Commercial Properties and Real Estate Finder

Investing in commercial properties and setting up their leases is easier than you may think. The key to doing it successfully is first understanding what will be required of you as a professional landlord, and putting this information into action. Know that and you will easily be able to recognise the distinction between residential property leases and commercial property leases.

Commercial leases themselves are fairly straight forward. You just need to make sure that it contains the following components before you sign up. All of which we shall now explain:

Parties

These are the official names of the individuals involved in your property. Namely you and your tenant. But if for example you find yourself renting out your rental property to a business, make sure that you name the business itself as the party on the lease, not the person who manages the company.

Managers can change whereas companies as a whole do not.

Premises

When you invest in a property, and in turn rent it out, you need to be aware of the property in its entirety. It is not just a block of offices, but are individual units that can be rented out. So all premises essentially describe is the space you are renting out, for this reason within the lease you need to verify what is actually being rented out to your tenant and what space is involved.

Rent

This section of the lease explains to the tenant how the rent for your investment property has been calculated (including common area maintenance and other costs linked to the rental property). Also within this section it is not uncommon to find the phrases ‘gross lease’ or ‘triple net lease’.

At this point it is valuable that both you and your tenant gain a firm grasp of what these terms mean, before you continue with the agreement.

Term

All this section actually confirms is the length of the agreement i.e. when the lease begins and when the lease ends. One thing to consider here is the inclusion of ‘re-negotiation’. If for example you are renting out your rental property to a business, it is fair to say that at the end of the term they may want to renew their lease. With this in mind, it is a good idea to keep this option open for discussion within the lease.

Deposit

Now this one is an important one as it enables you to receive a security deposit from your tenant for your rental property. Within this section of the lease it is also important to include an agreement over what shall happen should their lease be forfeited. This ensures both security for yourself and your tenant.

Hold Over

This term you may be less familiar with, but all it actually represents is an overview of what will happen should your tenant choose to not vacate the property once the lease ends.

Use/Restrictions

It is important to know what your commercial property is going to be used for. After all the last thing you want to find out is that your tenants are committing illegal actions there. So within your lease make sure there is a reference to this stating what can and cannot be used in terms of signs, hours of use, limits on occupancy and sub-leases within your property.

Tax and Insurance

Of all the points listed here this one is probably the most important as it will prevent confusion later down the line. In this section of the lease, issues such as property taxes and insurance are agreed upon, in relation to who will actually pay the fee. To ensure that your rental property is fully covered, tenants will need to provide proof of insurance on the property and all its containing equipment, plus liability insurance which should protect you as the landlord.

Maintenance

Similar to the one above, it is important that whoever is responsible for the properties maintenance is identified within the document. In most leases of this kind, tenants are traditionally expected to pay for all repairs that relate to common usage. Landlords on the other hand will be in charge of paying for ‘extraordinary repairs’ that are as a result of major damage or equipment failure.

Now these are only a sample of the many features involved in the creation of a commercial property lease. There are other key areas that you need to take into consideration. These shall be discussed in part two of this article.

Natalie Cunningham is a professional copywriter specialising in Property Investment advice and commercial property investment She has over 8 years experience in the property development industry and is currently working on educating members of the public via London property investment seminars.

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A commercial property should always be inspected first in order to comprehend its viability. After all, any given commercial property is undoubtedly a major investment that should be treaded carefully in order to avoid ending up with a money pit of sorts that has more expenditures attached to it than profit. With that said, in terms of inspecting a brand-new commercial property for your potential participation, paying close attention to the physical dangers that the piece of real estate presents or may experience is in order. Therefore, here’s a list of the risks, perils, and dangers that a commercial property can throw at you that you should watch out for as much as possible.

Asbestos Risk

Ever since asbestos has been identified as a hazard to residents inside commercial property, it has become one of the greatest challenges in selling older commercial property. The probable or established existence of asbestos in commercial property is quite dangerous because of its immediate and long-term negative effects on humans. To be true, an asbestos-ridden real property may prove to be more of a financial liability in the long run.

After all, asbestos was a widely available commercial property building product all the way to the early eighties, so if you’re getting an older commercial property, asbestos poisoning may be a very real risk. The financial burden of a property full of asbestos includes management and removal of the material as well, because in order for your commercial property to not become a health hazard, the asbestos must be eliminated post haste.

Tenant-Generated Risk

Yes, even your tenants may prove to be a risk for your commercial property as well. Obviously, caution, people skills, and foresight are required when it comes to mitigating tenant-generated risk. More to the point, there are tenants who may have high-risk businesses that could affect the overall property value of your commercial real estate. For example, they could have highly volatile chemicals in their storage vaults, so you might want to use the lease to manage that particular danger better.

A strong lease is required in order for you to lessen your exposure to liability; that is, it can be used to control and support occupancy factors so that you’re faced with less of a hazard because of your tenant’s activities. If anything within the property affects the local precinct in particular and the environment in general, then the state government or local council may be compelled to rectify the problem. A properly developed lease will allow you to avoid such hazards from implicating you with responsibility, protect your interests, and keep their tenants in line should an inopportune circumstance happen.

Precinct Risk

The precinct or neighborhood you’re in can also present some physical risks against your real estate and its occupants. Natural disasters such as flooding are among the primary risks you have to face whenever you look beyond the boundaries of your territory in order to find any potential pitfalls that can reduce the value of your given estate. Even though it’s a random occurrence, every time flooding happens, it can damage your property physically as well as financially. Ergo, investing in a flood-risk area requires a lease that holds you, the landlord, less liable if ever a flood occurs.