Commercial Property Leasing Specialists - How to Review Leases and Tenant Mix

When you as the property manager take on a new property management, the most important part of the handover process will involve a review of all current property or tenancy leases. Leases form the backbone of the tenancy mix and the rental or income profile. An investment property without well written leases will be difficult to sell and or market.

The main skills to develop as a property manager are in documentation and lease interpretation. A property with many leases will always be complex when it comes to the lease review process. Each lease may be unique and different, and on that basis should be completely reviewed with regard to all terms and conditions. Look for the differences in the leases, because they will be there.

It will take time to capture the necessary critical dates and the terms and conditions that affect occupancy. The critical dates and the important terms and conditions of the lease would normally be entered into some form of software diary program specially designed for lease documentation. This allows you to stay on top of the main events from the lease and serve the necessary notices as appropriate and at the right time.

Here are some of the big issues to look for when it comes to lease interpretation and review.

The identification number or reference suite number for the tenancy should be unique and different. It may also refer to some reference point within the property plans or survey plans. If these plans exist, it pays to get a copy of them as part of the handover process.
The lease will make reference to the names of the landlord and tenant. These will be the legal identities on which any notices are served under the terms of the lease. There will also be addresses relating to the services of notices.
The status of rent charges and outgoings charges raised in the monthly rent invoices should be checked against the lease. Make sure that all rent reviews and outgoings charges or reconciliations have been correctly handled.
The demised area and the permitted use for the premises will be detailed within the lease. The demised area refers to the location of occupancy, and the permitted use refers to the use that the premises may be put to. Importantly the permitted use should be in accordance with the property occupancy certificate and the zoning relative to the property location. Check that the tenant is using the premises in accordance with these factors.
The term of the lease will be the initial term of occupancy. That will normally be a number of years and or months. The start and end date of the lease will be relative to the lease term. These dates are critical dates and should be entered into your property diary process with a necessary lead time for any action.
At the end of the initial term of lease there may be an opportunity of lease renewal for the tenant to consider. This renewal term will also be a number of years or months as the case may be. The dates relative to the time to exercise of option should also be entered into the diary process.
The rent review process throughout the term of lease may vary in type and timing, and set dates will apply to the review process. The rent review dates are also critical dates to enter into your diary process.
The lease will normally refer to obligations of the tenant regards outgoings and property expenditure. In many cases the outgoings will require contribution from the tenant during the lease. As to what outgoings are contributed towards by the tenant will also be detailed in the lease documentation. Given that the outgoings clause of the lease is so important, it pays to spend time in the interpretation and capturing of the clause detail. Read and understand it fully.
Special areas and other factors of occupancy such as car parking, common areas, and access points should be identified in the lease document. It is likely that certain rules and regulations will apply to these special areas and how they are to be used.
A lease will normally feature specific terms and conditions that apply to the landlord and the tenant. A complete review of these terms will help you understand other matters of importance relating to these parties.
Insurance obligations commonly occur within a lease document. It may be that certificates of currency are required each year to evidence the existence of the required insurance policy. Plate glass insurance is a common one to look for.

So these are some of the main items relative to a lease review process. Given that each property is unique and special, other situations and obligations can exist within the lease. A property manager should be very comfortable and consistently accurate in their review of lease documentation. If any terms of lease cannot be understood or recognised then a property solicitor should be involved to assist lease interpretation. When in doubt, ask questions. Errors in lease interpretation will normally cost money to rectify.

If you want some more tips and ideas to help your commercial real estate agency and convert more opportunity into listings and commissions, you can get a free ebook of tips and tools at

John Highman is an experienced Commercial Real Estate Agent, International Speaker, and Sales Coach.

Original article