Take command of your lease and all its clauses. You, as the tenant must manage your lease and not let your lease manage you!
As a broker have you ever received a frantic call from a client you helped say a year ago with a question regarding their lease? Chances are its locked in the file room and the furthest thing from your mind at that moment.
Some brokers digest or abstract a lease for their client and I have done this in the past, but actually was told that the tenant should be engaging someone to do that as part of lease management for a fee. I have also done lease management as an asset manager. I can tell you that it is more than just digesting or abstracting it and putting the lease in fire safe or file cabinet. Also, as brokers we must use caution when it comes to the legal interpretation of lease clauses. What is the point of digesting the lease if we do not understand its implications? To me it is worthless effort.
In my opinion, we as brokers should encourage and lead our tenants down the right path. The tenants should digest and abstract their lease and fully understand it and learn how to manage it, in other words, take command of your lease!
Tenants should be educated about the important dates and call-up dates. Use today’s technology to get alerts from calendars or put a tickler system in place to avoid missed notice dates, or key dates when the rent changes. Tenants should not completely trust their landlord to properly apply a month free rent, mid term, or a reduction in their rental rate. Tenants with accounting departments are fortunate, but what is the point of an accounting department if they do not possess the lease agreement or understand it? The executive in charge must go through the document and make sure the accounting team understands all of the key business points to monitor. You cannot blame accounting if they are not trained or in the know!
Just a few of the key things to track include:
- Changes in rental payments
- Reimbursements from the landlord
- Action needed by either party
- Other Rights
- Expiration Dates
There is an increasing trend by landlords to spread free rent over the term of the lease, i.e. the rent is free for the month of November, every lease year. In addition some landlord’s are allowing tenants to perform tenant improvements over a period of time [say during the first two years of the lease]. Then the landlord is reimbursing the tenant improvement allowance over a period of time such as over the next 3 years, on a monthly basis. Many lease terms are triggered by actions and dates. i.e. improve your space before X date, send the landlord the lien waivers and paid bill receipts and landlord will reimburse you up to X $$’s.
I have seen some situations where the tenant files their lease in the filing cabinet and then forgets about some of these terms. This can result in lost revenue and can be costly if the letter of the lease is not followed. It is really sad to learn that a tenant replaces carpet, expecting the landlord to reimburse them, but they missed the dates and did not follow the directions in the lease. If you are lucky you have a landlord who will say, that’s OK, we will just amend the lease and get things on track, but why should they. It is a contract, is it not? I would not recommend trying it. I would rather make sure the tenant is informed and ready to manage the lease and not take risks.
The responsibility of managing a tenant’s lease falls on the tenant not their broker and not the landlord. There are some cases where a broker will provide those services, but again, somebody has to do this or there will be problems.
In conclusion, digesting the lease and establishing call ups for important dates or actions can eliminate monetary loss and much stress. Ring in the new year with a command of your lease and good process in place. It will save you from the last minute scurry on new years eve when the intent to renew letter is due by 5pm!
Photo Credit: “Finance Control” by patpitchaya FreeDigitalPhotos.net