Trey Peterson thanks for following me on Twitter! https://t.co/GF2rnIq9hK

Trey Peterson thanks for following me on Twitter! https://t.co/GF2rnIq9hK

— Nathan K Smith (@AustinTenantAdv) May 28, 2018

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— Nathan K Smith (@AustinTenantAdv) May 25, 2018

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Bill Manassero thanks for following me on Twitter! https://t.co/W6EmD5Gjag

— Nathan K Smith (@AustinTenantAdv) May 24, 2018

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— Nathan K Smith (@AustinTenantAdv) May 22, 2018

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— Nathan K Smith (@AustinTenantAdv) May 21, 2018

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— Nathan K Smith (@AustinTenantAdv) May 19, 2018

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— Nathan K Smith (@AustinTenantAdv) May 19, 2018

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— Nathan K Smith (@AustinTenantAdv) May 16, 2018

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— Nathan K Smith (@AustinTenantAdv) May 15, 2018

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How to Get Out of a Commercial Real Estate Lease

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When signing a commercial real estate lease (office space, retail space, warehouse space) you are typically committing to either 3 year, 5 year, or sometimes longer lease contract and you are legally obligated to fulfill the entire obligation regardless of whether or not your business succeeds or fails.  You have the best intentions to create a successful business however sometimes things just don’t go your way. For example when searching for warehouse space for rent in Austin Tx expect to sign at least a 3-5 year lease.

If you find yourself in a situation where you need to close your business however still have lease term left on the lease there are some ways you can get out of your commercial real estate lease.  3 of these options will keep your good credit in tact, however one option will not.

Sublease

Most lease contracts have a sublease clause which allows you (the tenant) to find another tenant to sublease from you.  If you don’t have one make sure you get it included.  Essentially you become a sub-landlord and collect rent from the subtenant, however you are still liable to the building owner for rent payments and any damages to the space that may occur.  Subleases require landlord approval which they cannot unreasonably withhold as long as the subtenant is similar to your business and they have financials as good or better than yours.  You can also sublease a portion of your space if needed.

Assignment

In some cases the landlord may allow you to assign your lease to another company, thus removing you from any liability or obligations.  Commercial lease assignments can occur in many situations such as:  1.  you sell your company, 2. landlord realizes they can get higher rents if you move out so they release you of obligation, 3. tenant next door buys you out of your lease, etc.  Again assignments can release you of all obligations, however in most cases the landlord will want the new entity to have as good or better financials than you.

Lease Buyout

Lease buyouts are possible as long as you can come up with terms and conditions that entice the landlord.  The landlord does not have to agree to a buyout however depending on the market, terms, and conditions you may be able to get them to agree to one.  In a lease buyout you would typically offer to pay a lump sum (% of remaining costs) equal to one or more of the following:  1. certain number of months of rent and expenses, 2. unamortized cost of tenant improvements, 3. unamortized cost of commissions, 4. additional months of rent to give landlord time to lease out the space again, etc.

Move Out in the Middle of the Night

This is the last thing you want to do however I have seen tenants do it.  They simply file or bankruptcy and move out in the middle of the night.  If the stakes are high landlords will do everything in their power to sue you for one or more of the following: 1. rent that has not been paid, 2. legal expenses, 3. cost to prepare space for re-letting 4. commissions, 5. rent not received while marketing space for new tenant, 6. advertising, etc.  If you signed a personal guarantee then the landlord can go after you personally for damages.  This is not how you want to get out of a commercial real estate lease!

Conclusion

Overall you need to communicate with your landlord.  If you realize things are not going great then try to work out something with the landlord or property manager.  No communication is the first sign of trouble!  You will be surprised to find that some landlords will help you out anyway they can.  Others may not be so flexible.  Try to avoid tarnishing your name and company name do things the responsible way.

 

The post How to Get Out of a Commercial Real Estate Lease appeared first on Austin Tenant Advisors.

How to Get Out of a Personal Guarantee on a Commercial Lease

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So you are a new business or startup and ready to lease your first commercial real estate space, however with little track record and little to no revenue how will you be able to get the landlord comfortable with having you as a tenant?

Most landlords are hesitant to lease commercial space to startups as they have a high probability of going out of business and if they do will leave the landlord with an empty space and lost income. To ensure they get their rent in the event your business does not work out they may ask you to sign a personal guarantee.

For example when searching for retail space for rent in Austin Tx most landlords will require that you personally guarantee the lease for the entire term. 

What is a Personal Guarantee?

A personal guarantee is a written promise from a guarantor (business owner or other person) guaranteeing commercial lease payments in the event the business does not pay. In the event of non-payment the landlord can go after the guarantor personally for payment. This is a very common request when the business is a startup with weak financials.

Do You Have to Sign a Personal Guarantee to Lease Commercial Space?

Well if you really want a space bad enough and the landlord won’t let you have it without one then you have no choice. If you are able to show a track record of paying rent elsewhere have have steady, strong company profit / loss statements and balance sheets then you might be able to get away with not having one. If you don’t have the financial track record and sign the personal guarantee then try asking for the guarantee to expire after a certain amount of time has passed (e.g. 12-24 months) as long as you pay rent payments on time.

How to Get Out of a Personal Guarantee Early

Your options for getting out of a commercial lease personal guarantee early are pretty limited, however if it’s important then try one of the following:

• Consult with an attorney on what your options are
• Show proof of consistent revenues and profits (P&L statements, balance sheets, etc)
• Ask for an amendment to the lease after 12-24 months
• Ask for the guarantee to expire after 12-24 months as long as you have paid rent payments on time
• Try to renegotiate the guarantee terms
• Offer to pay a large security deposit. The norm is typically equal to one months rent. If you can offer to give a security deposit of 4-12 months
• Offer to prepay the first 6-12 months of rent payments
• Offer to set up a letter of credit (LOC) with your bank. If you don’t pay rent then the landlord can take rent payments from there.

 

 

 

The post How to Get Out of a Personal Guarantee on a Commercial Lease appeared first on Austin Tenant Advisors.

Where to Find Office Space For Rent

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When searching for office space the first thing most people is search online which typically involves using google to search office space for rent. The first thing you will see is a laundry list of office space listing sites with hundreds of listings for office space for lease all across the city near you. These can be a good place to start however you will quickly find that most of these are simply set up for lead generation. The listings are typically outdated, not available anymore, or the information is complete and not helpful at all. Some can even be misleading. They can be a good place to start however at some point you may want to hire a commercial realtor to help you who knows the market well.

Some of the common office space listing websites you will see are:

• Craigslist Office Space For Rent
• 42floors
• Cityfeet
• Loopnet
• Instant Offices
• thesquarefoot
• etc.

After you have done a little preliminary office space searching online you might consider hiring a commercial real estate agent. For one their service does not cost you anything as their fee is paid by the landlord, even though they are legally obligated to represent your best interests. Also, they keep a pulse on the market and know what is available, when it’s available, and at what price. They also know what can be negotiated which can be helpful in ensuring you get the best deal possible. The experienced commercial agents know all the players in the market (landlords, building owners, listing / landlord agents, contractors, architects, movers, furniture vendors, etc so they can help you facilitate the many aspects of renting office space.

If you want to know where to find the best office spaces for lease on your own then your going to have to do a lot of legwork. This could take hours of time searching the internet, driving around calling on for lease signs, and talking to many different listing agents. OR…………hire a commercial tenant representative and let them do all of the heavy lifting of calling, searching, getting floor plans, etc. Again their service does not cost you a dime and it will save you a ton of time and money. 

 

 

The post Where to Find Office Space For Rent appeared first on Austin Tenant Advisors.

When Renting Office Space Who is Responsible For Upgrades?

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When searching for office space for rent the spaces you look at will typically need some sort of upgrades. You might get lucky and find one that is move in ready and exactly the way you want it, however in most cases they will need new carpet, new paint, walls removed, new walls built, new plumbing, lighting, etc.  

The question that many tenants have is who will be responsible for paying for the upgrades? Well that depends on a number of factors such as:

• Your current financial situation – the stronger your credit the more leverage you have in negotiations.
• Lease term length
• Lease rate 
• Size of space
• Current condition of the space
• Market conditions
• Level of finishes 
• Etc.

In most cases if you are an existing strong credit tenant and are signing a 3-5 year lease then you should be able to negotiate to have the landlord pay for a portion of or all of the standard office upgrades. I say “standard” because landlords will invest money into standard building finishes. If you want granite counter tops, hard wood floors, or other expensive upgrades then you may have to come out of pocket for those.

If you are a new business or startup that can only sign a 1-2 year lease then don’t expect the landlord to give you any money for office space upgrades. You will typically have to take the space “as is” unless you want to spend your own money for the office upgrades needed.

If you are dealing with an institutional investment group they are more savvy and you will have a better chance of being able to negotiate office space upgrades as long as you qualify. If the office building owner is a small time single investor then they may not have the money to give or want to take the risk so you will more than likely have to foot the bill. You might be able to get them to give some free rent in lieu of money for upgrades

The post When Renting Office Space Who is Responsible For Upgrades? appeared first on Austin Tenant Advisors.

Austin Tech Events thanks for following me on Twitter! https://t.co/nsr46fSVik

Austin Tech Events thanks for following me on Twitter! https://t.co/nsr46fSVik

— Nathan K Smith (@AustinTenantAdv) May 11, 2018

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— Nathan K Smith (@AustinTenantAdv) May 10, 2018

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— Nathan K Smith (@AustinTenantAdv) May 5, 2018

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— Nathan K Smith (@AustinTenantAdv) May 3, 2018

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Lahat Tzvi thanks for following me on Twitter! https://t.co/7RduAlCuva

— Nathan K Smith (@AustinTenantAdv) May 2, 2018

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