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If sympathy usually weighs in on the commercial tenant’s scale, with the mountains of fine print to go through, difficult clauses and debilitating upfront cash deposit, let it be known that a commercial landlord’s maze is no child’s play either.
Here’s a list of what the commercial landlord considers before entering into a long-term contract with a tenant:
Creating an ideal tenant profile – The landlord has to ensure that the tenant’s business complements the other businesses in the area, especially when it comes to leasing in a mall. All retail tenants have a directly proportional relationship with each other, where the sales of one can impact the performance of another, and thus the entire shopping complex. The anchor tenant, who has the longest lease period, generally has a say in the surrounding tenant mix. In case of new businesses, the landlord has to review the business plan to ensure its viability and the direct consequences it has on his own business.
Research – The screening process for a commercial tenant is often outsourced to a property management agency, that is because the research that precedes the contract signing is intense. The landlord goes through the tenant’s credit, business and tenancy history to ensure the dependability of the tenant and timely payment.
Foolproof contract – The landlord’s legal team prepares a contract to protect the rights of the landlord, and with good cause. A poor tenant can do long-term damage to the value of the commercial space. The building of illegal structures, changing areas of business, putting up illegal or inappropriate signage are guarded against in the contract. Inflation is also taken into account as are market dynamics. Clauses are put into the contract to ensure that annual rent increases, keeping in line with federal rules, are agreed to by the tenant.
• Commercial landlords have task of creating ideal tenant profile
• Inflation must be taken into account to maintain property value
• Contracts must be foolproof to safeguard rights of both parties
Source: Bushra Hameduddin, Special to Properties
The writer is a freelancer