Commercial property is often considered an endeavour reserved for those with millions of euros to spend on office blocks, industrial factories and shopping malls. But with the Irish economy growing, there are plenty of opportunities for smaller enterprises.
Regardless of size, all commercial landlords have responsibilities to their tenants, their tenant’s staff and or customers. Commercial landlords must navigate many commercial laws, rules and regulations. This guide will explore the pros and cons, the rights and responsibilities, and the critical legislation you need to know about.
Benefits of Becoming a commercial landlord
The main objective for any commercial landlord is to maintain the maximum income via rent while keeping the building to a standard where it will realise its maximum asset value upon sale.
There are four main benefits of being a commercial landlord:
- Achieve comparatively high returns.
- Diversification of your investment portfolio
- Maintain a steady, long-term income
- Realise long-term capital growth
To maximise your returns, some key considerations should not be overlooked; the most important ones are:
Understanding Your Tenant’s Business
The landlord-tenant relationship is extremely important; by their very nature, commercial leases often run far longer than their residential counterparts, thus relationships must be nurtured longer.
It’s also important to understand your tenant’s business model so that you can ensure the safety of your tenants and any other occupants related to their business. By understanding your tenant’s business, you will build rapport by providing the amenities they require which will provide you with invaluable insight into what provisions need to be made to accommodate them. For example, a storage warehouse will require utterly different insurance, health and safety requirements and fire safety plans compared to a populated office setting.
Negotiating the Lease Agreement
Lease agreements are more complex than residential ones because commercial property is not a one size fits all exercise. Technically every term on a commercial lease can be negotiated.
As the landlord, it’s essential to remember that virtually every tenant will want different terms, so it’s crucial to determine what you will be happy with and not to move past that point.
When negotiating the lease, you will need to build in wear and tear; for example, if the lease is being let for industrial use over 10 years, you need to quantify what wear and tear will be done to the building in that period and how that will affect the overall asset value. You then need to account for that figure into your rental premium.
Tenant Screening and Background Checks
One of the essential parts of a commercial lease is tenant screening and background checks.
The key things to look for in a commercial tenant is
- References from previous landlords
- Any Incidents in previous premises
- Any police or court action
- Business Trading History
The Importance of Clear and Detailed Lease Terms
Always remember that contractual agreements favour the party who didn’t draft them in the event of a dispute. So it’s vital to ensure that lease terms are as detailed and concise as possible.
It’s essential to clarify what will happen if the terms are broken. That way, it protects you and the tenant by knowing what’s expected of them.
Maintaining the Property and Conducting Inspections
As with any lease, the landlord should conduct regularly scheduled inspections. This serves two purposes; the first is the most obvious, which is for you to have the opportunity to make sure the property is being kept inside the lease terms. It also allows you to ensure the property is being used for its leased intention and that there is no damage to the property.
Dealing with Late or Missed Rent Payments
Another onerous part of commercial lease ownership is rent collection, which is particularly laborious when payments are late or missed. One of the most common causes of detriment in a landlord-tenant relationship is rent collection.
Using a third party for rent collection is advisable, such as a property management specialist. Not only can this help maintain the relationship between tenant and landlord, but it also invariably ensures rent is paid as quickly as possible.
Handling Lease Renewals and Terminations
When dealing with lease terminations and renewals, it’s always better to consult a professional third party. If you have a property manager, then this will usually be facilitated by them.
Avoiding Legal Disputes with Tenants
Another reason many commercial landlords opt to use a property management specialist is to avoid legal disputes with tenants. A property manager can act as an arbitrator if any issues arise and ensure the issue is brought to a satisfactory conclusion without the need for legal intervention.
Often, a tenant-landlord relationship becomes personable, and neither party wishes to budge when disputes arise. Bringing in a third party to deal with issues and provide legal reasoning to their resolve often means that the tenant-landlord relationship can remain harmonious.
Creating a Positive Tenant-Landlord Relationship
As mentioned in several sections above, the most crucial relationship when dealing with commercial leases is between the landlord and the tenant. The best way to preserve and nurture this relationship is to have a third party deal with the parts that could cause animosity or tension or perhaps you instead purchase a commercial property and want to maximise your returns without dealing with the day-to-day monotony. In that case, you can employ a commercial property manager to deal with everything from selecting tenants, creating lease agreements and collecting rents.
Kpm Commercial Lease Management
As your property portfolio grows, particularly with a mix of commercial, residential and industrial use, things can quickly get complicated.
KPM Group can help maximise the long-term value of your property portfolio by implementing customised asset management strategies and taking the day-to-day stress out of managing your properties.
Whether retail, commercial, industrial or residential property, we are highly experienced and trusted in managing property portfolios all over Ireland.
When you choose KPM Group for your property management requirements, you enjoy the rewards of your investments, knowing KPM Group is maintaining and enhancing your portfolio.
Contact us today for an informal chat about how we can help you maximise profits from your commercial property.
