Monday, June 24, 2019

Commercial tenancy agreement? Financial and legal considerations

Have you ever heard a bad story about a commercial tenancy agreement gone wrong? This article aims to avoid this happening to you.

Commercial property is an incredibly complicated industry. 마카오 개인 롤링This article is last in a series of three “don’t-leave-home-without” articles. We’re going to write this from the perspective of a tenant – so it is feels least intimidating.
We’re putting  this into the public domain because we think it will do good. Our aim is to help tenants, customers of the industry, to pick better service providers. And we hope service providers can use this to help train less experienced professionals in their businesses.
With reference to the subject, below is a quote by Donald Rumsfeld, the then US Secretary of State for Defence, stated at a Defence Department briefing in 2002.
‘There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know.’

Our objectives

Commercial property is a wonderful industry,마카오 롤링 filled with many passionate, competent professionals and skilled advisors. With this article, we aim to do two things
  1. Upskill you sufficiently to eliminate your “unknown unknowns”, and help you add value to the process.
  2. Empower you to assess whether the service provider you are dealing with can deliver the professionalism your needs require.

Some context

First of all, commercial tenancy agreements need to be built on an understanding of your needs as tenant. This needs understanding allow terms to be structured that work for both tenant and landlord.
Above all, in CRE,마카오 룰렛 nothing is set in stone.
Depending on the “season”, many of the below can be negotiated with a landlord. But always remember, while you are looking at many options, landlords in parallel can be looking at alternative tenants for your space. Negotiating here is about you knowing what is reasonable and what is not reasonable. Similarly, it requires hard-won experience to know what concessions are negotiable and which items, beyond a point, are not negotiable.
Landlords are more negotiable in “seasons” when supply of vacant space exceeds demand, and less flexible when their tenant options are many. This however varies from area to area, from property category to property category, and from properties of different grades and attributes (such as good parking ratios or visibility or stacking volumes).
The right professional, based on a combination of intellectual property ranging from market intelligence to skills and experience to relationships, can help steer you in this process.

Hidden expenses

No one likes bad surprises. 마카오 바카라So it is your right to obtain complete transparency about all your expenses, up front. Your advisor, if she or he doesn’t have this info on hand to disclose to you, can get you the following answers fairly fast.
  • What fixed expenses are payable by you, the tenant, to the landlord in total every month? What is payable on top of this to third parties? What are variable expenses?
  • How much are “add-on” expenses payable by the tenant like lights, water and sewage?
  • What are the escalations for rent, and estimated escalations for expenses?
  • Are these escalations above, on or below market?
  • What happens if the recovered expenses change – who pays for the increase?
  • How, in a multi-tenanted property environment, are expenses going to be allocated to your lease? What underpins this allocation calculation?
As a result of the above questions, you end up with hard numbers. These expenses (rent, recoveries (paid by landlord, billed to you), and add on expenses) can be packed into a financial model. And this model can give you a cost value of your lease, in today’s terms. This cost comparison is the next step in evaluating alternatives.
As a rule of thumb, provided all escalations are roughly the same, the property that is the cheapest in day one expenses, will be cheapest at the end of the net present value exercise above.