Some Real Life Tenant Adventures - Believe It or Not
Often you hear stories that seem incredible at first blush but the teller is so convincing that you kind of shrug your shoulders and say, Maybe that's true!" Every time there's a fire in California, we hear stories of the Scuba Diver found in the middle of a burnt out field with all his equipment on. Everyone was to assume he got there by being scooped up by one of the helicopters that brought water from the local lake to fight the fire.
And I have a bridge to sell in Brooklyn (for you guys in LA, that's where the REAL Dodgers played)
Here We GO!!!!
Throughout “What They Forgot To Teach You At Tenant School”, We have tried to highlight the potholes and "heads-ups" we've seen regarding every one of those topics. Just when we thought we'd seen it all, some inventive landlord comes up with another angle.
Did you read the chapter when we told you about making sure your broker (or you if for some strange reason you're not using a broker) track the deal in a clear written sequence? It helps to avoid "Some-timer's" disease. It's that disease landlords tend to get around deal consummation time-sometimes they remember, sometimes they don't. Here's a deal where we had more documentation than the national budget until Mr. Murphy (Murphy's Law for you beach bums waiting for the Summer winds) showed up.
Truly one for the books
For the past two years we have been working on an expansion and extension of a small space. Sounds like a no brainer - wrong.
Just after we started the negotiations, the building went into foreclosure. The bank (a large California based institution) hired a broker to represent them both in the sale of the property and our little deal. It gets better!
We struck a deal, memorialized it in no less than four written documents. The critical issue was the tenant improvement allowance. Landlord approves a $51,000 allowance to cover hard costs (actual materials) and further agrees to pay all "Soft Costs" (permits, architectural, etc.) that are above and beyond that. Let's go to leases. Not so fast!
First the brokers find a buyer for the building who agrees to all the terms of our negotiated deal. We only need to finalize what we're getting for our $51,000 hard costs. Then the bank fires their asset manager, and then the new guy (his former boss) takes over and blows apart the sale. Then he fires the broker. Amazingly, our deal still looks good, for now.
Let's go to lease! Remember a previous chapter about signing the landlord's standard lease? Well the landlord and their attorney tried to modify a NNN lease form into a bastardized modified gross lease. What a challenge (the attorney really tried). Unfortunately, there was a BIG error that actually had nothing to do with the NNN, FSG, MG, PGA, or NFL. The attorney stated in the lease that the $51,000 included ALL TI costs-hard and soft. OOPS!!!
Did the banker say OOPS? I think NOT!!! With hard and soft costs now being about $74,000, his response was to split the additional $25,000 and amortize the tenant's overage at 9% over five years adding about $.10 PSF per month.. Thanks a lot!!!
Ok all you attorneys out there! They made an offer and we accepted. The memorializing of that agreement in the form of a lease was mis-documented. Now the banker claims there never was any acceptance. Take it or leave it!
We're still fighting for our client but…
Lesson: It ain't over 'till the check clears or Find a building that will never be sold, the bank won't fire their asset manager then fire their broker, then renege on a sales agreement, then renege on a lease agreement, then have their lawyer memorialize the lease incorrectly in their favor. Now that shouldn't be hard!!
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