Achieve Success

In commercial and retail property, the choices you make as the property manager regards the tenancy mix and selecting the new tenants are critical to the performance of the property. Each tenant should be well qualified prior to the lease negotiation, acceptance and lease implementation.
Qualifying the tenant is the stage before the lease negotiation. All the checks and balances will allow you to know that you are talking to the right people and that they have an established business history that is valid and real for your managed property.
So What Do You Look For in a Good Tenant?
Typically these problems are the bane of a property managers job. They are:

• Late payment of rental
• Difficulties in negotiating rent reviews
• Poor communication on current issues
• Lack of cooperation regards maintenance and building operational issues

When it comes to lease negotiation and tenant selection in a commercial or retail property, there are a few rules which can apply and help the process of tenant selection and negotiation process.

1. The tenant should provide a history of occupancy from other property that they recently occupied. This will allow you to talk to the previous landlord or the property manager to check that the tenant is of integrity and has not been of any difficulty or controversy.
2. The level of security, bonds, or bank guarantee that is to be obtained from the tenant in the leasing process will protect the landlord in the case of any lease default. Ideally you should be seeking an amount that is at least equivalent to a 3 month rental plus outgoings (including GST or other taxes relevant in your location).
3. Director's guarantees are also helpful in the leasing process although not as strong as a bank guarantee. A statement of assets will also justify the process of a director's guarantee.
4. A letter or some other form of business history from the tenant's solicitor or accountant will give you the knowledge that they have been in business for some time and how they have been trading.
5. Get a Company search to ascertain that the Directors of the Company are those that you are dealing with.
6. Get a copy of the tenant's business plan and talk with them regards the operation of their business. Find out where there end market is and how they connect to their clients. It will have relevance to how they occupy the property.
7. Interview the tenants regards the permitted use that they want to put the property towards.
8. Any lease incentives that are to be offered or paid by the landlord as part of the lease negotiation should not be provided until all the factors of the lease are satisfied such as a signed lease, deposits paid, bonds or guarantees lodged.
9. A list of tenant works for the new tenancy should be provided by the tenant so the landlord can see just what quality of fitout and occupancy is intended.

When you consider the average property and the instructions of the landlord, it is possible that other items should be added to this list. Importantly you are doing all the right checks and balances before the final lease sign off is agreed to and implemented.