Dos & Don'ts

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If a prospective tenant asks to rent space in your center beginning on a day past the first of the month, you should prorate the rent for the remainder of the month. Spell this out in the lease carefully. Otherwise, you and the tenant could end up in a dispute over which calculation method to use. That’s because there are several methods to calculate prorated rent, and each one gives a different result. It’s important to carve out the right to use the method...

Under certain circumstances, you could get stuck with a big bill for a brokerage commission or transfer taxes if your tenant assigns its lease or sublets its space. For example, you may have a listing agreement with a broker that entitles it to a commission for any transaction involving your building or center. Or a tenant may fail to pay real estate transfer taxes due on an assignment and leaves you with the problem of getting rid of the resulting lien on your building...

If your lease with a tenant that’s making improvements or doing other construction in its space requires the tenant to give you documents—a certificate of occupancy from your local government, contractor affidavits, or lien waivers—to prove that the work was done properly, you might’ve required the tenant to give you another vital piece of information—drawings of the finished construction work. If you didn’t require “as-built&rd...

When you buy an office building or shopping center, don't rely on the prior owner's space measurements when you set your tenants' rent. Always remeasure each tenant's space, and then use your measurements to calculate the rent before you negotiate a new lease. Otherwise, you could lose money. That's because by putting a prior owner's incorrect measurements into a new lease you might get less rent than you could have asked for because the s...

It's important to make your notice to a tenant valid if your attorney sends it. If a tenant violates your lease, you're probably required to notify the tenant in writing that if it doesn't cure—that is, correct—the violation by a set deadline, you can take action against it. But it's common for owners to ask their attorneys to send this violation notice on their behalf, because they think that will show the tenant that they're serious and...

When you're negotiating a lease with a strong tenant that wants an exclusive to sell certain merchandise at your center, it may demand that you agree not to rent space to any other store that has a “department” selling the prohibited merchandise. If you agree to this restriction, you may be setting the stage for a potential dispute with the tenant. That's because the term “department” is so vague that you and the tenant may not agree abou...

When describing management fees that you'll pass through as a CAM cost or an operating expense, don't depend on synonyms for “manage” or “management” to convey your meaning. If you use only the words “supervise and administer” or “supervision and administration” a tenant may argue that the lease doesn't authorize you to pass through “management” fees. So you may get stuck footing the bill for them, ...

Make sure that your property manager is vigilant about keeping maintenance and inspection records. They can help you refute claims made by your tenants or their employees that you or your management staff knew about a dangerous condition at your property and failed to fix it.

Tenants sometimes complain that they don't receive notices sent by owners, which can lead to arguments if they lose valuable lease rights or options, or wind up defaulting on their leases because they didn't know that their owners were trying to contact them. This doesn't affect only your tenant negatively, though. You can lose money if you need a response from the tenant, especially when time is of the essence, but the tenant didn't realize it needed to...

Before you sign a lease, have a local attorney review it. Since real estate laws aren't uniform among the 50 states, it's important to consult an attorney who can practice in the state whose laws will apply to the lease. Otherwise, you risk getting burned by unfamiliar state laws—or losing out on important state-specific rights.