How to manage Commercial Property?

Managing commercial property is more complex than managing residential properties. This is because of the general fact that the daily upkeep of the commercial premises is not as well-maintained as that of residential properties.

When managing commercial property you need to really plan ahead in order to avoid costly surprises.

The first step in leasing a commercial property is to fill-out a Proposal of Lease. This should be filled-in by all prospective tenants of the commercial property irrespective of whether the deal goes through or not.

The contents of the Proposal of Lease, captures the name of the business owner, the nature of business, the business turnover, credit worthiness, etc of the potential tenant among other things like year of establishment, etc.

Along with the Proposal of Lease, there are certain supporting documents which are also required which include the Company Registration Certificate from the Secretary of State, a credit guarantee from the business owner and declaration about the nature of the business.

The nature of business should be clearly and specifically stated in the Proposal of Lease. For example a company manufacturing nuts and bolts and selling them from the same premises, then the intended usage of the commercial premises should be defined as retail sales, manufacture and main office operations and so on and so forth.

The preferred tenure for lease of commercial property is five years. In case for some reason this is not possible, then the minimum tenure of the lease should at least by three years. In addition to this, there should be a clause stipulating increase in rental charges every year by a bare minimum 5 percent. However, this increase is mutually decided between the landlord and the tenant.

All commercial property leases should be supported by an appropriate credit report, security deposit of a minimum of six month’s rent and an advance rent of at least 2 months.

It is but normal that the improvements that the tenant might require specific to his operations be borne between both the landlord and the tenant. This is because, unlike residential property where the intended use of the property remains the same across tenants, commercial properties are not so.

The intended use of commercial properties varies from tenant to tenant and hence it is required that the tenant bears half the cost of the improvement of the premises.

This also means that the maintenance of the interior of the entire premises is the full responsibility of the tenant and not the landlord.

Managing a commercial property is hence more complicated than residential properties.

 



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