September 18, 2019
Who ever reads their annual reconciliation statements? Or understands it? Red flag! When a building was recently sold and a client got a HUGE bill for property tax increase (in CA based on 1% of the sale price) something still seemed off. Turns out the LL made a typo so the multiplier was more than double what it should have been. Don't just accept the statement because it looks reasonable. #UnderstandIt #operatingexpenses #cams #tenantLandlord #landlordtenantmatters
September 25, 2019
HVAC doesn't work? Client was constantly complaining about the air conditioning not working or being balanced. LL's HVAC contractor consistently said the system was working fine. We suggested they look at the vents to see if they were connected properly. Turns out the vents were fine but in the construction of the suite, "Someone" ran the walls up to the concrete above so the air flow couldn't go from room to room. Holes cut...everyone is now COOOOL! Every problem has a solution...just need to find it. #landlordtenantmatters #hvac #propertymanager #tenantissues
Paying attention to real estate details. OOPS! LL built a parking structure specifically because for a new large tenant. Existing tenants only had the use of a portion of the new spaces but were being charged for their pro rata share of the new facility. Upon discovery we questioned the additional cost since the facility would not have been built had it not been for that tenant. Most leases exclude costs applicable to one tenant's use. With that, tenant just received a $5,500 credit for last year and will not be charged moving forward. Who watches over your real estate? #landlordtenantmatters #OperatingExpenses
September 30, 2019
Another W for the Good Guys. Last month a tenant asked us about a huge CAM bill they got because the Landlord built a new parking garage in the 3rd year of the lease. First knee jerk reaction was that if it wasn't in the Base Year (see earlier post "History of Base Year") they couldn't charge in subsequent years. BUT... it turns out the garage was built primarily for one tenant's use. Most leases will state in the fine print that any amenities constructed for the exclusive use of a single tenant would be excluded from BOE charges. WooooHoooo. Tenant received over $5000 back in credits. If you don't understand something in your operating statement, call us. #BOEStatements #propertymanager #landlordtenantmatters #BaseYear
October 1, 2019
What needs to be restored after you vacate? Many tenants do improvements after they move in. Client anticipated doing additional improvements after their renewal was signed. To avoid any issues, we had the property manager walk the space with us and note not only what was done but also what was going to be added and whether any or all improvements needed to eventually be removed. Everyone agreed on a plan. #Good2Go Also had a clause in the Lease that if Tenant did improvements, at the time the Landlord approved the work they needed to let the tenant know if the improvements were to stay or be removed. #proactiveapproach #landlordtenantmatters
October 3, 2019
What if your new business acquisition is not what you thought despite all well intended due diligence? The lease is with a third party. Before signing off on the purchase, understand your lease options should the new venture go south. Be sure a commercial tenant broker is involved. Often, the business of real estate is different than the legal aspects of real estate. #landlordtenant #businessopportunities #leaseassignment
October 8, 2019
Are you getting all the parking spaces you deserve? In most of OC CA office market, tenants are allowed 4 spaces for every 1000 rentable square feet they occupy. Doesn't matter if you pay for all, some or get free parking cards (assuming there is a gated lot). Some landlords try and base the parking on Usable Square Feet which means you get less spaces and have to pay a hefty price for the additional spaces that should have been included within your allocation. Do the math and see what you come up with. Also, it shouldn't matter, other than security or tracking, who has the cards. If one person wants all the allocation because they drive several cars, you shouldn't have to pay for any cards as long as it's within your allocation. Questions? #tenantland #landlordtenantmatters #parkingissues #RSF #usf
October 12, 2019
Those Darn Cold Callers
Often, I’m asked by clients how brokers know their lease is coming up and how do they stop the annoying cold calls?
First, there are databases such as CoStar and AIR that list more information about your firm then may be on your website. If you are within a year of a lease expiration, hang on to your hats.
What to do?
At IN/House, we serve as our clients’ in-house real estate department through an “evergreen” engagement letter so whenever ANY real estate matters come up, we’re the first call clients make.
When the cold caller arrives or sends a solicitation email we tell our clients to be courteous and let the broker know that they are under and "evergreen" contract with IN/House and they handle all real estate matters. Often the cold caller will say, “OK” or “If you ever think of changing, here’s my card.” That usually ends it. If they persist, clients pass on the brokers’ contact info to me and we give the broker a friendly call.
You should engage a broker early in the process if you don’t have an ongoing relationship with one. It’s always best to get a recommendation from someone you trust and be sure it is a broker with no conflict of interest i.e. their firm never lists properties. That could create a potential conflict down the road.
October 15, 2019
Most every lease requires a landlord to maintain and/or replace the roof. But what happens if the roof leeks and consequential damage is done to your interior walls? Property? Or even mold? Who is responsible for the repairs? You may want to start with documenting everything as soon as the damage is noticed or even taking ongoing videos of the Premises to compare. If it's hidden mold, maybe worth it to hire your own mold consultant.
October 19, 2019
What happens if a landlord adds a structure or amenity after your first year of the lease? Most leases will allow for that as long as the cost of the capital improvement is amortized over the useful life. But, if that new structure was built after your first year of the lease, can you be charged in subsequent years which would create a HUGE delta in your operating expenses? What adjustments should the landlord make to your reconciliation statements? We'll be following this. Check out our earlier article posts on the history of Base Years and how BOMA accounting practices can protect tenants.
October 22, 2019
Here's one we actually saw before. A "Conspiracy" of ravens (yes, that's what they are called) decided to live in the a tree above a client's reserved parking space. We gave several solutions to the LL including 1) cut or trim the tree 2) relocate client's space 3) put down Clorox- non toxic but they HATE the taste and never return. Let's see what the LL does. #landlordtenantmatters #reservedparking #birdproblemparagraph. Click here to add your own text and edit me. It's easy.
October 23, 2019
WHERE'S MY MAIL? Moving is always a hassle. In negotiating the lease, often Landlord’s will give you 10 business days to fixturize the new suite. Most think only about furniture and IT/Phones.
But here’s a problem that keeps popping up…MAIL. Typically, the USPS take up to 10 days for forwarding mail. Simple solution. Have the transfer date set for 15 business days BEFORE you move. Since you will likely have the new suite and mail key, for a short period you’ll likely get mail in both places. After you move in, it should all go to the new address.
October 25, 2019
Ready to move out? Tenants focus on a long list of things to do prior to a move but too often they forget to address the general condition of the suite. Simple guideline to follow- if you can take it with you without damage to the Premises then remove it. Do not leave loose stuff laying around assuming the custodians will clean it up on their regular evening routine. A client just relocated, and we suggested they even Spackle the picture holes. Not necessary but it shows a bit of “extra effort”. Try not to leave anything to the property manager’s discretion. They can charge you a fee to remove ANYTHING..AKA “Blank Check”.
In CA the Landlord must notify you within 15 days if there is damage that either you can repair, or the Landlord can deduct the cost from your deposit. If there is no notice of damage then they must return your entire deposit within a defined period per statute or per your lease. Ask your attorney for specific guidelines on that. Remember, the Landlord will likely repaint and recarpet the suite for the next tenant so as long as you removed all your items, there should never be a general clean-up charge.
October 25, 2019
Received a call from a friend who is a CFO. A relative was ready to sign a lease and wanted to ask her to review the economics. BIG RED FLAG. She had him call IN/House. While we didn’t do a full “business” review of the lease, as a favor, we did give him about 12 items that were of concern including the “Use Clause.”
Imagine you are a law firm and you eventually need to sublease but the use clause specifies ONLY a law firm? Can the Landlord reject the sublease on those grounds if you wanted to sublet to a tech firm or accounting firm? Little things in the lease are certainly legal but do they make business sense? Two reviews needed…business points (other than deal points) and legal issues. NEVER sign the landlords “Standard” form without two reviews. #BeProactive #leases #landlordtenantmatters
October 30, 2019
Received calls from two attorneys asking about leasing out extra offices they had. Spent some time discussing ways to be proactive before even signing their initial lease, best practices in subleasing the offices as well as realistic expectations. Read more detail in my next Blog at www.inhousecorp.com. #sublease #individualOffices #tenant
November 1, 2019
Typically, IN/House is named on all our clients' leases to receive copies of all notices sent to those clients. Recently, Estoppel Certificates were hand delivered to all the tenants in a building. My client had been in their East coast office, so the designated person was not there to receive the document. Upon receiving my copy I contacted both the property manager and the client to arrange proper deliver and avoid potential default. The Property Manage sent us a nice note that they have now received the signed document. All is good.
A suggestion to all; check to see who is identified in the lease to receive notices. Too often you have personnel changes and the documents end up sitting on some desk, never to be seen or, as in this case, that individual was out of the office for an extended period. Always be sure to have an off-site back-up person named for copies, whether it be your attorney, broker or other professional consultant. #EstoppelCertificates #Notices #TenantLandlord
November 1, 2019
What are your building’s regular hours of operation…the time the landlord is required to provide basic services? This also impacts the times the landlord can allow contractors to enter the building. This is important to know regarding several issues including: • “ Quiet Enjoyment” (times in which you have the right to a quiet work atmosphere • When does after hour charges such as HVAV start • Time slot to allow movers and large deliveries. Each of these three issues came up recently. The problem with one property was the new owner changed the hours (or maybe just thought the building had different hours based on other properties they acquired) of operation without notifying anyone. Construction noise started way too early. Devil is in the details.
November 5, 2019
Are you getting the best bang for your TI dollars?
Often, landlords will provide “Turnkey” improvements. This means they have a good idea as to the costs of your improvements and assuming you don’t make changes, they can do all the work within their budget.
However, if the landlord provides you with a budget, make sure you are getting the best price.
A client had a balance left on their TI allowance, a portion of the original allowance they were able to use as rent abatement but stipulated there was a set amount that had to go towards actual improvements. Initially we went to the landlord’s contractor for a simple recarpeting which included moving the furniture in and out. The price was way over the remaining allowance. Soooo, we went to a vendor who had done a similar job for another client (different LL). Their price was about one half. Excluded a lot of “on top of” fees and other mark-ups and included more services.
Work was done professionally and on time. Client is happy and LL will likely use the vendor in the future. Win-Win.
November 7, 2019
But what about my security deposit? In commercial real estate the security deposit may be an amount equal to the last month’s rent, but typically cannot be used for the last month’s rent payment.
While residential deposits must be returned in 20 days (CA) it’s an open question it that applies to commercial. Check your lease. We typically do a “Walk-through” with the property manager about a month before move-out. We ask what items or improvement need to be removed or possibly left behind. Following move out we may do a second one to access any damage “beyond normal wear and tear.”
The LL then needs to notify you if there is any damage that needs to be repaired. If so, they should give you the option to repair the damage or allow them do the work and take the funds out of your deposit. There are legal questions if the LL doesn’t give you that option whereas they may forfeit their rights (lawyers-jump right in).
In most cases the commercial deposits are returned within 30 days. We recently relocated our offices and had a check for the full amount in 2 weeks. 😊 If it goes beyond 30 days and the lease does not address any specific time frame, call and demand prompt payment.
#landlordtenantmatters #SecurityDeposits #NormalWearAndTear
November 11, 2019
Check your lease. Holiday schedules. There are six days that are considered National Holidays. They include: New Year’s, Memorial Day, 4th of July, Labor Day, Thanksgiving and Christmas. Most buildings are closed on these days thus no regular services are provided including HVAC. However, there are a few other days that you need to be aware of such as Veteran’s, MLK and even Columbus Day. Before you sign your lease, know the “Hours of Operation.” Some leases note the building will be closed on “All recognized National Holidays.” Some note specific days while some may say holidays “as recognized in the local market.” Best practice is to clearly define hashtag#landlordtenantmatters those days. We had a client in a property that was sold. The first Vets Day under the new landlord the tenant got a bill for over $700 for after hour HVAC. We pointed to the lease signed under the previous owner which was very specific to name the six holidays. The charges were reversed. Some landlords, as a compromise, will ask the tenants if they will be open on the other holidays noted. If so, they will provide free HVAC. Otherwise the rest of the building may be closed. Check your lease!
November 14, 2019
Insurance anyone? Be sure to update your insurance policies. Typically renews on the yearly anniversary of your lease. And don't forget to notify your landlord and send them an updated "Accord" form showing you are properly insured per the lease. Detail that often falls through the cracks and could cost you.
November 22, 2019
Need HVAC after hours? Landlords typically provide HVAC during stated regular business hours. But if you want to receive the service at other times there is a fee. Is the amount reasonable? Landlord certainly can charge a fee for a tech to turn on the system, actual electric costs plus a reasonable wear and tear/amortized cost. If there is no tech needed because the system is computerized you may be overcharged. Know that LL's can not charge a surcharge for electric usage in itself. There are variables but you might want to ask for back up cost segregation.
November 25, 2019
Who is really representing you? The Legislature passed AB 1289 effective 1/1/19 modifying, among other codes, the 2079 Agency Disclosure form. A tenant's agent has to disclose his relationship to his principal in writing. If there is a problem, unless the Business and Professional Code is also changed to require the form be in writing as well, the only relief a consumer has if the written disclosure is not provided up front or he/she finds out their agent was actually a dual agent is for the Principal to sue rather than simply file a complaint with the DRE which functions under the B&P Code. #ChangeTheCode
December 9, 2019
Are you paying more in building operating expenses than the other guy who has the same size space? The two possibilities are 1) exclusions from the BOE's stated in one lease and not in the other or 2) the two tenants have a different base year. So why was Tenant's statement 60% higher?
Tenant’s building was purchased in 2017. Typically, a new owner would do a lot of neglected upgrades. They did and accordingly, properly amortized those costs.
Initial review showed the Tenant’s charges appeared appropriate. The property manager stated the delta was likely to exclusions or caps noted in the other tenant’s lease.
However, upon review, even if that was the case, and the items that could be exclude or capped in both leases, removing the corresponding amounts from the Tenant’s statement would not have reflected the stated delta between the two.
Therefore, the only reasonable explanation would be that the Tenant had a Base Year prior to the sale (all tenants had “Prop 13” protection) while the other tenant had one after the sale which included all the additional upgrade costs.
We’ll keep you abreast of this adventure. Important to have a professional review of your annual statements.
December 19, 2019
What’s this new CAM bill? Around this time of year, landlords send out a statement indicating what they estimate will be your pro-rata share of next year’s (2020) CAM’s which will likely modify your monthly charge. IT IS AN ESTIMATE. Around March 2021, they will reconcile the actual costs and either credit you if you over paid or charge you additional funds if there is an underpayment. While you can’t argue too much about the line items because they are estimates, be sure all is according to the lease. We just read one where my client is not supposed to pay any CAM’s until 6/1/20 but the property manager failed to see that in the lease and is charging them for the whole year. OOPS! If you have questions, email me at firstname.lastname@example.org. PM’s do make mistakes. hashtag#landlordtenantmatters hashtag#CAMCharges hashtag#operatingexpenses
January 2, 2020
Who’s responsible for excessive noise in your suite? You have the right to “Quiet Enjoyment,” to enjoy and use premises in peace and without interference. A tenant's remedies for breach is damages and injunction. (NOTE: we are NOT attorneys). There are two issues here. If the noise is between offices within the suite then the tenant may have to bear the burden of remediation. If the noise is coming from the common area into the suite then this should be the landlord’s responsibility. Recently had the latter. Property Manager had several vendors look at solutions. Every time the adjacent toilets were flushed the noise reverberated throughout the tenant’s suite. Although PM initially said the Tenant would have to pay all costs, the question of responsibility should be quite clear under Quiet Enjoyment. Hopefully it will be resolved efficiently and at a reasonable cost to the Landlord. Quick heads up…if you have particularly loud employees or deal in sensitive materials and need a high level of quiet within the office, be sure to bring up installing internal soundproofing in the TI stage of the project. It will cost much more to do it after you move.
January 8, 2020
Here's something to look out for when it comes to building operating expenses. This is an item that is typically not capped because the landlord has little or no control over insurance costs other than shopping for the best price. Be prepared for this line item to be higher than projections. https://lnkd.in/ga2_xEJ
January 13, 2020
Who reviews your monthly statements? As is often the case, the accounting responsibilities are assigned to someone who was not involved in the lease negotiations and not have a real estate background. In large companies, invoices for multiple locations are sent to a corporate accounting office. But what happens if there is an error or an unusual charge? The accounting department may have a lease summary showing when rent increases. They may also be aware there may by other charges such as estimated operating expenses or parking fees. One astute accounting person recently sent us an invoice to review. The question was whether or not the amount for 2020 operating expenses was correct. What we noticed was that under the new lease extension, the tenant should not have been charged any CAM’s for the first 12 months of the term. We notified the property manager. She confirmed the error, “thanked me” and is refunding the tenant for the January payment. Be sure to review your rent bills every month.
January 17, 2020
BUILDING CLOSED? Is your building open on MLK Day? Buried in the Lease is a list of “National” holidays that your building is closed. On MLK Day, some property management offices are closed but regular services like HVAC will be provided. A very few buildings may be closed. So if you want HVAC you may get a bill for after hour usage. Check with your property management if you’re not sure. Closed buildings for MLK Day is not the norm in most markets. #propertymanager #landlordtenantmatters #BuildingClosures
January 20, 2020
There is a lot of talk AND confusion about the proposed law to "Repeal Prop 13" in CA. The title of the bill is misleading and only impacts commercial property. But what will the impact be on tenants and landlords if passed? Your thoughts? hashtag#HighRents hashtag#landlordtenantmatters
January 28, 2020
Tenant Improvement Alert!!! Don’t sign yet!
You may be given a “turn-key” build-out. You tell the landlord what you want, and they build it out at their cost. Your only additional expense may be for items you add after the initial plans are approved.
BUT, if you have an allowance such as $15/RSF with you paying any overage, be sure to get the estimated cost of construction in writing BEFORE you sign the deal and be sure that plan/cost is documented in the Lease.
Also, be sure the bid includes both “Hard” (actual contractor’s construction costs) and “Soft” (architect/permits/fees) costs. And that the stated costs are related only to your project and does not include Building work such as required ADA improvements.
February 13, 2020
President's Day? What's going on this Monday? Check with your landlord to see if they are providing full or partial services on Monday. Put this in the category of MLK Day, Columbus Day and Veterans Day. Most will at least provide HVAC. Be aware though, the latest AIR lease form does list it as a National Holiday. Don't be surprised by an after hour usage bill. hashtag#landlordtenantmatters hashtag#nationalholiday hashtag#afterhours
February 21, 2020
Another insurance issue? What if you have two or more businesses in one suite such as affiliated consultants or doctors. Do you EACH have to have your own liability policies or can you buy one policy to combine all entities? Question has come up more than once. Thoughts? Maybe form an LLC with each member agreeing to a PG for the Lease so only one policy required for the LLC ? One named individual with the others as additional insured? hashtag#landlordtenantmatters hashtag#OfficeInsurance
March 4, 2020
Can the landlord raise the cost of your parking during the term? Depends. Client received a letter that the LL was increasing the parking charges for tenants. Quick check of the lease. Rate was negotiated and fixed for the term. Client would not receive increase. Too often an overlooked item. When clients have questions or issues, IN/House is their first call. Contacted parking office, reviewed the lease with them. Client worried about their core business while we worried about their real estate. hashtag#INHouse hashtag#RealEstateDepartment
March 10, 2020
It's that time of year...ok...it's tax season but it is also the time your landlords will be sending you their annual operating cost reconciliation statement. Be sure to read it. In a typical year as we review our clients' statement we find well over 50% have errors or raise questions because of the way landlords do their accounting. If you have a large space and you have concerns, it may be worth it to contact a lease audit firm such as Cyber Lease Corporation and Terry Barger. #landlordtenantmatters #OperatingExpenses #camcharges
March 17, 2020
Holdover? If your lease is expiring in the next 2-3 months, you may want to contact your landlord NOW. With businesses shut down due to Covid-19 there are a lot of moving parts that could delay your move...attorney lease review...vendors backed up...TI's halted...If LL enforces Holdover you can be charged 150%+ in rent in your existing space after the date you were supposed to move out. #landlordtenantmatters #Holdover
March 18, 2020
A lot of folks have asked about the Force Majeure clause in their Lease. Typically, this clause only delays payment of rent but not the obligation to pay rent. It may also extend the term of your lease by any time the building may be closed. Good follow-up for RE attorneys? Comments? #landlordtenantmatters #RentPayments #forcemajeure
March 20, 2020
I have been receiving numerous calls related to leases and covid-19. In particular, questions about insurance coverage. Attorney David A. Gauntlett who specializes in insurance coverage offered this link which may help understand what is happening in this arena and what your options may be.
If you have further questions, David can be reached at (949) 553-1010 or contact me at 949 442-0922.