Stepping Over Dollars to Pick Up a Dime

Landlords have done a good job over the years getting tenants to focus on their per square foot rental rate. It’s good marketing on the part of landlords, as it trains tenants to think of their facility lease as a commodity. The problem with this simplified approach for tenants is that it often leaves out the myriad of other factors that comprise the true cost of a lease.

Here are a few questions to ask yourself to gauge whether or not you can calculate your true lease costs:

-What method of measurement was used to calculate the rentable square footage you’re paying on and was that measurement confirmed?
-When you receive your annual operating expense reconciliation statement from your landlord, do the charges comport with your lease and are they in-line with market?
-Does the landlord have the right to require you to restore alterations, and how much will restoration cost you?
-How much in fees and “profit” splits will you incur to sublease?
-If you try to sublease a portion of your facility, can the landlord terminate your lease?
-How much will landlord oversight fees or a performance bond cost you to make changes to your facility?
-Can the landlord relocate you and what costs would you face if you had to move?
-What are the landlord’s obligations regarding the existing conditions of the premises, code requirements and who’s responsible for hazardous materials?

In short, for tenants, real estate is a process, not a commodity. Tenants who focus in on the rental rate while not professionally evaluating the other factors impacting their upfront and long-term costs and liabilities at the appropriate times expose their organization to unforeseen costs. By following the right process, tenants can minimize their true costs of occupancy and rest assured that they are protected from undue complications.

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