Check Header Headline

“It’s our standard form lease – everyone signs it.” is a phrase landlords often use.  And it must be true because the landlord’s broker says it is.

Leasing commercial space is expensive and a big responsibility – the success or failure of your business may ride on the terms of your lease.  There are two (at least) big myths about leasing commercial real estate:

Myth #1:  All standard form leases say the same thing. 
Myth #2:  Standard form leases treat both parties fairly 
                    and equitably.

While most landlords have a “Standard Form” lease, it is carefully crafted to the particular landlord’s needs.  Most landlords have multiple “Standard Form” leases for different situations and different properties.  As a corporate real estate executive, I had two different “Standard Form” leases (with variations) for short-term, small-space deals depending whether I was landlord or tenant.

The simple fact is every lease contains dozens of individual agreements and there is no way a pre-prepared, “Standard Form” lease can take into account the individual needs of each and every tenant.

When you get serious about an available business space, chances are you'll be presented with a typed or printed commercial lease prepared by the landlord or the landlord's lawyer. As you read the lease, keep these points in mind:

#1: The terms almost always favor the landlord.
#2: You can almost always negotiate changes to accommodate 
                   your business needs.

In theory, all terms of a lease are negotiable. But your negotiating power depends on your attractiveness as a tenant (whether your use adds value to the property and your financial strength) and local rental market conditions. 

With vacancy rates well into double digits for all Lexington property types, most landlords are more flexible than they have been in years.  Ask for what you need for your business’s success, you may be surprised by what you get.

This week Andrew Zezas reported on an especially egregious commercial real estate brokerage conflict of interest in his blog: Corporate Advisor.  Andrew reports that a landlord’s agent refused to allow a potential tenant to view property for lease; the tenant currently leases in another property the same agent has listed!

The tenant in this story will ultimately get a complete and unbiased look at all suitable property because the tenant had the wisdom to engage a tenant representative to represent its interest.  Unfortunately, the same would not be true if the tenant were relying on brokers in the employ of the landlord.

The kind of conflict Andrew describes occurs way too often in commercial real estate brokerage.  His story is only noteworthy because the brokers’ conduct was so blatantly in conflict with their duties.  In most such instances, the tenant never knows when opportunities are not shown.

As a tenant you must be vigilant in insuring the commercial real estate broker representing you is putting your interest first.  The best way to do this is to engage an exclusive tenant representative to work for you.

Most commercial real estate transactions, sales and leases, involve real estate brokers.  In almost all cases, those brokers represent sellers or landlords!  For many of the 20+ years I held responsibility for my company’s real property, I used brokers – the agents of landlords and sellers – to help me purchase and lease commercial real estate.  Eventually I learned (I may not be a quick study, but I eventually do learn) that I, and my company, were much better served by hiring a real estate expert to work for me and exclusively represent my interests when dealing with seller’s and landlord’s agents.

My real estate brokerage business is centered on bringing what I have learned as a corporate real estate manager to my clients: to help them save money, save time, and avoid expensive mistakes in acquiring real property for use in their businesses.  I try to limit my business to the representation of real estate users and avoid the conflicts inherent in also representing landlords and owners.

This blog is intended as a vehicle to share what I have learned, to share what I expect to learn in the future, and to provide a forum for discussion about commercial real property issues in Lexington Kentucky.

I intend to focus on issues principally from the point of view of the user of real property - the business owner or tenant.  Look for half a dozen posts a month; maybe more.

Future topics will include, but not be limited to:

• general market conditions: financial, market, and real estate
• local and national news related to real estate
• business issues in commercial leasing
• business issues in purchasing real property
• using professional services
• aligning business plans with real property needs
• trials and tribulations of writing a blog
• anything else that is particularly interesting

Soon there will be the ability for you to comment on this blog.  I hope you will.  If you think associates and friends would be interested in the material provided here, please let them know about it.

Thank you for visiting this blog – come back often.