The Landlord's View

Posted by: Alan Bernier

The Landlords View
(or the 5 questions landlords will asks about you)

1. What is the credit of the company I am signing a lease with?
Most landlords have loans in place, and at times, their lender will
ask to approve a lease before it is signed since they are technically
part owners. If a landlord wants to refinance a building, a large part
of the valuation of the building will depend on the building’s rental
stream and the likelihood of the rental stream continuing (e.g. your
financial picture and credit history). Some landlords will not be comfortable
leasing spaces to start-up companies because of this credit risk.

2. How much do I have to spend to get them to start paying rent?
The issue here is what kind of concessions the landlord is willing to give you,
the tenant. These include custom tenant improvement, build-outs, free rent, and
commissions paid to brokers involved in the transaction. The more a landlord must
pay to start his rental stream, the more scrutiny he will use in analyzing your
company as a potential tenant.

3. What security do I have if this company defaults?
In most cases, your security deposit is the landlord’s easiest collateral access. 
Theoretically, they can get in line with the other company debtors attempting to
collect some of your business during liquidation, but this time investment is rarely
made by a landlord. If you are unlucky enough to have personally guaranteed the lease,
the landlord might pursue you personally to cover the remaining lease obligation or at
least the marketing time and cost for procuring a new tenant.

4. How long will I have to wait for another (better) tenant to come along?
During the negotiation process or when you are potentially behind on your rent, the landlord
will consider this argument. If the market is doing well and there is allot of demand for space,
your ability to negotiate will be decreased because the landlord will have a rough idea of how
long it will take to find a higher quality tenant. If the market is weak, then you will have a
lot more leeway to negotiate and can use this argument as part of the negotiation process.

5. What is their use and how will that affect the building?
If a company is cramming 15 people into 1,000 square feet, these people are having an adverse effect
on the buildings systems and building community. For example, a school that leases space will have a
few hundred students using the lobby, parking lots, and bathrooms when a normal office user might have
30 full time users affecting the building. A landlord will think carefully about your use, your clientele,
the type of consumer who comes to visit, and how that will affect the other tenants in the building and the
building’s value.

 

Last updated: 10.20.2008 03:01 PM