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How much is the rent?

This is usually the first question a prospective tenant will ask when inquiring about a space. In fact, it should be the last. The reason for this is, before the landlord can make that determination, he needs to know more information regarding the needs of the tenant. Examples are….

  • Is there remodeling needed that the tenant wants the landlord to pay for or will the space be rented “as is”? The answer to this can make a big difference in how much the rent is. The less the landlord needs to spend usually means a lower rental amount.
  • How long of a lease term is the tenant willing to commit too? A short term will not motivate the landlord to sharpen his pencil as much as a longer term lease.
  • What is the credit worthiness of the tenant? A national company known to pay its rent on time – every time, may get a better rate than a start up company whose long term stability is unknown.
  • How much space is the tenant looking to rent? The larger the area to be rented will usually command a better rate than a smaller space.

What does the rent include?

This is a very good question and one the commercial real estate industry makes complicated for a prospective tenant. The reason for this is that different landlords include different costs in the quoted rates. It is important, when comparing properties, the tenant understand exactly what is included or excluded to be able to compare similar properties. Basically there are 3 types of lease arrangements – Gross, Modified Gross and Triple Net (NNN).

  • Gross Lease – this will include all costs associated with occupying the premises. While even this can have slightly different components, the tenant in a gross lease agreement should expect to make one rent payment which includes all costs of occupying the space with the exception of phone/internet service and janitorial costs of cleaning the space they occupy.
  • Modified Gross – this will include the cost associated with the tenant occupying their space (Base Rent) but will have some extra costs. Common examples are utility cost and CAM (Common Area Maintenance) charges. CAM is explained in more detail below.
  • Triple Net (NNN) – this type of lease is most common where a tenant occupies the entire building. In this scenario the tenant is responsible to pay all cost associated with the property. Examples are – Real estate taxes, building insurance, lawn and snow care, building systems maintenance. The base rent charged by the landlord will be lower to the tenant but the tenant must then understand how much it will cost them to pay for all the other expenses.

What is CAM?

CAM is an acronym for Common Area Maintenance. These are costs associated with the building that the landlord pays but passes on to the tenant. Examples are taxes, insurance, lawn and snow care, building systems maintenance. Depending on the property this can add about $2.75 per square foot rented to the tenant costs of occupancy. Normally the landlord will ask for an estimated CAM charge paid monthly by the tenant. At year end the landlord will then provide an accounting to the tenant for the actual costs. If they are more than the estimated payments he will ask for a CAM payment to make up the difference, or if less, a refund of the over paid CAM will be made to the tenant. Be sure you understand how the landlord will be collecting CAM from you.

What if I want to move out before the expiration of the term?

This is a very difficult question to have one answer too. A lease is a binding contract between two parties. A tenant is legally obligated for the full rent outlined in the lease if they occupy the rented space or not. The landlord must have fulfilled all of his responsibilities as well. Different circumstances can result in different answers to this. Going into the lease you should be confident that you are dealing with a reputable landlord and always have an attorney review the lease.

Do I need a real estate agent to represent me?

This is a decision each tenant has to make on their own. An agent can be very helpful in obtaining rental space. Some reasons to obtain representation are –

  • Their familiarity of what space is available may make it easier to find what you are looking for.
  • Their familiarity of how to structure a lease agreement that helps the parties reach a common ground and eventually executes a lease agreement.
  • Their familiarity with market rent prices to assure you are being asked to pay a fair rent amount.

On the other hand, if you are comfortable with what you want to lease and feel competent in negotiating a lease agreement with the help of your own attorney an agent is not necessary to work with a prospective landlord.

Aren’t all landlords the same?

This is absolutely false. Different real estate companies have varying investment philosophies. Some properties are owned by national companies and hire management companies to work with the tenants. Others are in the industry to make a fast buck by buying a property, leasing it out and then selling it. Others are in the business for the long term by obtaining quality properties and working with good tenants over a long period of time. As with all business dealings it is important to understand who you are dealing with and what their motivation is.

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