Five Important Duties of a Commercial Landlord

leasing, Wheaton commercial real estate attorneysWhen you own and lease out commercial property, such a venture could be extremely profitable. However, you could also face serious risks, especially if you are not properly prepared to handle the responsibilities associated with being a commercial landlord. Some of these risks include the possibility of financial loss or being sued for failing to meet your obligations as the property owner. It is important to understand what these responsibilities are and how to fulfill them. A qualified commercial leasing attorney can help.

Duty #1: Comply With All Applicable Laws

There many different federal, state, and local laws that apply to all property owners who rent out their properties, including commercial landlords. For example, as a commercial landlord, you are not permitted to discriminate against would-be tenants on the basis of certain criteria, including religion, race, and national origin. You must also follow all zoning laws and building codes. If you fail to comply with any applicable law, you could face serious consequences, including legal action.

Duty #2: Use Clear Language in Your Contracts

If your lease agreements are not clear and concise, your tenants might not understand what is expected of them. Your contracts could also be more difficult to enforce if there is confusion about what they contain. Commercial leasing contracts should clearly address all of the relevant concerns, including matters of rent, repairs, alterations to the property, and communication expectations.

Duty #3: Keep Your End of the Agreement

In addition to using clear language, your leasing contracts should only include provisions that you are willing and able to meet. You should also familiarize yourself with your responsibilities for making certain types of repairs, such as those involving heating and cooling systems, electrical work, and plumbing. This can help ensure that the property is maintained properly and in accordance with applicable laws.

Duty #4: Mitigate Risks and Limit Liability

Proper maintenance will go a long way toward protecting yourself and your property. However, limiting risk means more than fixing a broken water heater. You might also consider installing a security system, additional lighting, or doors and windows that can be locked securely. It is also a good idea to identify and address potential environmental hazards, such as uneven walkways where water could pool or roof overhangs from which snow or ice could fall.

Duty #5: Be Fully Insured

Despite taking all the precautions in the world, you could still suffer losses due to fires, floods, falling trees, or other “acts of God.” Comprehensive insurance coverage is a good way to protect yourself and your property. Similarly, you should also carry insurance policies on any vehicles or equipment that you may own and use in connection with leasing the property.

Call a DuPage County Commercial Real Estate Attorney

At Stock, Carlson, Oldfield & McGrath LLC, our team is dedicated to helping commercial landlords maximize the return on their real estate investments. Our experienced Wheaton commercial leasing lawyers can guide you through the entire leasing process and will assist you in managing any issues that may arise. Call 630-665-2500 to schedule a confidential consultation today.

 

Sources:

https://smallbusiness.chron.com/business-tenants-rights-67257.html

https://www.businessnewsdaily.com/15101-commercial-lease-guide.html

Property Valuations in Commercial Real Estate Deals

commercial real estate, Wheaton real estate attorneysIf you have decided to acquire any type of commercial property, it is important to be sure that the price you will pay is a fair one. Commercial real estate transactions typically involve the exchange of large amounts of money, which makes a proper valuation critical. In fact, a valuation is generally a requirement for real estate deals that are backed by lender financing.

Understanding Appraisals

A commercial property valuation is accomplished by means of an appraisal that is conducted by an approved appraiser. In order to be qualified as an appraiser, an individuals must undergo specialized education or training, and, in most cases, be certified by a professional organization of appraisers. A real estate broker is not considered to be a qualified appraiser—unless, of course, he or she has completed the necessary certification and training. Therefore, if the broker sets the initial sale price of the property, it is not necessarily backed by a qualified appraisal.

A qualified appraiser may choose from three methods of establishing a property’s value. The most appropriate method will depend on the type of property and how the property will be used in the future. An appraiser may utilize the:

  • Income capitalization method: This approach is most often used to evaluate properties that produce income, such as rental residential and commercial rental properties and shopping centers. The income capitalization method focuses on the property’s potential to generate revenue and the expected rate of return for the investor. Factors such as the condition of the property or its location are not given significant weight;
  • Sales and market comparison method: This method is commonly utilized to establish a value for single-family residential properties, but it can have commercial property applications as well. Under this approach, the appraiser will compare the recent sale prices of similar properties while taking into account the health of the local real estate market. A property sold during a boom, for example, will not be a good comparison if the market is currently slowed or depressed.
  • Cost method: The cost method takes into account the property’s value, including any improvements and the land itself and subtracts any depreciation that may have occurred. The goal is to determine if the buyer  would be better off buying the property or building a new, similar property.

In addition to being a requirement for a bank-financed transaction, appraisals are often needed for commercial real estate disputes. If the dispute reaches the courtroom, multiple appraisals may be conducted and it will be up the court to determine which value will be used in deciding the outcome of the dispute.

Call a Wheaton Real Estate Lawyer

If you are in a situation where you need a commercial property appraisal, the experienced DuPage County real estate attorneys at Stock, Carlson, Oldfield & McGrath LLC can help. We work with a network of trusted appraisers, and we will assist you in obtaining an accurate valuation of the property in question. Call 630-665-2500 for a confidential consultation today.

Sources:

https://www.investopedia.com/articles/realestate/12/real-estate-valuation.asp

https://homeguides.sfgate.com/three-methods-appraising-commercial-real-estate-value-1567.html

Commercial Real Estate Leases – What Every CRE Investor Should Know Before Renting Out Their Property

Wheaton CRE investment attorneysWith more investors breaking into the commercial real estate sector, demand for reliable and comprehensive information on the selling and leasing of property increases. Granted, the information that one finds on the internet must be carefully vetted, and investors are highly encouraged to run all decisions and potential changes by their attorney, as this can help avoid the risk of lawsuits and financial loss. However, with a better understanding of the potential pitfalls, landlords can be better prepared, which can allow them to better plan for their future. 

Being Prepared for the Challenges in Commercial Leasing 

The stakes and risk of financial loss are far greater for the commercial landlord and tenant. There are also some nuanced issues in the CRE market that can significantly alter the needs and concerns of an investor. For example, there are different asset classes in the CRE market, and the challenges tend to vary for each one. In other words, the owner of a low-income apartment will have different needs than a hotel or casino owner. 

Negotiating – whether it be during the purchase or sale of a property, or while trying to re-negotiate a lease or establish a new one – is a skill, in and of itself. Most investors are not negotiators, though some do seem to have an innate ability. In either case, the negotiation process should never be done alone. There are different types of leases, and you can never be certain that you are getting a fair deal until all aspects of the sale have been carefully weighed and considered. An experienced commercial real estate investor can help. 

The safety and security of potential patrons may also be an issue for certain investors (but not all). Restaurant investors will likely need to account for the risk of fires and premises liability. Investors who focus their time and energy on office buildings or parking garages may be less likely to face these same issues. Instead, they may need to worry about things like crime on the premises, or whether they could be held liable for the damage of someone’s property. 

Thankfully, you do not have to understand all the exact nuances of your asset class or investment type. In fact, it is highly recommended that you resist the urge to manage your portfolio alone. The most successful people in the world probably got to where they are because they had a skilled and educated support team – and while the members of your team may change over the years, depending on your needs and goals, the one person you should never go without is a seasoned real estate attorney. 

Contact Our Wheaton CRE Investment Lawyers

Whether you are just starting out in the CRE market or a seasoned veteran, Stock, Carlson, Oldfield & McGrath, LLC is the firm to call for your legal real estate needs. Backed by over 40 years of knowledge and experience, our skilled DuPage County real estate lawyers can assist you with everything from performing your due diligence to successful commercial lease and purchase or sale agreements. Call 630-665-2500 to schedule your consultation today. 

Sources:

https://www.cnbc.com/2019/01/11/5-money-blunders-that-keep-you-from-getting-rich.html

https://www.forbes.com/sites/forbesrealestatecouncil/2018/12/11/how-to-prepare-commercial-real-estate-for-premises-liability/#86706b871248

https://www.bizjournals.com/birmingham/news/2018/06/01/expert-tips-for-negotiating-your-commercial-lease.html