25 Gotcha’s Are Hiding In Your Lease Right Now: Discover the Ones That Are Costing You Money
25 Gotcha’s Are Hiding In Your Lease Right Now: Discover the Ones That Are Costing You Money Wally & Company Announces Publication FOR MORE INFORMATION: Chris Wally Wally & Co. 913.693.4695 firstname.lastname@example.org
(February 22, 2013) – Overland Park, Kansas)- Any business owner who has ever signed a real estate lease may have been the victim of a potentially expensive ‘gotcha’, which is a financial component of a lease that a business owner may not know exists or doesn’t think is a problem, according to Chris Wally, President, Wally & Co., an Overland Park-based real estate consulting firm focused on helping clients with lease renewals and negotiations.
In the publication The 25 Gotcha’s Hiding In Your Lease, Wally explains there are about 25 components in a typical commercial lease that can impact your bottom line. “Real estate decision makers are not real estate experts; more than likely it’s the CFO or a manager who has been charged with renegotiating a current lease or negotiating a new lease. Knowing what to look for can put you in a better position to negotiate more favorable rates and avoid long term expensive headaches.”
What are the top “gotcha’s” that tend to be problematic? •Operating Expense Escalations – Also known as additional rent and pass thrus. Full service leases means that the rate per square foot includes everything – base rent, operating costs, taxes and insurance. Full service leases have an escalation provision that allows the landlord to escalate, or pass thru, increases in operating expenses. The landlord becomes an intermediary, so the escalations are passed through over some stated base amount (either an operating stop or a base year amount) that’s included in the full service rent. The landlord is setting the base amount which can cost a tenant money. •Services – The services section describes what a landlord is responsible for providing depending on your type of lease. In a full service lease, it’s closely related to operating expenses like electricity, water, heating, elevator, security, janitorial, etc. Sounds straightforward enough until the lease interjects a phrase like “during normal business hours, which shall be from 8:00 a.m. to 5:00 p.m., Monday through Friday and 8:0 a.m. to 1:00 p.m. on Saturday except for legal holidays.” That means no electricity after 5:00 p.m. during the week? You may have employees working after 5:00 p.m. No elevator services except during those times? The prospect that a landlord will shut off the electricity or water or elevators outside of normal business hours is remote; however, tenants need to be careful lease language specifically addresses these kinds of items. •Parking – This used to be a no brainer; every building has it or has access to parking for employees and visitors. However, the quantity of parking has become a frequent and significant lease issue as more employers are utilizing modular furniture, which means more people per 1,000 square feet of space. Historically employers had a ratio of 3 parking spaces for every 1,000 square feet of space. Today it’s common that a tenant needs 5 parking spaces for every 1,000 of rental space. Landlords are also pricing parking based on ‘market costs’ that can be adjusted up or down from time to time. •Renewal Options – These are also known as “flexibility options” which gives tenants the right to renew (or extend) the term of the lease beyond the initial lease term. Requesting a renewal needs to include the number and length of the renewal options. Another important issue is your creditworthniess, which in this economy, is a huge issue and leasing rates are lower for creditworthy tenants. The complimentary 25 Gotcha’s publication can be ordered by visiting the Wally & Co. website at www.wallyandcompany.com .
About Wally & Co.: Founded in 2007 by Chris Wally, the firm represents tenants commercial property leasing. An award winning real estate professional, Chris Wally has over 30 years of experience in commercial real estate and tenant representation. He is a licensed real estate broker in both Kansas and Missouri. Additional information about Wally & Company is located at www.wallyandcompany.com .
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