Commercial real estate outperformed the five years before the pandemic in quarter one of this year.
That's good news for you as an investor. However, you still have potential risks and considerations to keep in mind.
Do you know what to do if your renters breach your commercial property lease?
If not, you're about to find out.
Owning commercial property is a great business venture, but it comes with unique challenges. This lease management guide aims to shed light on common terms that are breached in commercial leases.
As a business owner and landlord, this information will help you navigate the legal landscape more effectively.
Common Breaches
Unfortunately, numerous types of breaches are common across the industry.
Late rent payments or no payment is one of the most prevalent breaches that landlords deal with. This can cause a lot of issues for you and must be addressed as soon as possible. The rent due date and amount should be clearly stated, so there's no miscommunication or confusion.
Violation of insurance requirements is another common breach. If you've stated in the lease that renters must maintain specific insurance policies, you'll need to ensure they are in place. You don't want their insurance to lapse.
Unauthorized subleasing is also common. Subleasing is more common in commercial apartment complexes than in office spaces.
You'll need to be clear in your lease on what's allowed in your commercial space. A lease breach may occur if the tenant performs or allows activities not in the lease.
Your tenants should not alter your property or make changes without your permission, either.
Understanding Legal Ramifications
If the lease agreement is broken, you can and should take action. There are different legal consequences depending on the severity of the breach.
An eviction is an option for non-payment. However, this should be avoided if possible, as it can be a timely and costly process.
Financial penalties are common consequences for a breach of lease. You may require tenants to pay for the damages, pay fines for late payments, or cover the cost of legal fees.
If your tenant is consistently breaking the term, you do have the option to terminate the lease agreement.
Making the Right Decisions
Before making any decisions, be sure to provide a notice of breach of lease to your tenants.
If they don't read the lease terms thoroughly, they may not realize they have done anything wrong. While this isn't your fault, talking to them may prevent expensive legal battles.
Be sure to seek counsel as well. There are laws that you must follow when taking any of these actions. Consulting with a professional on lease management will ensure you're protected.
The Power of Effective Lease Management
As you know, commercial leases have their legal risks that require your consideration and attention. By taking the time to understand the common terms that are breached, you'll be better equipped to avoid issues with your tenants.
Effective lease management is the cornerstone of a successful commercial property portfolio.
Don't wait to take action. Our team at PMI is the best property management company and we have more than twenty years of industry experience.
For lease management tips and services, give us a call today!
