Commercial Real Estate Brokers – Critical Dates Management is Essential to Property Lease Performance

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In managing a commercial or a retail property you will need to watch the critical dates applicable to each lease and each tenant in occupation.  Those dates will be relevant to important investment decisions and can have a major impact on property occupancy and rental recovery.

If you manage a large property, the number of leases and the variety of tenants can put pressures on lease management and the monitoring of critical dates.  To help with that, you should get the software program to integrate into your property management systems.  That software program can track the upcoming lease events and tenant management issues.

Here are some of the critical dates to look for within a lease document.  Always read the lease document completely and thoroughly as part of identifying upcoming occupancy issues for both the landlord and the tenant.

  • End of lease – The end of the lease is something to be planned for.  At least 12 months out from lease expiry make the decisions relating to any occupied area.  That means you should have a look at the terms of occupancy currently existing, the potential for renewal, and the existing tenant for relevancy within the tenancy mix.
  • Rent review – The prevailing market conditions will have a lot to do with the levels of market rent applicable at rent review time.  If the lease stipulates that a market rent review will apply then it is necessary to identify comparable properties and comparable leases.  Factual information relating to market rental conditions will allow you to agree on a new lease rental with a tenant in a timely way.  Given a tenant’s sensitivity to increasing rent in today’s market, make sure that you have a full awareness of market conditions, lease enquiry, and lease absorption.  The vacancy rates in the local area will also have something to do with incentives offered to tenants and rental levels negotiated as part of any new lease or market rent review process.
  • Renovation requirements – The renovation of a property or part of a property may be required as part of lease occupancy.  That is certainly the case when it comes to leases over the longer term.  It is also a common practice when it comes to retail premises and those within shopping centres.  With any lease for a term longer than five years, it is wise to include a renovation requirement clause within the lease document.  That clause will then have a critical date response by the tenant to ensure that the renovation is undertaken at the right time and in the right way.
  • Insurance – Many leases today have important obligations on the landlord and the tenant regards insurance.  In reading the lease document you will see obligations for both parties relating to risk management, public liability, and the insurance of the building and premises.  Each year that insurance will need to be renewed at an appropriate level; the critical date associated with that renewal is something to be watched and carefully administered.  A landlord or a property manager would usually obtain a copy of the insurance cover note at the appropriate time given the critical date nominated within the lease.
  • Lease compliance – There are many different situations in a commercial or retail property today that could require lease compliance and response on the part of the tenant or the landlord.  To understand those factors, you can read the lease document and extract the necessary dates relating to any event or any situation involving the parties.  Take a note of the issue and note the relevant date into your software diary system.
  • Documentation – At different times of the year certain documentation may need to be exchanged between the landlord and tenant.  As an example you may find that the tenant in occupation should be supplying to the landlord the retail sales figures relating to business turnover.  Commonly, and in that situation you can find that the rental charged to the tenant is geared to the level of retail sales.  In a shopping centre situation the provision of sales figures by the tenant to the landlord would occur monthly or quarterly to allow for rental adjustments to occur.  That is then another example of a critical date linked to occupancy and the lease document.

From these points you can see how the factors of lease compliance and critical dates are so important when it comes to commercial property occupation and property performance.  A good property manager or landlord will take the time to completely review all lease documents relating to the tenancy mix and the managed property.

Stay ahead of the critical dates and the upcoming diary events.  In that way you will reduce problems within the property and help the property stay on track when it comes to tenant occupancy and rental income for the landlord.