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When transitioning from residential or simply starting your investment portfolio in commercial real estate, it is important to remember one thing: commercial leases are not the same as residential. Commercial leases are subjected to a much higher percentage of risk if not properly structured.
Elise Batsel has made it her business to ensure landlords are protected in any commercial lease issue from the ground up. As counsel with the Tampa firm Phelps Dunbar, LLP, Elise specializes in commercial real estate land-use and zoning. Elise represents developers and institutional lenders in acquisitions, dispositions, financing and transactions as well as all aspects of commercial leases. In this episode, Elise discusses seven hot-topics all landlords and owner/operators should know about commercial leases.
- Commercial vs. Residential Leases
- Commercial properties have different costs and expenses that can be transferred to tenants: common area maintenance expenses (CAMs)
- CAMs may include: utilities, landscaping, management fees and other costs associated with owning and operating commercial properties
- CAM and Triple Net Leases
- Triple Net Lease – For landlords and tenants who want stability; does not account for unanticipated expenses or for properties without a familiar investment history
- CAM lease – Serves as umbrella to protect landlord/owner from future costs and expenses incurred from property management; specifies expenses and tenant liabilities
- Tax Implications
- Though not frequently addressed in lease, tax implications are a major tenant-landlord discussion that could be beneficial for both parties
- Leases can stipulate landlord ownership over tenant-improvements with proper recompense for tenant
- Americans With Disabilities Act (ADA)
- Commercial real estate considered public accommodations and subject to more ADA compliance regulations
- Represents huge liability for landlords not in compliance
- Sub-letting and Tenant-Assigned Leases
- Landlords can address sub-leasing and assigning terms in commercial leases
- Landlords entitled to portion of income from tenant leases
- D-I-Y Leases
- Do not attempt to draft generic commercial leases if self-managing property
- There are many changing facets to follow when drafting commercial leases
- If drafting your own lease, have attorney or specialist review
- Protection Against Bad Tenants
- Always ensure strong deposit from tenant
- Small-Claims Court
- Write effective demand letter to tenant
For any commercial lease, zoning or land-use issues and questions, Elise can be contacted by phone at 813-472-7564 or through email at firstname.lastname@example.org
For even more information on commercial leases as well as landlord and tenant relationships, Elise suggests the following articles: Tenant’s Checklist of Silent Lease Issues and Model Landlord’s Checklist of Silent Lease Issues – S.H. Spencer Compton, Esq. & Joshua Stein, Esq.