Bakers Journal

Features Business and Operations Facilities
The Lease Coach: April 2019

Leasing a Commercial Space?


March 22, 2019
By Dale Willerton and Jeff Grandfield

Topics

10 Questions every bakery should ask the landlord.

If you’re ready to open your first bakery or expand with a secondary location, you’ll need to do your homework. Bakery owners preparing for lease negotiations need to learn as much as they can about the desired commercial property as well as the landlord. Before you agree to any lease terms and sign on the dotted line, we recommend that you ask the following 10 questions.

  1. Who is the landlord? Will you be dealing with a large institution? A bank or a small, independent, “Mom and Pop” landlord? Different types of landlords will require different negotiation approaches (for example, with a large institution, you may have to wait weeks to connect with someone there to discuss a problem while with a Mom and Pop landlord, you could simply just knock on their door).  
  2. How long has the landlord owned the property? Long-time landlords will know a great deal about their own property and usually are interested in keeping it. Commercial tenants will also find that long-time landlords, typically, will have more realistic rent expectations as their mortgages can be fully paid off and will not have to charge their tenants higher rents to help cover this cost.   
  3. Where is the landlord physically located? Local landlords with office space within the commercial property of interest or just down the street are often more accessible to tenants. We remember one of our tenant clients who often could not reach his own landlord – the reason was that this landlord was a 70-year-old doctor who continued to practice part-time as well as travel. Personal meetings were made more difficult.
  4. Is the person in charge of property management local? Similar to local landlords, local property managers are also more available for tenants. In this business, it is not uncommon to see property managers overseeing a number of commercial sites and travelling between them.  
  5. What is the building’s history? As a commercial tenant, you will need to ask about both the exterior and interior history of building. With exterior history, we are referring to building maintenance. This includes property upkeep, garbage removal, and landscaping which tenants help pay for through a property’s Common Area Maintenance (CAM) charges. Tenants leasing in an older building should expect higher CAM charges to cover the additional care of such a building. Ask about what has been going inside the building as well. Are the tenants stable, has there been a high turnover of previous tenants, or has a similar-use tenant previously leased space within the property and either closed the business or moved elsewhere within the past 10 to 20 years?
  6. Who is brokering the property lease? Is this a big leasing brokerage, a real estate agent or the landlord’s son? Be mindful of what you hear from agents as well: While they must follow a code of conduct, they can only share what they have heard from the landlord about the property. As a prospective or current tenant, you may hear anything from a disreputablelandlord who may tell you anything to get you to sign or re-sign.  
  7. Who were the two most recent tenants to move in – and when?  After you are referred to these tenants, personally contact them, introduce yourself, and ask them for their thoughts and/or opinions on their own recent lease negotiations. The leasing agent may claim that he/she has only recently acquired the property listing and is unaware of all the tenants so far. Do not accept this. It is the agent’s job to be familiar with the property and who is leasing space within the property.  
  8. Who were the last two tenants to move out? Similar to the above, you will want to contact these tenants and ask for details. Press for details as to when and why they moved; where they moved; and what they thought about the landlord, property manager, and the commercial property.  
  9. Who is the property’s biggest tenant (the anchor tenant)? Anchor tenants typically attract the most traffic property, but even anchor tenants can close or move. We remember a number of tenants in a local strip mall who were surprised when the major grocery store anchor tenant moved out. Despite having a long-term lease, this grocer can often move their business but continue to pay the rent, thus disallowing any competitor to move in.
  10. Is the building for sale? Building owners looking to sell their building will have different motivations with prospective tenants. Also, consider that you may like the current landlord but dislike the new landlord.

For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please email your request to JeffGrandfield@TheLeaseCoach.com.


Dale Willerton and Jeff Grandfield – The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Dale and Jeff are professional speakers and co-authors of Negotiating Commercial Leases & Renewals FOR DUMMIES (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com or visit www.TheLeaseCoach.com.