Tag Archive for: commercial lease

Empty Commercial Space: Protecting Your Commercial Building During a Temporary Vacancy

For commercial real estate landlords and business owners, there are several reasons why a commercial property may remain closed for extended periods of time. Your storefront may be lying vacant for a new renter. Shutters can remain down for weeks or months when large-scale renovations are going on. Vacant commercial properties plagued the United States even before the pandemic.

As an owner, you don’t just endure a loss of income when your property is lying vacant, but also an increased risk of garbage dumping, illegal squatting, and metal theft. Landlords should take a proactive approach to protect their property by employing different measures. An experienced real estate attorney can help you better assess the various risks and take the right steps toward protecting your vacant commercial property.

Stay on Top of Insurance and Mortgage Obligations

When a property is let out, the tenant usually remains responsible for maintaining the occupied areas. The rent received is usually used towards paying for the insurance and repairing any parts not included within the lease. All of these costs fall on the landlords in the absence of a tenant.

There is a real danger that the building may deteriorate unless you take active steps to keep the building secure and in good shape. You should check the terms of your insurance policy. Don’t forget to go through the mortgage agreement to keep on top of things. A seasoned real estate attorney may be able to help you identify specific exclusions and conditions that apply if the property is unoccupied.

Changes in Business Rates

The financial impact becomes worse if a commercial property is allowed to remain empty for more than three months. You may become liable for empty property taxes. In 2022, the City Council approved the Santa Cruz Empty Home Tax to ease the pressure on the housing market. Homes lying vacant for more than 8 months are now taxed.

While this rule doesn’t apply to commercial properties, you should still speak with a seasoned real estate attorney in your area to understand the costs you will be liable for. Many commercial property owners resort to letting out their property to companies to avoid empty rates from becoming due.

There are specific benefits and drawbacks to the different strategies for avoiding empty property rates. You should speak with a skilled real estate attorney to learn more about all available alternatives.

Illegal Use of Premises and Squatters

Empty commercial property is highly attractive to squatters since the government has made it illegal to squat in a residential building. As an owner, you will need to employ formal legal proceedings to get the squatters out. This can be a time-consuming and costly affair.

Another main risk of allowing a commercial property to remain vacant is that it may be used for illegal purposes. This can be by squatters or on a more casual basis. Owners can become liable even if no crimes are being committed. For instance, if neighbors report the property as a nuisance, you may need to hire an experienced real estate attorney to take the necessary steps for avoiding liability.

Alternative Options to Leaving Your Commercial Property Lying Vacant

Typically, commercial property is used for business purposes in offices, industrial, retail, amusement, and lodging. The expected vacancy rates for commercial offices in the United States are between 15 – 20%. You need to take the necessary steps for protecting your unoccupied and vacant building spaces. There are several possibilities for putting an empty building to good use.

There is a trend for pop-up events and businesses. This means that there are several companies and individuals out there looking for short-term occupancies. These are known as ‘meanwhile’ leases. You can reach out to local organizations, including charities for leasing out the building for short-term exhibitions and events. You can also turn the empty and neglected space into a vibrant community area.

Every short-term occupation should be properly documented. This way you can get the property back when a long-term tenant shows interest. Your real estate attorney will walk you through the necessary paperwork that needs to be completed.

Vulnerable properties should also carry adequate property insurance. A knowledgeable real estate attorney can help you determine the right amount of insurance for your property. The tiniest mistake in maintaining or securing a commercial property can result in costly lawsuits and damages. This can be harmful to your reputation. Vacant properties, even if they remain empty for a short period, are especially vulnerable.

You need to obtain adequate insurance for your peace of mind and protection. Make sure you speak with a qualified real estate attorney to get the insurance coverage you require.

Request a Consultation from Our Seasoned Real Estate Litigation Attorneys

The knowledgeable real estate litigation attorneys at Peterson, Martin & Reynolds, LLP are determined to protect your commercial property during a vacancy period and will do everything possible to resolve any legal disputes in the most effective manner. If litigation is necessary, we are seasoned professionals who know how to win inside the courtroom.

To set up your confidential consultation with a member of our legal team, call (415) 399-2900 or reach us online.


How Commercial Tenants Should Protect Themselves When Leasing a Property

For brick-and-mortar businesses, the commercial space they rent is not only one of the key components in their operational costs, but it also plays an important role in the success of their business. Several commercial landlords and tenants in California get into disputes over issues related to the condition of the property, upkeep and maintenance, and various other matters.

There are a number of things you should consider before signing a lease because every legal clause and paragraph has the potential to impact your company. This makes it important to have a consultation with a qualified real estate attorney in California, who can review the terms and conditions of the commercial property lease, make appropriate recommendations, and provide the right legal advice to protect your interests.

Review All Terms of the Lease Carefully

The overall value of the commercial real estate sector in the US is around $16 trillion as per the National Association of Real Estate Investment Trusts (NAREIT). Businesses can easily become overwhelmed when searching for a commercial property with so many options. Commercial tenants often focus on rental rates and locations when searching for a new property.

Based on this, it’s as crucial to review the lease agreement. In fact, you should get an experienced attorney to carefully review the specific details of the lease agreement. The lease is what controls your rights and interests if a dispute or problem arises. These are a few terms to pay attention to:

  • Late payments: Commercial leases should clearly mention the terms of late rent. It should specify the amount of interest and an additional charge for late payments. This gives you a clear idea of what will happen on nonpayment of rent.
  • Use clauses: These clauses will list out the things you can and cannot do with the commercial space as a tenant. It will also dictate the manner in which any disputes are to be handled if multiple tenants lease the same building. There may be a limited use clause that permits you to use the space for specific purposes till authorized capacity.
  • Assignment and subletting: Commercial tenants are typically allowed to sublet or assign space as per the terms of the lease unless the commercial lease specifies otherwise.
  • Non-Waiver provisions: This is actually a protection for the landlord to enforce any terms that they may have allowed to slide in the past. For instance, your landlord may not enforce a late payment charge if you are late on the rent the first time, but does it the second time.
  • Security deposit: California law places no restrictions on the amount of security deposit a landlord can request for a commercial space. Your attorney will negotiate with the landlord to come up with a fair amount.
  • Repairs and maintenance: Commercial landlords are not required to maintain or repair a commercial property, except as required by the lease. Tenants should negotiate the repair and maintenance clause to obligate the landlord into making repairs.
  • Insurance: These clauses dictate whether you, the landlord, or both of you are required to obtain insurance for the space, the minimum amount of insurance required, and the type of insurance needed.

Pay Attention to the Clauses on Liability Risks

Your liability risk is a key factor to investigate when evaluating a commercial lease. Commercial landlords often try to shift a large share of the risk onto their tenants. You may end up accepting a far greater liability risk if you fail to review the specific terms and clauses of the lease agreement. Common Area Maintenance (CAM) charges are an important thing to look out for.

This is also known as NNN or triple net lease. CAM charges are basically in the form of a fee paid to the landlord. It’s designed to cover the expenses of running day-to-day operations. The CAM fees are usually proportional to the total rental obligations where the common space is shared with other commercial tenants.

CAM charges can be used for paying for landscaping, trash removal from common areas, and elevator upkeep. Repairs and improvement to the commercial property is another critical provision to look out for. You should check if the landlord can pass on repair and improvement costs to your business.

You should also clarify how the expenses are charged if the costs do get passed on to you. The cost may be in the form of a lump sum payment or get amortized over several years.

Negotiate the Terms and Conditions of Your Commercial Lease

In general, commercial lease agreements can be negotiated. Based on this, there are a few take-it-or-leave-it options as well. It’s vital that you consult with a seasoned real estate attorney and have them review the lease terms. Your attorney will give you specific advice on the meaning and implications of the different terms and clauses.

You may be able to talk your landlord into certain amendments that reduce your overall risk. Your attorney will help you decide on a lease agreement that offers a fair rental rate and ensures that your business is protected from unreasonable liability risks.

Get Legal Representation from Skilled Real Estate Attorneys in California

The seasoned real estate attorneys at Peterson, Martin & Reynolds LLP have the legal experience and skills to draft, review, and negotiate commercial lease agreements. If you are renting a commercial property and have questions about the lease, our informed attorneys are here to help. To set up a consultationwith us today, call us at (415) 849-2564 or write to us online.