How to Avoid Common, but Costly, Tenant Mistakes - Constructive Solutions, Inc.
Every developer and general contractor needs to be aware of circumstances by which their tenants may cost them significant amounts of money. Tenant mistakes is often extremely expensive if the developer or general contractor has to deal with the financial repercussions of these mistakes. Common tenant mistakes that will cost a fair amount of money include building renovation, tenant improvements, injury and other causes for liability on the premises, tenant income problems, tenants that don't move in on time, and tenants who misrepresent themselves during lease negotiations.
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Discussed below are some of these common tenant mistakes and methods 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 to the property without permission or approval through the owner of the property. In commercial construction projects, developers and construction management generally don't want tenants making decisions about the construction of the property without conferring with them first. The explanation for this is because tenants could add or renovate the house in such a way that could lower value of the property.
This mistake could be prevented very easily, however, by reminding tenants after they sign the lease they cannot make changes on the property without asking permission from construction management and from the owners of the property. Its also wise to consult with your attorney and include in the lease the availability that if the tenant does opt to make alterations, they will be responsible for paying for the task as well as for any financial loss suffered due to the changes. This will make sure that you are legally protected from the costs associated with tenants who make an unauthorized building renovation or tenant improvements.
Injuries on the property and other factors behind liability.In some cases, when someone is injured on the commercial property, whether they are a tenant, you could end up suffering the consequences. For example, if a customer of your tenant gets hurt for the premises, even if the tenant caused the injury, the landlord or property owner may be liable for the damages through the injury. And if a tenant is hurt, especially due to a construction issue or in the commercial construction process, then the general contractor or construction management may be held liable for the damages from your injuries as well.
Even though it must be negotiated carefully by using your attorney, you are able to construct certain lease provisions to limit your liability if a tenant or a customer of your tenant is injured around the property. You can also educate your tenants about ways to stay safe also to keep their customers safe around the property, and you should take notice of the commercial construction process closely to ensure the project is being succeeded and safely.
Tenant cashflow problems. Owners of commercial property depend upon their tenants to pay their rent as well as any other fees or costs properly. If your commercial tenant is struggling financially, you may have a problem collecting rent frequently from the tenant.
Just like many other tenant mistakes, place provisions into the lease where you can 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 should proceed with caution. When a company files for bankruptcy, all legal proceedings against them are halted. If the tenant files for bankruptcy and also you then try to evict the tenant, you will not be successful with the eviction before the bankruptcy proceedings are gone, usually in a few weeks. If you think the tenant is going to declare bankruptcy, it is to your advantage to begin eviction proceedings against them before they file.
Not honoring the transfer date.Owners of commercial property often try to schedule tenant move in’s in such a way that the property will be earning money. Although move in dates are often negotiated if the lease is signed, sometimes tenants don't move in as scheduled. But by delaying the move in date, a tenant could be costing you money, particularly when part of the tenant’s rent comes from profits they make by operating their business.
To prevent this from occurring, you can put a provision from the lease that imposes a fee or a penalty if your tenant does not move around in when they promised which they would. This can just be sure you do not lose the part of the rent derived from their profits when they are not prompt about entering into the commercial property they are renting from you.
Tenants who misrepresent themselves during lease negotiations.Particularly if negotiating provisions about rent, property owners and landlords often depend on the tenant’s business records to find out how much to charge for rent and any additional costs. But also in some cases, a tenant may try to show a potential landlord that they are more successful than they have been in order to get a desired location, or they are less successful compared to what they are to negotiate lower rent.
Whenever possible, check into the business’s success yourself before you make any final decisions about leasing. Moreover, add to the lease the tenant will be answerable for any misrepresentations made during lease negotiations.
While most common tenant mistakes, for example building renovation, tenant improvements, injuries for the property, tenant earnings problems, not honoring the scheduled move-in date, and tenants who misrepresent themselves can wind up costing you money, it is possible to avoid these unnecessary expenses by subtracting precautions. You and your contractor and construction management need to carefully write the lease, keep tenants informed, and pay attention to any renovations the tenant makes to counteract these issues once your commercial construction project ends and tenants commence to move onto the property.
An experienced civil engineer using more than 15 years of experience, Rami Tawasha works as a senior project manager for Constructive Solutions, Inc., an industrial general contractor based in San Mateo and San francisco bay area. Under his leadership, the firm performs services including design build to tenant improvement and renovation for corporate offices, medical facilities, building renovation, seismic retrofit, industrial and retail spaces across the San Francisco Bay Area.