commercial
Commercial Leases… It’s In The Details
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Commercial leases—they can be very overwhelming to read through, not only because of the legal jargon but because of the details on every topic they cover. But, the details are necessary to protect the property owner or landlord and the tenant, to make certain that there is no room for ambiguities or misinterpretation between the parties involved, and to ensure that all parties have the same understanding of a lease’s terms of agreement.
Some details a commercial lease should cover include the following:
- Lease Term – Is the lease for one, two … five years? Is there a restriction on how soon a tenant’s business can move in and operate once the lease is signed? Is there a renewal clause? Is there an exit clause? Is there an option to sublet? What are the terms of each?
- Area or square footage – Does the lease only apply to the square footage of the office or that the tenant’s business would occupy? What about common areas such as lobbies, hallways, washrooms, etc.—are these (or a percentage of these areas) governed by the lease a well?
- Parking, Signage – is signage included in the lease? Is there a designated parking area included in the lease?
- Renovation – Does the lease allow the tenant to have the space renovated to better suit their business needs? If so, what are the parameters and restrictions?
- Maintenance, Utilities and Repairs – Who is responsible for what repairs and operating costs? Is this to be a shared responsibility?
- Rate – What does the rent rate cover? When is it subject to rate increases?
- Insurances – what insurances are required by the lease and who is responsible?
Assumptions are not an option. If there are any ambiguities within a commercial lease, they need to be clarified and spelled out in detail. If any party does not agree to the details, an amendment can be written and initialed by both parties as part of the negotiation process.
Final tips:
- A commercial lease should be drafted, edited and finalized by professional underwriters and lawyers. (Believe it or not, there have been cases where commercial leases were drafted by the tenant only to later lead to lawsuits based on lack of details)1
- All details and fine print should be read.
- No party should sign anything until all can agree to everything.
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DJ McGauley and Associates Inc. is your Office Move, Reconstruction and Reconfiguration Project Management Company of choice for the Toronto, GTA and surrounding areas. If an office move or reconstruction of your 2000 – 25,000sqft office space is a remote possibility, consider contacting us to arrange a no-obligation site meeting. We guarantee that by the end of that meeting you will know all that would be required to make your office move/reconstruction project a successful reality.
Call 416-239-1931, email [email protected], or visit our website to complete our contact form.
Do Commercial Tenants Need to be Protected from Lease Fraud?
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Lease Fraud…it happens in both the residential as well as the commercial real estate world. Commercial lease fraud mostly occurs at the title or owner level with the fraudster manipulating documents and going through legal channels to assume the role of an executor or officer of a commercial or mixed-use property and then placing a high mortgage on that property (unbeknown to the real executor, officer or owner) and using the money for personal use.
Now I should clarify that commercial lease fraud in Ontario is extremely rare – less than 2% of all commercial leases end up being reportedly fraudulent and the entities affected are usually the owners, investors, lawyers and brokers. But what about tenants? Can they be affected by lease fraud?
Well, truth be told, tenants should not be affected by lease fraud because property owners usually have professional underwriters and lawyers draw up and edit their lease agreements and insurance brokers that outfit them with the proper insurances (e.g. title insurance) to protect their real estate from any issue of “lease fraud” before such issues can affect the tenant.
However, there is the possibility of a tenant’s lease being interrupted or cancelled by the property owner due to circumstances beyond his control. Lease fraud? Not likely. But such an interruption can have serious implications on a tenant’s business.
So what can a commercial tenant do to protect itself from such a possibility? Here are some thoughts:
- Review your lease with your own professional lawyers to see if there is a clause that speaks to such interruptions and details the responsibilities of both the tenant and the property owner. (If in the lease negotiation or renewal stage, this is a great clause to negotiate on so that the terms are fair for all parties involved)
- Seek the professional aid of an insurance broker to ensure your business has the proper rental property and lease-related insurances it needs to protect itself against the unexpected (e.g. rental interruption due to natural disaster, leasehold insurance for situations where your lease is cancelled due to circumstances outside of your control)
- Remain in good standing with your landlord or property owner. A good business relationship with your property owner could cause the property owner to “fight” to keep you as a tenant by recommending one of their other commercial sites to you.
- Do not sign anything you do not fully agree to.
Like lease fraud, lease interruptions are a rarity, but protecting your business from such possibilities can certainly be a game changer for the survival of your business.
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DJ McGauley and Associates Inc. is your Office Move, Reconstruction and Reconfiguration Project Management Company of choice for the Toronto, GTA and surrounding areas. If an office move or reconstruction of your 2000 – 25,000sqft office space is a remote possibility, consider contacting us to arrange a no-obligation site meeting. We guarantee that by the end of that meeting you will know all that would be required to make your office move/reconstruction project a successful reality.
Call 416-239-1931 , email [email protected], or visit our website to complete our contact form.
Case for Commercial Office Furniture
Non-commercial and commercial office furniture can look good and function well in any office space, but if you were to ask us to recommend a grade of office furniture for your business, nine times out of ten we would likely recommend going with commercial office furniture if your budget permits. Here is why:
Expansion and Moveability. Commercial office furniture disassembles and reassembles well and can survive relocations.
Longevity. Commercial office furniture is built to withstand frequent usage and high levels of business activity, therefore has the potential to look “as good as new” for a longer period of time (i.e. will not delaminate or scratch as easily) despite frequency of usage.
Storage & Sound Barriers. If physical storage space is an important element for your business, then commercial office furniture has physical storage space usually included in its system package and is of better quality. Similarly, if your office space is divided into cubicles and sound barriers are required to lessen interferences with business calls, then commercial office furniture is ideal.
As mentioned in a previous blog, office furniture is a viable asset to your company. Hence, when considering the longevity of your business and your office furniture, investing in commercial office furniture would be a better long-term investment.
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DJ McGauley and Associates Inc. is your Office Move, Reconstruction and Reconfiguration Project Management Company of choice for the Toronto, GTA and surrounding areas. If an office move or reconstruction of your 2000 – 25,000sqft office space is a remote possibility, consider contacting us to arrange a no-obligation site meeting. We guarantee that by the end of that meeting you will know all that would be required to make your office move/reconstruction project a successful reality.
Call 416-239-1931 , email [email protected], or visit our website to complete our contact form.
Commercial vs Home Office Furniture—Which is Best for Your Business?
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Office furniture can play a crucial role in substantiating a business, however, with different grades of office furniture to choose from — namely home-graded vs commercial graded office furniture– how does one decide which office furniture is best for their office space?
First, I should probably clarify what I mean by home-graded vs commercial graded office furniture. Please take note of the chart below:
| Home Graded Office Furniture | Commercial Graded Office Furniture |
| Made out of low-grade laminates with limited colour choices | Made out of higher quality laminates, solid wood, contemporary fabrics, stronger internal hardware, and have a wide selection of colour choices |
| Available at stores catering directly to consumers (e.g. IKEA, Staples, Best Buy, etc) | Available at warehouses and stores that mostly cater to office space designers or interior designers |
| Usually has a lower upfront cost | Usually a higher upfront cost |
| Built to withstand light to medium usage | Built to withstand frequent usage, high levels of activity |
Both types of furniture have their place in an office space, but what is best for your business is typically determined by the following factors:
The Business Itself—Stage, Size, Culture
In our experience, we have seen companies with roughly 25 or less employees utilize home-graded office furniture, whether or not their office space is in a home or commercial space, whereas companies with more employees lean towards commercial-graded office furniture. The differences are usually based on the stage the company is at (i.e. a start-up company versus. a company beginning to grow versus an established corporation), the industry of the business (IT vs industrial), and sometimes the company culture (for example, we have one client whose culture includes having new employees build their own desk the first day on the job).
Business activity:
The amount of business activity involving the usage of your furniture is one good way to determine whether to invest in home-grade office furniture or commercial grade office furniture. For example, some businesses (like IT businesses) function best with just a telephone to make or take calls and laptop at the desk. In our industry, that would be considered a light to medium usage of the office furniture simply because wear and tear on the furniture itself would be relatively minimal …… perfect for home-grade office furniture. Other businesses, however, use their office furniture more frequently for a variety of business activities such as storage and filing, collaboration meetings, conferences and so on. For businesses that have higher levels of business activities that involve more frequent or heavy usage of their furniture, we usually recommend commercial grade office furniture.
Budget:
Budget is a “bottom-line” determinant in choosing the type of office furniture for a business. In short, we have seen businesses with lower upfront budgets purchase the home-graded office furniture for their businesses, regardless of company size or business activity, while businesses with higher upfront budgets are more apt to purchasing commercial-graded office furniture.
The bottom line is that office furniture is a viable asset to your company. So, if your company is small (i.e. less than 25 employees), has a low up-front budget, and is the type of business in which the activity and usage of the office furniture is relatively light, then home-graded office furniture might be the right choice for your company right now. Otherwise, if your business activity involves high usage of the furniture and your budget allows, then commercial-graded office furniture is the way to go.
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DJ McGauley and Associates Inc. is your Office Move, Reconstruction and Reconfiguration Project Management Company of choice for the Toronto, GTA and surrounding areas. If an office move or reconstruction of your 2000 – 25,000sqft office space is a remote possibility, consider contacting us to arrange a no-obligation site meeting. We guarantee that by the end of that meeting you will know all that would be required to make your office move/reconstruction project a successful reality.
Call 416-239-1931 , email [email protected], or visit our website to complete our contact form.
Could Target’s Exodus Significantly Effect Commercial Real Estate Lease Rates?
It was all over the news in January. Big chain American retailer, Target, announced its plan to exit out of Canada. That means the close of 133 stores, the loss of 17,600 jobs and the anticipation of approximately 20 million sq ft of commercial real estate across Canada becoming vacant. The question remains: Will Target’s mass exodus affect commercial real estate lease rates in the Canada?
Well, let’s look at the possibilities.
Other commercial or retail companies may jump at the chance to expand their businesses into some or all of those vacant spaces, paying the same lease rate Target currently pays. News has it that some large stores like Walmart, Sobeys, Loblaw’s and Metro are considering taking over approximately 55 spots accumulatively of the 133 soon-to-be vacant locations. Fitness companies like Good Life Fitness and possibly some other large fitness clubs may consider expanding into some spots as well. If all those Target locations are filled with other commercial players, then lease rates would be minimally effected if at all.
However, Target locations are, in general, large and currently only attractive to larger commercial or retail companies that may be interested in expanding into locations that best fit their “target” markets and budgets. Since not all locations may fit their criteria, there is the possibility of many of the 133 Target locations being left vacant.
Commercial Real Estate Investments companies have taken the above into consideration and have posed a possible solution. Those that own the Target locations may consider reconstructing the sites into several smaller retail units in order to make the commercial site more attractive for smaller retail companies. This would give an opportunity for commercial real estate companies to lease the smaller units at higher leasing rates.
The commercial real estate companies that have not considered the above as an option may find themselves with a fight on their hands. Co-tenants of some Target locations, particularly in malls and plazas, could take this opportunity to re-negotiate their leases knowing that the current lease rate for the Target spaces are at least 50% cheaper than those of other spaces. This could drive commercial space lease rates downwards.
So, what will happen with commercial lease rates after Target leaves Canada? Only time, tenant and commercial real estate activity will tell.
Corporate Space Planning & Relocation Advice 