Thursday, April 23, 2015

5 Questions You Should Ask Your Landlord Before You Sign a Lease

5 Questions You Should Ask Your Landlord Before You Sign a Lease


Touring office space and warehouse space is no easy task.  You probably only search for space when your lease is about to expire, which might be anywhere from once a year to once every ten years.  You are inherently at a disadvantage to your landlord, who does this for a living and might negotiate several lease agreements each month.

Wouldn't it be nice to have a list of questions that you need to ask every landlord?

As a landlord of commercial office space and industrial space, we have heard every type of question from prospective tenants.  Some questions catch us by surprise (“Can we paint the warehouse floor bright yellow?”) and some questions are to be expected (“What is the average monthly power bill?”). 

By no means could we provide an exhaustive list of every question you should ask. What follows is a list of 5 questions you must ask your prospective landlord to put yourself in a better position to make the best decision for your office space or warehouse space needs.  Just remember, there are no stupid questions.  If it is important for you to know the answer as a tenant, it should be important for your landlord to give a response.
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     1.  Other than monthly rent, what additional charges can we expect?


You would be surprised with how many people do not ask this question.  As responsible landlords, we always reveal what additional charges there are before a lease is signed (even when not asked and even though such charges are covered in our lease).  However, before you can make an intelligent decision about an office space or warehouse space to rent, you need to have an accurate view of your additional expenses.

For example, Office Space A is advertised as $2,000/month which is inclusive of all utilities and internet.  Office Space B is advertised as $1,750/month but does not include anything other than the space itself.  If you don’t ask what additional charges you can expect to incur, you may be surprised by bills you have to pay for like internet, groundskeeping, water/sewer, waste disposal, power, etc.  A space advertised for less might end up costing more once you add in all the extra expenses.  You should probably create some sort of spreadsheet that itemizes the different charges so you know what your total monthly expense will be.

     2.  May we see a copy of your standard lease agreement?


Before you get too far into discussions and spend too much time negotiating back and forth, you should ask for a blank copy of a lease agreement.

Picture this scenario: You negotiate back and forth with your prospective landlord on the price and term of the lease.  Other items are discussed, such as property taxes and insurance.  The landlord tells you that the tenant is not responsible for property taxes or property insurance.  Several months pass and at last, you have reached a verbal agreement with your landlord.  And just in time, because your existing lease expires in 30 days.  Then, you get the lease form for signature.  Surprise!  Property taxes and property insurance are passed through to the tenant in the form of additional rent.  The landlord clarifies what was meant - the landlord pays the original bills in a lump sum and the tenant pays one-twelfth of the bills each month on top of the monthly base rent.  The landlord "thought" the tenant meant whether the tenant paid the actual property tax bill and was responsible for finding an insurance policy.  You formulated budgets based on a significantly lower monthly rent and cannot justify this additional expense for your business.  Meanwhile, you now have 30 days to move out of your existing space and find a different space to lease.  What now?!

This situation is not all that uncommon.  We have heard stories (more like nightmares) from our tenants about similar experiences with former landlords.  Thus, you should always ask for a copy of the standard lease agreement early in your negotiations.

And we think it is understood that you actually need to read the lease agreement.  And we mean every word of every paragraph in every section.  Landlords are sophisticated parties and each word of each provision is in the lease for a reason.  If you do not understand what something means, ASK!  And if the landlord is of no help, you might need to retain representation, whether it be an attorney or real estate professional.  Remember, your lease agreement is what will govern the relationship between you, as the tenant, and your landlord.  So if the landlord told you something that is not reflected in the lease, you need to address it before you sign.

     3.  May we take pictures of the spaces we tour?


Ask if you can take pictures of the office spaces or warehouse spaces you tour.  Not all landlords will allow you to take pictures (for various reasons).  We typically allow our prospective tenants to take as many pictures as they want (as long as we are not in the picture!).  Typically a prospective tenant only sends a representative to tour the space.  Pictures allow everyone in the office to review and brainstorm. 

And you never know what you might spot when reviewing the pictures.  People often wear blinders when they are touring a space that they have instantly fallen in love with.  Pictures allow you to take a step back and review them a day later, week later, month later, etc.  The pictures may show spots in the carpet you did not notice, stains in the ceiling tiles indicating a leak of some sort, you name it.  Not to mention, you will be able to do better space planning if you have pictures that show where electrical outlets, doors, windows, etc. are located.

     4.  How long has this space been vacant?


This question might give you some leverage in negotiations.  A landlord might be unwilling to budge on the monthly rent if a property is fresh on the market.  However, an office space or warehouse space that has been vacant for several months (or years for that matter) might go for less than the asking price.  Landlords like to keep spaces occupied because vacancies cost them money.  You might be able to squeeze out a better deal with this knowledge.

     5.  What is the process for repairs?


This is a bit of a loaded question.  First, it depends on whether the tenant or landlord is responsible for the cost of the repair.  Second, even if the tenant is responsible for the cost, the landlord might be responsible for performing the repair.  For the purpose of this question, let’s assume it is the landlord who is responsible for the cost and performing the repair for the HVAC system.  Your A/C or heat stopped working, (and trust us, the HVAC issues always happen in the hottest or coldest part of the year) and you call your landlord to notify them of the issue.

Does a form need to be submitted?  Does someone have to come take a look before making a call to a repairman?  How long until a representative is able to look at the problem?  How long until you, as the tenant, can call a repairman and bill it back to the landlord?  Basically, these questions all boil down to “How long until the HVAC is fixed!?”

Find out about the process for repairs.  While the lease will likely detail who is responsible for a repair, it will probably only give you a timeframe for how soon a repair must be accomplished if the landlord is responsible.  And when it is 90 degrees outside and your A/C stopped working, you want it fixed ASAP!
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This is by no means an exhaustive list of questions that should be asked.  Every space in each location is different.  Different properties demand different questions.  One property by a railroad track might spur (pardon the pun) a question as to how often the trains run.  You might need to ask about noise levels near a manufacturing facility, fumes near a chemical plant, traffic near a major highway or flooding in a coastal area.  The list literally goes on and on.

As landlords, we would much rather a prospective tenant ask us one hundred questions than zero.  It shows that you are serious as a prospect and that you have done your homework.  We also like our tenants to know what to expect so that there are no surprises after a lease has been signed.  And like we mentioned in the beginning, there are no stupid questions.  If you think a question is important, we want to answer it for you and your landlord should too.
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Please feel free to leave comments.  We promise to read them all.  You can also email us with any questions/comments at leasing@seawaybusinesspark.com or visit our website at www.seawaybusinesspark.com.  We provide office space for rent and office/warehouse space for rent in Gulfport, Mississippi.  Please keep us in mind if you are looking for a space in our area.