity right you had (<a href="http://www.leagle.com/decision/1988890519So2d371_1634/PIGGLY%20WIGGLY%20OF%20MANSFIELD,%20INC.%20v.%20WOLPERT%20ASSOCIATES" target="_blank">Piggy Wiggly of Mansfield, Inc. v. Wolpert Assoc.</a>). </p> <p>Want some help to review your estoppel certificate?<span>  </span>If so, click <a href="/how-it-works">HERE</a>.<span>  </span></p> <h3> </h3> <h3>Risks to the Tenant In NOT Signing the Estoppel Certificate</h3> <p>Although a tenant estoppel certificate is not a contract, your lease is, and it likely has wording surrounding your duties to execute estoppels in a timely manner.<span>  </span></p> <p>It may also have wording that stipulates what happens if you fail to execute the estoppel within the deadline.<span>  </span></p> <p>The common clauses are:</p> <p>1) The landlord effectively has power of attorney and signs on your behalf.<span>  </span></p> <p>2) You are in default of the lease.<span>  </span></p> <p>3) The landlord signing on your behalf sounds like it is harmless, but what if there is false information in the estoppel?<span>  </span>You would not want to put yourself in a position to dispute any items with the future landlord.<span>  </span></p> <p>The second clause is much worse for tenants.<span>  </span>It is very landlord-favorable and is designed to provide a strong incentive for tenants to comply with the estoppel retrieval process, but could also be used as a reason for a landlord to cancel a lease.</p> <p>However, it is actually more common for a lease to not mention estoppel certificates at all, rather than for a tenant to be in default. </p> <p> </p> <p><img alt="estoppel-certificate-default-lease.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/estoppel-certificate-default-lease.PNG" /></p> <h3> </h3> <h3> </h3> <h3>Who signs the tenant estoppel certificate?</h3> <p>The tenant signs the estoppel certificate and returns to the landlord.<span>  </span>The landlord may sign the estoppel certificate or may draft a separate letter for the potential buyers warranting that all estoppel certificates are accurate.<span>  </span></p> <p> </p> <h3><span>Do I have to sign an estoppel certificate when I sign a commercial lease?</span></h3> <p><span>Particularly in shopping center leases, we are seeing more and more that the tenant is obligated to sign an estoppel certificate upon signing their lease.  </span></p> <p><span>This provides convenience for the landlord.  </span></p> <p><span>If they decide to sell and the tenant has not defaulted on the lease, then the items in the estoppel letter will still be true and the landlord avoids having to track down the tenant to verify the terms of the lease.  </span></p> <p><span>This allows the landlord to save time and hassle when trying to sell the building.  </span></p> <p><span>It is also easier for the tenant as you are now signing the estoppel form while all the terms of the lease are still top of mind.  </span></p> <h3> </h3> <h3>SNDA and Tenant Estoppel Certificates</h3> <p>Both documents are important and misunderstood.<span>  </span></p> <p>An SNDA agreement comes into effect when a landlord defaults on its loan obligations and a tenant wants to remain in the space unaffected.<span>  </span></p> <p> </p> <p><img alt="estoppel-certificate-and-snda.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/estoppel-certificate-and-snda.PNG" /></p> <p> </p> <p><span>You can find out more about SNDAs here: <strong><a href="/blog/what-snda-and-why-should-commercial-tenants-care">What is an SNDA?</a></strong></span></p> <h3> </h3> <h3>What you should add to the Tenant Estoppel Certificate</h3> <p>In never hurts to insert a clause that states that the foregoing was answered to the best of the tenant's knowledge - this will help protect you somewhat if there are any future disputes.<span>  </span></p> <p>It is also wise to clear up any ambiguities, disputes or verbal agreements within the estoppel to ensure any special rights you have are added to the estoppel in writing, so that the new owner will be aware of those rights before purchasing.<span>  </span></p> <p> </p> <p><img alt="estoppel-letter.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/estoppel-letter.PNG" /></p> <p> </p> <p>Examples would include free parking, reserved parking, free after hours HVAC use, pets allowed in the office, expansion rights, etc.</p> <h3> </h3> <h3>Should I Renegotiate My Lease When I Receive An Estoppel Letter?</h3> <p>It is worth a discussion with your landlord.<span>  </span>Since the value of a building is directly tied to the length of the lease contracts, extending your lease could benefit the landlord by increasing the sale price.<span>  </span></p> <p>In exchange, the landlord may be willing to trade off some free rent immediately, or provide you a tenant improvement allowance or more <strong><a href="/blog/right-first-refusal-complete-tenant-guide">flexible expansion rights</a></strong>, or be willing to remove a<strong> <a href="/blog/personal-guarantees-commercial-leases-complete-guide">personal guarantee that you previously agreed to</a></strong>.<span>  </span></p> <p> </p> <p><img alt="renegotiate-commercial-lease.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/renegotiate-commercial-lease.PNG" /></p> <p> </p> <p>Keep in mind that if the landlord has issued estoppel letters, then the building may be sold fairly quickly and time is of the essence.<span>   </span></p> <p><span>Also keep in mind that the landlord is under no obligation to renegotiate with you, and you should not try to use the estoppel certificate as leverage to get a new deal - just ask the landlord if it may be mutually beneficial to work out a new lease prior to selling.  </span></p> <h3> </h3> <h3>What is a typical estoppel turnaround time?</h3> <p>Estoppel certificates have a timeline associated with them, so the landlord can provide the to the prospective purchasers in a timely fashion to help ensure a quick and smooth sale of the building.<span>  </span></p> <p>Ten business days is common and reasonable.</p> <p> </p> <p><img alt="estoppel-certificate-timing.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/estoppel-certificate-timing.PNG" /></p> <h3> </h3> <h3> </h3> <h3>Estoppel Clause in a Lease</h3> <p>Not all leases provide instructions on what has to happen when a landlord provides an estoppel certificate, even though it is to the landlord's benefit to provide such a clause.<span>  </span></p> <p>Here is a sample clause (taken from a recent shopping mall client in San Antonio, Texas), and it would be worth looking through your lease to find a clause like this:</p> <hr /><p><strong>From time to time the landlord may deliver an estoppel certificate to the tenant, providing a summary of pertinent clauses within the Lease.<span>  </span>Tenant agrees to confirm said details, execute, and deliver back to the landlord within five (5) business days from receipt of the estoppel certificate.<span>  </span>Failure to comply shall mean that the Tenant is in agreement with the terms of the estoppel certificate.<span>  </span></strong></p> <hr /><h3> </h3> <h3>Sample Tenant Estoppel Certificate Form</h3> <p>Here is what a tenant estoppel certificate form looks like:</p> <p><img alt="what-is-an-estoppel-certificate.JPG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/what-is-an-estoppel-certificate.JPG" /></p> <p>And here are the clauses in that estoppel template:</p> <p><span><span>1.<span>       </span></span></span>The term of the lease commenced on the 1<sup>st</sup> day of July, 2017 and expires on the 30<sup>th</sup> day of June, 2026, subject to the exercise of rights of renewal or extension as set out in the Lease.<span>  </span></p> <p><span><span>2.<span>       </span></span></span>The Tenant is in possession of the Premises and is carrying on business in accordance with the terms of the Lease.<span>  </span>The Premises is comprised of 2,355 square feet of Rentable Area.<span>  </span></p> <p><span><span>3.<span>       </span></span></span>The Lease has not been altered or amended since its execution and is in full force and effect.<span>  </span></p> <p><span><span>4.<span>       </span></span></span>The minimum rent will be $80,225.00 per annum effective July 1, 2017, in accordance with the terms of the Lease.<span>  </span></p> <p><span><span>5.<span>       </span></span></span>The amount of prepaid rent or security deposit currently held by the Landlord is $160,000.00.</p> <p><span><span>6.<span>       </span></span></span>All inducements, <strong><a href="/blog/tenant-improvement-allowance-complete-guide">tenant improvement allowances</a></strong> and rent-free periods have been paid in full.<span>  </span></p> <p><span><span>7.<span>       </span></span></span>To the best of the Tenant's knowledge, the Premises have been complied in accordance with the obligations of the Landlord.<span>  </span>The Tenant is not claiming any deduction, abatement or set-off of any rent payable, nor any counterclaim or defence against the enforcement of its obligations to be performed under the Lease.<span>  </span></p> <p><span><span>8.<span>       </span></span></span>There is no existing default or breach of the Lease on the part of the Landlord of which the Tenant has notice or of which it is aware.</p> <p><span><span>9.<span>       </span></span></span>There is no agreement between the Tenant and the Landlord, other than that contained in the Lease, pertaining to the obligations of the Landlord and the rights of the Tenant relating to the use and occupation of the Premises by the Tenant.<span>  </span></p> <p><span><span>10.<span>   </span></span></span>To the best of the Tenant's knowledge, there is no litigation or governmental or municipal proceedings commended or pending or threatened against the Tenant with respect to the Premises or which, if decided against it, would adversely impair its ability to comply with the terms of the Lease.<span>  </span></p> <p>Then there would be a spot for the tenant to sign and date.<span>  </span></p> <p>The problem is that most tenants are so busy running their business that reading the lease to verify that the estoppel certificate reflects the lease is a low priority.<span>  </span></p> <h3> </h3> <h3><span>Conclusion</span></h3> <p>Landlords require the prompt co-operation of tenants to execute and return back estoppel certificates in order to sell or refinance buildings. </p> <p>It can also be beneficial to tenants to clear up any disputes or renegotiate leases (although this is rare) during this time. </p> <p>If you are in possession of a tenant estoppel certificate, it would be wise to complete the form as soon as possible and return it to your landlord.</p> <p> </p> <hr /><h3><span>Tenant Estoppel Certificate Review Service</span></h3> <p>By the way, did we mention that Lease Ref offers an Tenant Estoppel Certificate Review Service?<span>  </span>Simply <strong><a href="/how-it-works">upload your lease</a> </strong>with the estoppel certificate or letter and we are happy to review and verify that they match.<span> </span></p> <p>All you need to do is select the <strong><a href="/how-it-works">Bronze Package</a></strong>.<span>  </span></p> <p><span>Here is a short video that outlines our estoppel certificate review service:</span></p> <div class="video-embed-field-responsive-video"><iframe width="854" height="480" frameborder="0" allowfullscreen="allowfullscreen" src="https://fast.wistia.com/embed/iframe/shueekaldg?autoplay=0"></iframe> </div> <hr /><p><img alt="commercial-lease.PNG" data-entity-type="" data-entity-uuid="" src="/sites/default/files/inline-images/commercial-lease.PNG" /></p></div> <div class="bottom-links"> <div class="field--taxonomy-terms clearfix field field--name-field-blog-tags field--type-entity-reference field--label-above"> <div class="field__label">Post Tags</div> <div class="field__items"> <div class="field-item--taxonomy-term field__item"><a href="/taxonomy/term/70" class="taxonomy-term" hreflang="en">Working with Landlords</a></div> </div> </div> </div> </div> </div> Thu, 30 Mar 2017 17:01:08 +0000 Jeff 426 at https://www.leaseref.com