Lease and Tenant Mix Checking in Selling Commercial Real Estate Today

When you inspect a commercial property for leasing or for sale, the existing tenant mix should be checked and referenced against the current leases.  It is remarkable just how many problems you will find with the property when you do that.

Many landlords and property managers are not accurate and up to date when it comes to lease activity and critical dates from the leases.  This then produces problems later when the property is sold.

Here are some questions to help you with lease reviews and tenant mix status.

1. Who are the tenants in the property today and what leases allow them to be in occupancy?  Are those leases all current and up to date when it comes to options and rent reviews?
2. What outgoings are to be paid under the lease and are they full up to date?
3. Are there any arrears outstanding in the property and if so why?  Any disputes with the tenants will need to be resolved if the property is to be taken to the market for sale.
4. What do the tenants think about the landlord?  Could that impact the sale in any way?
5. Should some of the tenants have their leases renegotiated as part of preparing the property for sale?
6. What does the tenancy schedule for the property say about the tenants and the leases?  Does the information cross reference accurately with the leases and the actual tenant location in the property?  You will need to check this yourself.
7. Who is the tenant point of contact and how can you contact them to inspect the property before the marketing is to commence?
8. Do the tenants need more or less space in the building?  Should that requirement be addressed now as part of moving the property to sale?
9. Do the tenants comply with the permitted use for the premises as outlined in each lease?
10. Are there any renovation or relocation clauses to exercise as part of preparing the property for sale?
11. Are there any outstanding issues relating to make good of tenant premises that need to be addressed?

You can add to this list based on the property type and the location of the property.   All of these checks and balances are a requirement of preparing to market and sell a commercial or retail property.  Your diligence in the process of checking tenants and leases will save a lot of issues and problems later.

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