Property ownership important to those leasing space

At one time, commercial buildings in smaller markets usually were owned and managed by individuals or couples who were easily accessible. These days, however, buildings are just as likely to be owned by large corporations based overseas and managed by companies headquartered out of state.

Due to the many legal and practical aspects of ownership, the first step in leasing commercial space is to find out who owns the building, who will manage it and who is authorized to speak for the landlord. In other words, who will the real estate advisor be dealing with in a lease transaction? Will it be the landlord, a property manager or the landlord's commercial broker? Consider it a red flag if you can't get clear answers to these simple but very important questions.

For example, an advisor can spend countless hours in a lease negotiation, only to find out that the person they have been dealing with lacks the authority to speak for the actual landlord.

Although this doesn't happen often, an experienced real estate agent can eliminate the risk entirely by asking a few key questions early on. Next, they can easily confirm the information they've received (including the owner's name) by visiting their local property tax office in person or online.

Beyond knowing the property owner's name, the agent representing the prospective tenant will want to know more, including: Is the operation healthy? Is the property well managed? What's it like to be a tenant in their building? Getting the answers will require a bit of investigative work.

First, the agent will need to check with the public office where the real estate documents have been filed (often referred to as the "recorder's" office). That will reveal whether there are recorded loans or mortgages on the property. The more financial burdens, the more likely it is that there are other investors behind the scenes.

Public records may also offer additional clues about the character and business practices of the landlord. For example, if the property tax records show that the owner is delinquent on paying his taxes, he may be equally slow in addressing his obligations to tenants.

After gleaning all available information from the public records office, the commercial agent should visit the clerk's office for the local trial court. Assuming that the court records can be accessed and searched, the agent should look for the owner's name in the records of defendants and plaintiffs. It's not a good sign if their name appears frequently in litigation either as a plaintiff or a defendant. It's always preferable to find a landlord with a less litigious background; one with a history of solving real estate-related problems outside of the courtroom.

Before signing a lease, tenants should know what it is like to deal personally with the prospective landlord and — if there is one — the building manager and/or management company. The simplest way to find out is by talking with the other tenants and asking a few questions. What do they think are the pluses and minuses of having their business in the building? How does the landlord respond to requests for maintenance and repairs? How well does the HVAC system work? Have there been any problems with security?

Also, if the lease space is occupied by a tenant who is leaving, it's a good idea to find out the reason(s) behind the move. If it's because the current tenant thinks the landlord is impossible to deal with or because the neighborhood is going downhill, the prospective tenant or commercial advisor should check further to see whether that's true. And if the landlord owns other buildings, the tenants at those properties can also be a great source of information.

Finally, before approaching the bargaining table, always check out the owner's finances and reputation. Without a realistic sense of the financial strength, business reputation and staying power of the landlord, it's impossible to gauge just how much you can push for concessions or services, let alone whether you want to do business at the address.

If you're a tenant seeking commercial space to lease, you can be sure that a careful owner will thoroughly investigate your business background, credit worthiness and general reputation. It's completely legitimate for you, or your commercial advisor, to have the same knowledge.

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Property ownership important to those leasing space