Commercial Leasing: Choosing Someone you know vs. Someone who KNOWS!

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These past few months I’ve met with half a dozen tenants who need help out of a mess! A mess that could have easily been avoided had they equipped themselves with the proper team of experts from the start!

Here’s some tips to keep in mind if you are thinking about leasing commercial space for your business –

1 – Don’t ever use a residential realtor for your Commercial space!

Usually we find comfort in choosing our friend, or friend of a friend when we are looking for referrals – and the Real Estate world lives on referrals.  The downside of working with friends – it’s hard to be tough on them.  Could you FIRE a friend if you thought they weren’t up to the job?  Sure Suzie was great at finding you your dream home, and she really knows the small town you want your business to grow in.  But she does she know –

  1. What construction costs you are looking at to fit out your space
  2. What parking or zoning requirements might be needed for your particular use
  3. How much time it will realistically take you to fit out your space
  4. How to calculate your GROC (Gross Rent Occupancy Cost)
  5. How to calculate percentage rent
  6. What types of Exclusive rights, Restrictions and first rights of refusal you would want to negotiate
  7. How to calculate CAM recoveries – and know which charges to exclude!

If you start asking those questions and they can’t come up with any answers you need to find yourself a different agent.

2 – Always document your agreement

If your Landlord is not willing to write up a Lease, be proactive and present them with a document.  Your Lease is one of your assets and you should be protecting it! Without a lease, there is nothing that your Landlord is bound by.  Sure you and your Landlord are pals today, but what if they are gone tomorrow, or a developer comes in with an offer they just can’t refuse – or even worse the government wants the land back! To ensure your business doesn’t suffer, and your lease term isn’t affected by these situations you want to have a proper Lease!

3 – Understand your space

Usually this will mean getting the right team behind you.  Most small businesses are experts in their fields – but will have little knowledge of the behind the scenes needs of their work space.  The baker that needs specialized HVAC (heating, ventilation, and air conditioning) system for the ovens, the Dentist that needs to core the floors for plumbing or the fashion retailer who needs accessible entrance ways.  Sophisticated Landlord will require you use one of their pre-approved Interior Designers (not to be confused with decorators – these individuals and technically trained in developing practical, usable space) to draw out and design your space in their Building.  Smaller Landlords might not have any requirements, and that’s where Tenants run into issues when they don’t have the right team supporting them.  They ends up with a space that needs significant improvements not budgeted for when they agreed to the rent.  Now that HVAC system is going to cost an extra $60,000, or the coring will add an extra 3 weeks to the construction schedule.  An expert Commercial Realtor will have a good idea about these types of requirements, and an accredited Interior designer certainly would as well.

So remember, unless your friend happens to be one of those experts in the field – do your business a favor and stick with someone who knows instead of someone your know!

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Katherine Jensen
Katherine has spent over a decade immersed in the world of Real Estate and Corporate legal administration. After graduation in 2006 Katherine took a role in a small law firm, drafting real estate documents from scratch and assisting with estate administration. From there grew to a clerk role in a larger law firm and then transitioned to an in-house role with a commercial developer in Saskatchewan. Working for a development and property management firm gave Katherine experience working with complex corporate structure and drafting intricate lease contracts for a variety of properties and tenancies including both office and retail. Moving back to Ontario, Katherine took a role analyzing leases for major landlords and tenants across Canada, offering solutions to maximize profits in their portfolios. Currently Katherine owns Jensen Consulting, and offers her expertise as a consultant to help landlords and tenants across Canada with drafting and auditing their Commercial Leases.

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