How to Avoid Common, but Costly, Tenant Mistakes - Constructive Solutions, Inc.

 

Every developer and general contractor needs to be aware of circumstances where their tenants may cost them significant amounts of money. Tenant mistakes is often extremely expensive if the developer or contractor has to deal with the financial repercussions of those mistakes. Common tenant mistakes that could cost a fair sum of money include building renovation, tenant improvements, injury or another causes for liability for the premises, tenant cash flow problems, tenants who do not move in on time, and tenants who misrepresent themselves during lease negotiations.

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Discussed right here of these common tenant mistakes and techniques developers and contractors can avoid them.

Building renovation and tenant improvements. Most tenant leases for commercial properties will incorporate a provision or provisions that prohibit tenants from making renovations, changes, or improvements towards the property without permission or approval from the owner of the property. In commercial construction projects, developers and construction management generally do not want tenants making decisions about the construction of the property without conferring with them first. The reason behind this is because tenants may add or renovate the property in such a way that could lower the price of the property.

tenant improvements

This mistake might be prevented very easily, however, by reminding tenants when they sign the lease that they can cannot make changes to the property without asking permission from construction management and from the owners of the property. It's also advisable to consult with your attorney you need to include in the lease the supply that if the tenant does choose to make alterations, are going to responsible for paying for the job as well as for any financial loss suffered as a result of the changes. This will make certain you are legally shielded from the costs associated with tenants who make an unauthorized building renovation or tenant improvements.

Injuries around the property and other reasons behind liability.In some cases, if a person is injured on the commercial property, whether or not they are a tenant, you may end up suffering the effects. For example, if a customer of the tenant gets hurt about the premises, even if the tenant caused the injury, the landlord or house owner may be liable for the damages from the injury. And if a tenant is hurt, especially due to a construction issue or through the commercial construction process, then a general contractor or construction management could possibly be held liable for the damages from your injuries as well.

Even though it must be negotiated carefully with the help of your attorney, you can construct certain lease provisions to limit your liability if the tenant or a customer of a tenant is injured for the property. You can also educate your tenants about approaches to stay safe also to keep their customers safe on the property, and you should observe the commercial construction process closely to be sure the project is being done well and safely.

Tenant cash flow problems. Owners of commercial property depend on their tenants to cover their rent as well as any other fees or costs properly. In the event the commercial tenant is struggling financially, maybe you have a problem collecting rent on a regular basis from the tenant.

As with many other tenant mistakes, you can put provisions into the lease that allow you to pursue certain remedies, like eviction or monetary damages, if the tenant doesn't pay rent punctually. However, if the commercial tenant files for bankruptcy, you need to proceed with caution. When a company files for bankruptcy, all court proceedings against them are halted. Should your tenant files for bankruptcy so you then try to evict the tenant, you will not be successful with the eviction before the bankruptcy proceedings have ended, usually in a few weeks. If you feel the tenant is about to declare bankruptcy, it is in your best interest to begin eviction proceedings against them before they file.

Not honoring the move in date.Owners of commercial property often make an effort to schedule tenant move in’s such that the property will be earning money. Although move in dates are often negotiated in the event the lease is signed, sometimes tenants usually do not move in as scheduled. But by delaying the transfer date, a tenant may be costing you money, particularly when part of the tenant’s rent comes from profits they make by operating their business.

To avoid this from occurring, place a provision inside the lease that imposes a cost or a penalty if your tenant does not move around in when they promised they would. This can just be sure you do not lose negligence the rent derived from their profits should they be not prompt about stepping into the commercial property that they are renting from you.

Tenants who misrepresent themselves during lease negotiations.Specially when negotiating provisions about rent, property owners and landlords often count on the tenant’s business records to ascertain how much to charge for rent and any additional costs. In some cases, a tenant may try to show a potential landlord that they're more successful than they come in order to get a desired location, or that they're less successful compared to they are to negotiate lower rent.

Whenever possible, check into the business’s success yourself prior to any final decisions about leasing. Furthermore, add to the lease that the tenant will be liable for any misrepresentations made during lease negotiations.

While most common tenant mistakes, for example building renovation, tenant improvements, injuries around the property, tenant earnings problems, not honoring the scheduled move-in date, and tenants who misrepresent themselves can wind up costing you money, you can avoid these unnecessary expenses if you take precautions. You and your general contractor and construction management have to carefully write the lease, keep tenants informed, and pay careful attention to any renovations the tenant makes to counteract these issues once your commercial construction project is over and tenants set out to move onto the property.

Rami Tawasha

A professional civil engineer with more than 15 years of experience, Rami Tawasha serves as a senior project manager for Constructive Solutions, Inc., a commercial general contractor based in San Mateo and San francisco bay area. Under his leadership, the firm performs services starting from design build to tenant improvement and renovation for corporate offices, medical facilities, building renovation, seismic retrofit, industrial and retail spaces through the San Francisco Bay Area.