This final article on the fundamentals of commercial property lease management concerns the management of the lease document after it has been signed, and the various factors that can affect it over its lifetime.
Once the commercial property lease is signed it requires a process for regular review and maintenance, together with all related correspondence, in order for it to be a living document. It is this concept of the lease being a living, breathing entity that is so crucial to the owner in a broader perspective of their investment – and in particular to maximizing the profitability of the lease and ensure that nothing slips through the cracks.
Any property lease amendment changes that are internally agreed must be actively tracked, recorded and filed. That includes verbal discussions that should be noted and filed with the lease to avoid getting lost; for example, a tenant who rents space on two different floors gets agreement after the lease was finalized, to install a staircase between the two offices on condition the space is returned to its original state when they vacate. Filed with the lease, these amended terms are evident at the termination of the lease, ensuring that the property manager can enforce the agreement before the tenant leaves. If this amendment was instead filed in a correspondence file, and not together with the lease, it is not inconceivable that the tenant would quietly leave and the owner would forget that the agreement was in place, leaving the owner to foot the bill for the “return to original state”.
Dates or encumbrances options may trigger changes to a lease, like empty space issues and who has rights could be tracked in a rent roll. Extensions and amendments could also be added formally or informally after the original lease is filed away. Even a simple email or letter can be considered a valid extension or amendment.
Document every negotiated agreement with a tenant, no matter how insignificant and file all correspondence that relates in any way to the lease with the original lease document file. Ensure everyone understands and knows how to use the file management system.
Investing in appropriate software that can manage your filing and retrieval is definitely an advantage and worth considering. It can help eliminate paper trails and pull lease details with ease.
In conclusion, good lease management is a process made up of three parts:
The process should be as formal and organized as possible – without it, you could be exposed to unbudgeted costs or unforeseen circumstances that could so easily have been prevented.
As a property owner, do you find that you have unbudgeted costs when a tenant vacates your premises? If so, you are probably missing one of the critical steps mentioned above.
Feel free to contact me directly if you have any questions in this regard. I’d be happy to point you in the right direction.
Armadale is a property management company located in Toronto. Over the past 25 years Armadale property management Toronto has grown, offering clients highly-focused, customized, one-on-one building management services that fit their property and benefit their bottom line. Armadale specializes in property and facilities management for retail, office and industrial properties. Contact Armadale today!