Commercial Real Estate Investment/Real estate management

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Expert: - 4/16/2009


Question
Discuss issues that surround the commercial tenant’s fixtures & any other improvements that are made by the tenant.

Answer
Ratanang-

Generally,the accepted practice in leasing is that the landlord retains all of the improvements that are affixed (in some way permanently attached) to the premises, and this language is included in a wide majority of leases.  The landlord and tenant usually negotiate the disposition of the fixtures and include that specific language in the lease - before the lease is executed.

It is common for a tenant to have non-standard equipment or fixtures that are specific for its business use.  The tenant will usually present the landlord with a brief legal agreement - this is separate from the lease document - to waive its' first lien rights to the equipment or fixtures in the event of the tenants default.  This agreement is usually required by the tenant's lender to protect the lender's interest in the equipment / fixtures the tenant financed.  Additionally, the lease can be amended - before the lease is executed - to stipulate the agreement of the parties regarding rights to the equipment and / or fixtures.  

Note that the entire matter of improvements to the premises, equipment and fixtures can be a matter that is negotiated between the parties in a lease negotiation.  However, expect that the landlord will probably require something of equal economic value in return if - in the unlikely event - it is asked to forfeit its rights to the base tenant improvements.  Such would be more likely to occur with a retail lease than an office lease.

Good luck.

-Jim

Commercial Real Estate Investment

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Jim Avancena, CPM

Expertise

Best qualified to answer questions that involve commercial leases, that is, basic issues as well as the often unexpected effects of the complexities and inter-relationships of the provisions a lease may contain, explain how seemingly innocuous text in your lease can have a major impact on a Tenant or Landlord and their business operations, and the common practices utilized in the industry. I can untangle most matters that may come up from the time a tenant begins searching for a office or store space and the lease acquisition process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of problems that may come up during the lease term and even after a tenant moves out. I have practical experience with most property management issues and resolving landlord and tenant disputes - especially those involving what may appear to be overcharges assessed for additional lease charges like CAM costs, operating expense reimbursement, real estate taxes, utilities, construction improvements etc. Note that I am not an attorney and cannot provide legal advice.

Experience

Thirty years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area (DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.

Organizations
Currently my three children keep me so busy that it is difficult to participate in organizations with continuing and specific time requirements.

Publications
I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 full pages) feature story on January 13, 1993; titled "Overcharging Overhead".

Education/Credentials
BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license in Maryland and the District of Columbia.

Awards and Honors
The same plaques and honors that most others in my industry have earned. I have none that I consider especially meaningful.

Past/Present Clients
Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.

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