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from Twitter https://twitter.com/AustinTenantAdv via Blogger Bryan thanks for following me on Twitter! https://t.co/m7fVh3gxiG The following post is copyrighted by Austin Tenant Advisors - . When signing a commercial real estate lease (office space, retail space, warehouse space) you are typically committing to either 3 year, 5 year, or sometimes longer lease contract and you are legally obligated to fulfill the entire obligation regardless of whether or not your business succeeds or fails. You have the best intentions to create a successful business however sometimes things just don’t go your way. For example when searching for warehouse space for rent in Austin Tx expect to sign at least a 3-5 year lease. If you find yourself in a situation where you need to close your business however still have lease term left on the lease there are some ways you can get out of your commercial real estate lease. 3 of these options will keep your good credit in tact, however one option will not. Sublease Most lease contracts have a sublease clause which allows you (the tenant) to find another tenant to sublease from you. If you don’t have one make sure you get it included. Essentially you become a sub-landlord and collect rent from the subtenant, however you are still liable to the building owner for rent payments and any damages to the space that may occur. Subleases require landlord approval which they cannot unreasonably withhold as long as the subtenant is similar to your business and they have financials as good or better than yours. You can also sublease a portion of your space if needed. Assignment In some cases the landlord may allow you to assign your lease to another company, thus removing you from any liability or obligations. Commercial lease assignments can occur in many situations such as: 1. you sell your company, 2. landlord realizes they can get higher rents if you move out so they release you of obligation, 3. tenant next door buys you out of your lease, etc. Again assignments can release you of all obligations, however in most cases the landlord will want the new entity to have as good or better financials than you. Lease Buyout Lease buyouts are possible as long as you can come up with terms and conditions that entice the landlord. The landlord does not have to agree to a buyout however depending on the market, terms, and conditions you may be able to get them to agree to one. In a lease buyout you would typically offer to pay a lump sum (% of remaining costs) equal to one or more of the following: 1. certain number of months of rent and expenses, 2. unamortized cost of tenant improvements, 3. unamortized cost of commissions, 4. additional months of rent to give landlord time to lease out the space again, etc. Move Out in the Middle of the Night This is the last thing you want to do however I have seen tenants do it. They simply file or bankruptcy and move out in the middle of the night. If the stakes are high landlords will do everything in their power to sue you for one or more of the following: 1. rent that has not been paid, 2. legal expenses, 3. cost to prepare space for re-letting 4. commissions, 5. rent not received while marketing space for new tenant, 6. advertising, etc. If you signed a personal guarantee then the landlord can go after you personally for damages. This is not how you want to get out of a commercial real estate lease! Conclusion Overall you need to communicate with your landlord. If you realize things are not going great then try to work out something with the landlord or property manager. No communication is the first sign of trouble! You will be surprised to find that some landlords will help you out anyway they can. Others may not be so flexible. Try to avoid tarnishing your name and company name do things the responsible way.
The post How to Get Out of a Commercial Real Estate Lease appeared first on Austin Tenant Advisors. via Blogger How to Get Out of a Commercial Real Estate Lease The following post is copyrighted by Austin Tenant Advisors - . So you are a new business or startup and ready to lease your first commercial real estate space, however with little track record and little to no revenue how will you be able to get the landlord comfortable with having you as a tenant? Most landlords are hesitant to lease commercial space to startups as they have a high probability of going out of business and if they do will leave the landlord with an empty space and lost income. To ensure they get their rent in the event your business does not work out they may ask you to sign a personal guarantee. For example when searching for retail space for rent in Austin Tx most landlords will require that you personally guarantee the lease for the entire term. What is a Personal Guarantee?A personal guarantee is a written promise from a guarantor (business owner or other person) guaranteeing commercial lease payments in the event the business does not pay. In the event of non-payment the landlord can go after the guarantor personally for payment. This is a very common request when the business is a startup with weak financials. Do You Have to Sign a Personal Guarantee to Lease Commercial Space?Well if you really want a space bad enough and the landlord won’t let you have it without one then you have no choice. If you are able to show a track record of paying rent elsewhere have have steady, strong company profit / loss statements and balance sheets then you might be able to get away with not having one. If you don’t have the financial track record and sign the personal guarantee then try asking for the guarantee to expire after a certain amount of time has passed (e.g. 12-24 months) as long as you pay rent payments on time. How to Get Out of a Personal Guarantee EarlyYour options for getting out of a commercial lease personal guarantee early are pretty limited, however if it’s important then try one of the following:
The post How to Get Out of a Personal Guarantee on a Commercial Lease appeared first on Austin Tenant Advisors. via Blogger How to Get Out of a Personal Guarantee on a Commercial Lease The following post is copyrighted by Austin Tenant Advisors - . When signing a commercial real estate lease (office space, retail space, warehouse space) you are typically committing to either 3 year, 5 year, or sometimes longer lease contract and you are legally obligated to fulfill the entire obligation regardless of whether or not your business succeeds or fails. You have the best intentions to create a successful business however sometimes things just don’t go your way. For example when searching for warehouse space for rent in Austin Tx expect to sign at least a 3-5 year lease. If you find yourself in a situation where you need to close your business however still have lease term left on the lease there are some ways you can get out of your commercial real estate lease. 3 of these options will keep your good credit in tact, however one option will not. Sublease Most lease contracts have a sublease clause which allows you (the tenant) to find another tenant to sublease from you. If you don’t have one make sure you get it included. Essentially you become a sub-landlord and collect rent from the subtenant, however you are still liable to the building owner for rent payments and any damages to the space that may occur. Subleases require landlord approval which they cannot unreasonably withhold as long as the subtenant is similar to your business and they have financials as good or better than yours. You can also sublease a portion of your space if needed. Assignment In some cases the landlord may allow you to assign your lease to another company, thus removing you from any liability or obligations. Commercial lease assignments can occur in many situations such as: 1. you sell your company, 2. landlord realizes they can get higher rents if you move out so they release you of obligation, 3. tenant next door buys you out of your lease, etc. Again assignments can release you of all obligations, however in most cases the landlord will want the new entity to have as good or better financials than you. Lease Buyout Lease buyouts are possible as long as you can come up with terms and conditions that entice the landlord. The landlord does not have to agree to a buyout however depending on the market, terms, and conditions you may be able to get them to agree to one. In a lease buyout you would typically offer to pay a lump sum (% of remaining costs) equal to one or more of the following: 1. certain number of months of rent and expenses, 2. unamortized cost of tenant improvements, 3. unamortized cost of commissions, 4. additional months of rent to give landlord time to lease out the space again, etc. Move Out in the Middle of the Night This is the last thing you want to do however I have seen tenants do it. They simply file or bankruptcy and move out in the middle of the night. If the stakes are high landlords will do everything in their power to sue you for one or more of the following: 1. rent that has not been paid, 2. legal expenses, 3. cost to prepare space for re-letting 4. commissions, 5. rent not received while marketing space for new tenant, 6. advertising, etc. If you signed a personal guarantee then the landlord can go after you personally for damages. This is not how you want to get out of a commercial real estate lease! Conclusion Overall you need to communicate with your landlord. If you realize things are not going great then try to work out something with the landlord or property manager. No communication is the first sign of trouble! You will be surprised to find that some landlords will help you out anyway they can. Others may not be so flexible. Try to avoid tarnishing your name and company name do things the responsible way. The post How to Get Out of a Commercial Real Estate Lease appeared first on Austin Tenant Advisors. via Tumblr How to Get Out of a Commercial Real Estate Lease |
AuthorThe experienced commercial realtors at Austin Tenant Advisors specialize in representing the best interests of buyers and tenants in the Search, Selection, Negotiation, and Occupancy of Office, Retail, Industrial & Warehouse Space for lease, rent, or sale in and around Travis, Williamson, Hays, Bastrop, & Burnet Counties, which are the 5 largest counties in Central Texas. We serve the surrounding cities such as Pflugerville, Round Rock, Georgetown, Leander, Cedar Park, Lakeway, Bee Cave, Sunset Valley, Dripping Springs, Buda, Kyle, San Marcos, Burnet, Marble Falls, and more. Archives
November 2020
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