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06 Nov 2015

Every developer and general contractor needs to be aware of circumstances where their tenants may cost them significant amounts of money. Tenant mistakes can often be extremely expensive if the developer or general contractor has to deal with the financial repercussions of these mistakes. Common tenant mistakes that may cost a fair sum of money include building renovation, tenant improvements, injury or any other causes for liability for the premises, tenant cash flow problems, tenants that don't move in on time, and tenants who misrepresent themselves during lease negotiations. general contractor san francisco

Discussed listed below are some of these common tenant mistakes and ways that developers and general contractors can avoid them.

Building renovation and tenant improvements. Most tenant leases for commercial properties will incorporate a provision or provisions that prohibit tenants from making renovations, changes, or improvements for the property without permission or approval in the owner of the property. In commercial construction projects, developers and construction management generally do not want tenants making decisions concerning the construction of the property without conferring with them first. The reason behind this is because tenants may add or renovate the exact property in such a way that could lower the need for the property.

This mistake can be prevented very easily, however, by reminding tenants when they sign the lease that they can cannot make changes to the property without asking permission from construction management and in the owners of the property. Its also wise to consult with your attorney you need to include in the lease the availability that if the tenant does choose to make alterations, they will be responsible for paying for the task as well as for any financial loss suffered due to the changes. This will make sure that you are legally resistant to the costs associated with tenants who make an unauthorized building renovation or tenant improvements.
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Injuries around the property and other reasons for liability.In some cases, when someone is injured on the commercial property, whether or not they are a tenant, you could possibly end up suffering the outcomes. For example, if a customer of your tenant gets hurt on the premises, even if the tenant caused the injury, the landlord or home owner may be liable for the damages from the injury. And if a tenant is hurt, especially on account of a construction issue or through the commercial construction process, then your general contractor or construction management may be held liable for the damages from the injuries as well.

Even though it must be negotiated carefully with the aid of your attorney, you'll be able to construct certain lease provisions to limit your liability if the tenant or a customer of the tenant is injured around the property. You can also educate your tenants about approaches to stay safe and to keep their customers safe for the property, and you should observe the commercial construction process closely to make sure the project is being done well and safely.

Tenant earnings problems. Owners of commercial property count on their tenants to pay for their rent and any other fees or costs properly. When the commercial tenant is struggling financially, you could have a problem collecting rent on a regular basis from the tenant.

Much like many other tenant mistakes, place provisions into the lease that allow you to pursue certain remedies, like eviction or monetary damages, if the tenant will not pay rent punctually. However, if the commercial tenant files for bankruptcy, you should proceed with caution. When a company files for bankruptcy, all court proceedings against them are halted. If the tenant files for bankruptcy and you then try to evict the tenant, you will not be successful with the eviction before the bankruptcy proceedings are gone, usually in a few weeks. If you think the tenant will declare bankruptcy, it is to your advantage to begin eviction proceedings against them before they file.

Not honoring the relocate date.Owners of commercial property often make an effort to schedule tenant move in’s such that the property will always be earning money. Although transfer dates are often negotiated when the lease is signed, sometimes tenants tend not to move in as scheduled. But by delaying the relocate date, a tenant could possibly be costing you money, particularly when part of the tenant’s rent comes from profits they make by operating their business.

To prevent this from occurring, place a provision in the lease that imposes fees or a penalty when the tenant does not transfer when they promised they would. This can make sure that you do not lose fault the rent based on their profits if they are not prompt about getting into the commercial property that they're renting from you.

Tenants who misrepresent themselves during lease negotiations.Particularly when negotiating provisions about rent, house owners and landlords often rely on the tenant’s business records to discover how much to charge to book and any additional costs. But also in some cases, a tenant may make an effort to show a potential landlord that they are more successful than they come in order to get a desired location, or that they are less successful than they are to negotiate lower rent.

Whenever possible, check into the business’s success yourself prior to making any final decisions about leasing. Furthermore, add to the lease that the tenant will be accountable for any misrepresentations made during lease negotiations.

Even though some most common tenant mistakes, like building renovation, tenant improvements, injuries about the property, tenant earnings problems, not honoring the scheduled move-in date, and tenants who misrepresent themselves can wind up costing you money, it is possible to avoid these unnecessary expenses by subtracting precautions. You and your general contractor and construction management need to carefully write the lease, keep tenants informed, and pay consideration to any renovations the tenant makes to prevent these issues once your commercial construction project is over and tenants set out to move onto the property.

Rami Tawasha

An experienced civil engineer with over 15 years of experience, Rami Tawasha serves as a senior project manager for Constructive Solutions, Inc., an industrial general contractor based in San Mateo and San francisco bay area. Under his leadership, the firm performs services including design build to tenant improvement and renovation for corporate offices, medical facilities, building renovation, seismic retrofit, industrial and retail spaces across the San Francisco Bay Area.


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