Scenarios

Common Commercial Real Estate Scenarios

 

Scenario:

 

An interesting spin-off in my dealings as a consultant is that I am frequently called upon to assist clients who are potential tenants of commercial properties, but who are experiencing difficulties at the negotiation stage with their potential landlord and/or managing agent. As I assist these clients to obtain favourable lease outcomes, I also become aware not only of common knowledge gaps, but sadly, of the patent lack of knowledge, of commercial property managers and leasing agents who really ought to know better.

Learning:

 

We all have knowledge gaps. It is incumbent upon us as commercial property managers to continue to learn and grow as industry practitioners by attending as many professional development events and training sessions as possible. Other highly recommended strategies that will assist you to quickly progress in your career include:

  • engaging with reputable practitioners;

  • finding a trusted industry mentor; and

  • subscribing to and regularly reading articles, blogposts and e-newsletters from reliable sources.

 

As you seriously set about developing in your career, you will expand your knowledge-base and challenge your thinking to encompass a broader range of possibility, in this way contributing to your overall professional success and to the wider success of the profession as a whole.

Scenario:

 

A response from a commercial leasing agent in reply to his being questioned about the currency of the version of an REIV VicForms commercial lease (code 143) provided to a tenant:

“The lease is still a code 143 commercial lease, so I think it is still okay, however, if you want an updated version please let me know and I will send this through.”

Learning:

 

The agent was not using the current REIV commercial lease but an old version and was not even aware of this. It is best practice to log on to the VicForms portal regularly to keep abreast of current versions.

 

Scenario:

 

A comment from a commercial leasing agent and property manager about a new tenant’s proposed use:

The lease is not a retail tenancy because the predominant use of the property is office and storage of ribbons and trims. They have also ticked non-retail use on their application form.

Learning:

 

In this instance, this was not correct because the tenant had an online business and was selling to the public through its website. The tenant was thereby a retail tenant. Further, how does a tenant know if it is retail or non-retail? To include such a tick-box on a leasing application form is potentially dangerous. Rather, questions relating to the business activities of the tenant might be included.

Further Scenario:

 

Leasing agent’s response:

“If this is the case, then the tenant will need to agree to pay land tax because the landlord has made it clear that he wants a tenant who can pay this.”

Learning:

 

This is really showing a lack of knowledge. A landlord cannot pass on land tax to a retail tenant under the Retail Leases Act 2003. If a tenant is a non-retail tenant, single-holding land tax may be levied to the tenant for reimbursement. The landlord of a retail tenancy may wish to include land tax in the rental but—a word of caution—this will need to be included at the time of listing and of publication of the asking rental. It is recommended that, wherever possible, the asking rental is a current market rental.

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