Thursday, August 25, 2011
Wednesday, August 24, 2011
Monday, July 11, 2011
Monday, June 13, 2011
Let’s say the gross square footage of an office building is 100,000 square feet. The gross square footage of the building is everything contained within the exterior walls. Let’s say that the total square footage of the common areas of the building is 15,000 square feet. This leaves 85,000 sq.ft. of usable space (i.e. suites).
To calculate the load factor we take the total square footage of the common areas, (15,000 sq.ft.) and divide it by the gross square footage of the building, (100,000 sq.ft.). The formula looks like this:
15,000/100,000 = .15. Therefore, the load factor of the building is 15%.
Let’s see how the load factor relates to leasing space within the building. Let’s say that a tenant plans on leasing a suite with 1,200 square feet of usable space. Knowing that the load factor of the building is 15%, the tenant could then calculate the rentable square footage of the suite (1,200 + 15% = 1,380 sq.ft.). So if the monthly rent for the suite is $2.00 per square foot, the tenant’s total monthly rent would be $2,760.00:
(1,380 rentable sq.ft. x $2.00 per sq.ft.= $2,760.00).
The rentable square footage is always higher than the usable square footage because it includes both the tenant’s suite and their percentage of the common areas.
When shopping for space, it’s important for tenants to understand and compare the load factors of the buildings they may be interested in. Higher load factors mean that more of a tenant’s monthly rent will be dedicated to common areas and less to the suite they occupy. That being said, buildings with higher load factors often have amenities, such as spacious lobbies or atriums, which many tenants may find appealing.
Saturday, May 21, 2011
In order to fully understand dual agency, it is important to understand that as far as representation is concerned, the law views the broker of record as the agent and the salespeople that hang their real estate license with that broker as licensees, not as agents. What this means is that a dual agency can exist even if two agents are involved in a transaction because they may share the same broker.
This is particularly important for companies that use a single broker of record for multiple sales offices. In such case, if a licensee from the Downtown office makes an offer on a listing held by another licensee in the Westside office, a dual agency must be disclosed to the parties. Again, this is because there is a single broker of record, agent, for both offices and both licensees are working under that broker/agent. Clearly the same is also true for a single licensee who is acting on behalf of, say, a buyer and seller.
It is important for brokers to understand all the laws surrounding dual agency and how these laws affect their duties of disclosure to their clientele.
Wednesday, May 4, 2011
Before agreeing to arbitration, there are a few things to consider. First, the process for preparing to appear in arbitration can be identical to preparing for an appearance in civil court. That is to say attorneys can be retained, depositions can be taken and evidence can be requested and exchanged. Therefore, the preparation costs can be the same as for a traditional court case. Also, the final decision of the arbitrator is binding and cannot be appealed, regardless of the legal standing for the decision. In other words, the arbitrator’s decision can be totally arbitrary and without legal precedent or standing. In addition, the cost/fees for the arbitrator can be higher than court fees and costs depending on the length of the arbitration. Finally, there is no assurance that an arbitrator’s decision will be any better or worse than that of a judge. That being said certain ADR companies such as JAMS employ retired judges almost exclusively. This is not to say that binding arbitration is without merit, it is potentially faster than the civil courts and some argue have more predictable outcomes than a jury trial. Also, if privacy is an issue, ADR can be much more discreet than the civil court system. In addition, in the event that there are technical elements to a case, many attorneys prefer to argue in front of an arbitrator with some level of technical expertise as opposed to a jury of laypeople.
A few precautions can be taken prior to agreeing to an arbitration clause. First, make vetting the arbitrator a part of the agreement. Selecting an arbitrator with an extensive real estate background would be wise. Also, the parties may want to consider setting financial limits. For example, the parties could exclude any disputed amounts that qualify for small claims court and/or placing a cap on the amount subject to the arbitration.
Monday, April 18, 2011
Monday, April 11, 2011
Sunday, April 10, 2011
Candidly I was shocked when I received the GSA's version of a request for proposal/solicitation. The document was over 100 pages. It was overwhelming to say the least. In addition to the volume of the solicitation, it required a great deal of attention to detail. Landlords are required to respond to a number of requests, surveys and questions. A potential property can be disqualified if just one error is made in response to the GSA’s solicitation. This is just the start of the process of leasing space to the Federal Government. If our building is selected, we will begin the process of negotiating the lease document and constructing the tenant improvements. I have been told that neither is easy because of the difficult requirements set forth by the GSA.
Because of the importance of these transactions, I sought out a consultant that could provide guidance from start to finish. As it turns out, two former GSA employees have started a company that provides such consultation. It is called Unified Interest (www.unifiedinterest.com). They offer a comprehensive set of consulting services for dealing with the GSA.
Considering that the U.S. Government is expanding quite rapidly, the likelihood of leasing space to them is greater now than ever. Landlords, and brokers for that matter, should seriously consider utilizing the services of expert consultants to help them through the rigorous process of completing a lease transaction with the U.S. Government. Here's a link to an interesting article relating to GSA leasing. www.ccim.com/cire-magazine/articles/gsa-way
Wednesday, April 6, 2011
With that in mind, all leases have a section where the premises are described. Many people feel compelled to include the square footage as a part of that description when preparing the lease. I urge against that. It opens the door for disputes during the term, such as tenants wanting to renegotiate their rent based upon a discrepancy in the square footage of the space. In other words, in the lease the landlord states that the square footage is 1,000 square feet, but two years into the term the tenant decides to measure the space and comes up with 975 square feet. In addition, the California Court of Appeal has weighed in on this matter in the matter of McClain v. Octagon Plaza. For further information visit http://www.gordonrees.com/publications/viewPublication.cfm?contentID=576
If it is necessary to provide the square footage in the lease, have an attorney draft language that specifies how the space was measured and by whom, and that the Lessor and Lessee agree upon same.
Thursday, March 31, 2011
Despite its importance and the requirements of the lease, it is not uncommon for tenants to make completing the estoppel a low priority. This can lead to a delay in closing the sale transaction. Depending on the language of the lease, the landlord has a few remedies against the tenant. First, he can pursue a breach action against the tenant. This option is probably not practical considering the time required and the fact that most buyers do not want to inherit a lease that is in breach. Secondly, many leases have language which allows landlords to provide an estoppel on behalf of the tenant if the tenant refuses to provide it. That being said, most buyers prefer to have an estoppel provided by the tenant themselves. Perhaps the most effective option is a monetary penalty. Try adding language to your leases that allows for charging an amount equal to one month’s rent. This could be the most effective way to motivate a tenant to complete an estoppel certificate.
One last word on estoppels. It's not unsual for a buyer or lender to add language to an estoppel that essentially amends/modifies the lease rather than just confirm its terms. Tenants are under no obliation to execute such an estoppel.
Saturday, March 19, 2011
One inherent problem with using the CPI as an index for adjusting rent is that landlords are forced to wait a few months before billing tenants for the newly adjusted rent. This problem is a result of the fact that there is a delay in the publication of the CPI. In other words, the CPI for January may not be published until March because the Government must gather and analyze data prior to releasing the index to the public. This forces landlords to bill tenants retroactively for the adjustment in rent each year. If January is used as the month that the rent adjusts each year, then landlords must wait until the CPI for January is published at some later date in order to know exactly how much to increase, or decrease, the rent. Besides being inconvenient, retroactively billing a tenant causes budgeting problems and accounts payable issues for tenants not to mention cash flow planning problems for landlords.
One solution is to set the CPI index date as a date prior to the rental adjustment date. In other words, separate the two dates. If a lease begins in January and the landlord would like to bill and collect the adjusted rent annually in January, he should set the CPI index date as the month of November (i.e. two months prior). In doing so, the landlord can be assured of having the published CPI index by the time he is ready to bill the rent for January. The difference between the November CPI and January CPI will be almost certainly be negligible, so there is little downside for either the tenant or landlord.
Conceptually, and in an abbreviated form, the lease language might read: "The monthly rent shall be adjusted annually in the month of January. The adjustment will be based upon the difference in the CPI between the months of November 2011 and November 2012…"
Tuesday, February 22, 2011
However, it is important to note that many of these certificates of insurance contain disclaimer language such as:
THIS EVIDENCE OF PROPERTY INSURANCE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THEADDITIONAL INTEREST NAMED BELOW. THIS EVIDENCE OF PROPERTY INSURANCE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE
While there is no reason to believe that the certificate is inaccurate or fraudulent, the landlord needs to be aware that these certificates do not guaranty the information they contain is correct or, in fact, an insurance policy exists at all. Keep in mind, most of the time these certificates are issued by the agent and not the insurance company itself.
To be sure, a landlord should contact the insurance company directly and request a certified copy of the actual policy.
Monday, February 21, 2011
- Very specifically (i.e. Metal fabrication operation.)
- Very generically (i.e. Industrial manufacturing and all other legal uses.)
Whether repping the landlord or tenant, be diligent when describing the tenant's use in the lease.
Sunday, February 20, 2011
A waiver of subrogation would disallow the insurance company from taking such action and pursuing the third party.
Saturday, February 19, 2011
At a minimum, when negotiating a lease document, brokers should make sure that tenants are aware of all the costs associated with the lease. If you are unsure about such costs, ask the owner for an operating budget for the building or simply ask for a breakdown of all costs for which the tenant may be liable. Negotiating a cap or fixing the amount of such costs should be done during lease negotiations.
Think of it the same way you do when purchasing a car. There's the sticker price and then there is the "out the door" price with all the extras.
If the tenant subleases any amount of space less than 5,000 square feet or subleases for anything less than the entire three years of remaining term, then he should use a sublease. If, however, he subleases the entire space for the entire remaining term, he should use an assignment form.
Rules of Thumb:
- Less than entire space= Sublease
- Less than entire term= Sublease
- Less than entire space and less than entire term= Sublease
- Entire space for entire remaining term= Assignment