COMMERCIAL LEASE MANAGEMENT
THE TERMS AGREED FOR ANY NEW LETTING ARE FUNDAMENTAL TO THE PERFORMANCE OF THE INVESTMENT AND WE NOW EXAMINE THOSE ASPECTS OF A TYPICAL BUSINESS LEASE WHICH MOST AFFECT THE PROPERTY PERFORMANCE.
1. TENANT SELECTION
THE TERMS AGREED FOR ANY NEW LETTING ARE FUNDAMENTAL TO THE PERFORMANCE OF THE INVESTMENT AND WE NOW EXAMINE THOSE ASPECTS OF A TYPICAL BUSINESS LEASE WHICH MOST AFFECT THE PROPERTY PERFORMANCE.
1. TENANT SELECTION
- THE SELECTION OF TENANT IS THE MOST IMPORTANT DECISION THAT A LANDLORD TAKES. AS THE VALUE OF PROPERTY STEMS FROM THE RENT WHICH IT CAN COMMAND, THE CHOICE OF TENANT, WHO IS THE CREATOR OF THE INVESTMENT INCOME, IS OBVIOUSLY CRUCIAL. IF A POOR TENENT IS CHOSEN, THE OWNER MAY HAVE TO LIVE WITH THE DECISION FOR A CONSIDERABLE TIME.
- THE CRITERIA FOR CHOICE CAN BE SUMMARIZED AS FOLLOWS.
- THE TENANT MUST BE APPROPRIATE TO THE BUILDING AND THE SURROUNDING PROPERTIES. THIS IS PARTICULARLY TRUE IN SHOPPING CENTRE WHERE THE QUESTION OF TENANT MIX MUST BE CONSIDERED. THE FREEHOLDER WILL BE ATTEMPTING TO ARCHIVE MAXIMUM ATTRACTION TO SHOPPERS AND THEREFORE THE SPREAD AND QUALITY OF RETAILERS IS OF UTMOST IMPORTANCE.
- THE TENANT MUST BE INVESTIGATED TO ENSURE THAT HE CAN PAY THE RENT AND FULFILLS THE OTHER COVENANTS. IF POSSIBLE HE SHOULD A GOOD TRACK RECORD OR FAILING THAT, PRODUCE GOOD CREDENTIALS.
- THE TENANT MUST HAVE SENSIBLE AND SATISFACTORY PROPOSAL FOR THE USE OF THE BUILDING. TO SAY THIS HOWEVER IS NOT ENOUGH
2. THE TERM
- BEFORE ANY PROPERTY IS LET PROPOSAL FOR THE TERM OF THE LEASE SHOULD HAVE BEEN PREPARED.
- THE LENGTH OF TERM WILL DEPEND UPON THE OVERALL STRATEGY FOR THE PROPERTY, AND POSSIBLY THE PORTFOLIO.
- A LESSOR WILL SEEK TO GRANT A LEASE OF TYPICALLY 20 TO 25 YEARS WITH REGURALY 5 YEARS OF RENT REVIEWS.
- THE SIGNIFICANT SHORTENING OF THE REDEVELOPMENT/ REFURBISHMENT CYCLE THAT HAS OCCURRED IN THE LAST TEN YEARS, COUPLED WITH CHANGING MARKET CONDITIONS AND GREATER INTERNATIONAL INFLUENCEES HAS MADE SOME SUCH DECISIONS APPEAR INAPPROPRIATE AT THE VERY LEAST.
- AT THE TIME OF WRITING THE STANDARD 20-25 YEARS LEASE IS PREVALENT, BUT THERE ARE INDICATIONS THAT BOTH LAND LORD AND TENANTS ARE ADOPTING MORE FLEXIBLE ATTITUDES TO LEASE LENGTH IN THE LIGHT OF CHANING MARKET DEMANDS.
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