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Orange County Legal Blog

A landlord may be willing to provide perks for signing a lease

A commercial tenant may spend a significant amount of time locating the perfect place to do business. The way the market here in Orange County and elsewhere in the country appears to be at this time, a prospective tenant may be able to negotiate more favorable terms when it comes to the lease. In fact, a landlord may agree to throw in some free perks as well.

Even though both parties want to ensure that they receive the best deal possible when it comes to the monetary terms of a lease, that does not mean that a tenant cannot negotiate for other items as well. It may be possible to negotiate for some free perks that would make it easier on a tenant to do business in the desired location. For instance, a tenant may negotiate to pay only a minimum rent, or no rent at all, during the build out of the space. It never hurts to ask.

Online returns are wreaking havoc on retail leases

Without a doubt, the way that people shop has changed dramatically over the last decade or so. California residents can buy products from anywhere in the country and have it shipped to their doors. This has caused brick and mortar retail stores to make significant changes in the way they operate. In fact, some have even had to close their doors, at least in some locations, because they simply cannot keep up with the changes.

Matters become even more complicated when the anchor tenants are the ones that leave. Mall and shopping center owners have had to make adjustments as well. Even so, new challenges continue to crop up over time.

Advice every commercial tenant may need for renting space

Securing the right rental space here in Orange County can be a challenge. After what may be an exhaustive search, a commercial tenant must then begin the arduous and often unfamiliar process of negotiating the terms of a lease. More than likely, the landlord has done this numerous times, and probably already has built a library of forms for nearly every situation.

It may seem like a good idea to rely on the landlord's forms, but more often than not, those forms provide more benefit to the property owner than they do to the tenant. The forms may provide a good starting point, but it may be a mistake not to read the fine print and negotiate better terms for the commercial tenant. One area where many tenants get into trouble is their portion of the property's operating costs.

Developers may need to heed warning signs of another bubble

The traditional retail model has undergone massive changes in the last few years here in California and across the country. With more people shopping online, shopping malls and other retail stores are helping the commercial real estate market plateau. Developers could find themselves in financial trouble if paying back their loans becomes problematic due to changes in how the economy works.

Banks have provided approximately $4.3 trillion dollars in commercial real estate loans since the last financial crisis, and that number exceeds the amount of loans out there at that time by 11 percent. When coupled with the fact that commercial real estate prices have already peaked and flat lined again, the market appears to be on a downward slope once again. These signs have some sources nervous.

Empty bank branches present opportunities for developers

As mobile banking and automated teller machine use increase, diminished foot traffic in bank locations led to shuttered branches. Nine out of ten households now utilize online banking and four out of ten use mobile banking, eliminating the need to visit a branch for normal transactions.

As branch closures continue to outpace openings, the banking industry is shifting their focus to technology and reassessing the need for brick and mortar establishments. The shrinking footprint of banks leaves enticing property up for grabs.

Liability insurance is essential for a commercial tenant

No matter how much planning you do, something could go wrong. For this reason, part of your business planning involves purchasing insurance policies to cover different eventualities that could occur during the course of your business. As a commercial tenant, your Orange County landlord will more than likely expect you to include liability insurance in those policies.

As part of most commercial leases, you and the landlord will determine who is responsible for what when it comes to the rental space. You will probably be responsible for any damages caused by you and your employees, if any. Not only does this protect your landlord, but it also protects you from having to pay for any damages out-of-pocket.

Insurance is an important component of any development project

Nearly every project, whether here in California or elsewhere, involves numerous moving parts. In order to protect yourself from any adverse events that could occur during a development project, you may want to consider several types of insurance. This may seem like an obvious choice, but what may not be as obvious to a new developer is what you need to properly insure your project and protect your interests.

This may vary depending on the type of project and those you work with on it. You may decide to rely on your general contractor's insurance. However, you could find that you need additional insurance unique to your project.

That's a fancy remodel, landlord

We've written about common area maintenance in the past. And for good reason. Vague line items like "administrative fees" can be thousands of dollars, sometimes hundreds of thousands or more. That's one reason you audit past CAM charges, especially where you've taken over a business. In other situations involving CAM, the property owner's estimates are off - by huge margins - and the tenant is hit with a massive bill.

To make a long story short, for tenants in commercial spaces like shopping centers, CAM charges can be exorbitant. The specific amount of CAM often seems to depend on the property owner's whim. You could characterize many of these cases as the property owner attempting to pass its costs on to the tenants.

Such was the case with a million-dollar remodel.

You make your bed with the letter of intent

"You made your bed. Now lie in it!"

According to Psychology Today, there is no such thing.

Lisa Ferentz writes that this common childhood message is an affront to your basic rights as a human being: "Those rights include re-evaluating your choices and decisions in life, changing your mind and your course of action to match ongoing or changing circumstances."

From a psychological perspective, the made-your-bed message has lost some of its validity. But when it comes to the letter of intent in commercial leasing, or LOI, the message comes through loud and clear.

The percentage rent commercial lease

As a landlord, you have numerous options regarding the types of leases you may offer tenants. If you offer retail space in a California shopping center, you may want to consider the percentage rent commercial lease. This type of lease may be more landlord friendly than other options.

A percentage rate lease allows you to charge a tenant a fixed amount of rent, called the base rent, along with a percentage of the tenant's monthly gross sales over a minimum threshold. This type of lease could be particularly advantageous with an anchor tenant whose monthly sales could be substantial. A common percentage for these types of leases is seven percent.