 The Denver Gazette on March 28 highlighted concerns over a bill aimed at limiting evictions without a substantial reason, emphasizing that its basis seems more anecdotal than analytical. This legislation restricts evictions to specific causes such as rent non-payment, plans to sell the property, lease violations, substantial property repairs, or property damage by the tenant. However, it introduces the possibility for tenants to legally challenge evictions, raising disputes over their validity. Recent legislative sessions in Colorado have aimed to bolster tenant protections in response to the escalating affordable housing crisis in Denver and statewide. House Bill 24-1098 seeks to clarify "just cause" for evictions, raising concerns that economic interventions by politicians often result in unintended consequences for those they intend to help. Critics argue that such regulations elevate operational costs for landlords, potentially leading to higher rental prices due to the bill's implications. Furthermore, the legal background of many state legislators is seen as a factor likely to encourage litigation, with tenants increasingly turning to lawsuits to avert eviction. The editorial also references Senator Nick Hinrichsen, D-Pueblo, who shared an anecdote about a 67-year-old constituent's alleged retaliatory eviction following complaints about inadequate heating, alongside other eviction scenarios involving personal disputes or political disagreements, though these instances lack substantial evidence and appear to be infrequent. With the introduction of House Bill 24-1098, tenants who have either fallen behind on rent for several months or have a history of property damage may now claim their eviction is retaliatory. This legislation allows for legal challenges to eviction causes, potentially halting the eviction process and enabling tenants to remain in their homes pending court decisions. This development is seen as undermining property owners' rights and could lead landlords to raise rents in an already expensive market. As the House and Senate prepare to reconcile different versions of the bill on April 2nd, constituents are encouraged to share their opinions with their representatives and senators, highlighting their stance on House Bill 24-1098 and the broader issues it raises concerning tenant rights and housing affordability. Full Bill can be reviewed by clicking here.
Jennifer Mussato is president at Denver-based First and Main RE powered by KW Commercial, a real estate group that specializes in land, acquisitions, dispositions, commercial leasing, and investment strategies.
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Commercial landlords love lease renewals. Just as you use an attorney and accountant for legal and financial matters, always use an expert commercial real estate negotiator that represents your best interests, not your landlord’s, and renegotiate your lease several months before it expires to guarantee the best results.
A proactive approach to a lease renewal is essential for success because time is a powerful negotiating tool. As your lease expiration draws closer, your negotiating leverage diminishes fast. The three biggest, mistakes when renewing or renegotiating a lease are:
Once a landlord believes the tenant is planning to stay, does not have time to move or is prepared to let the landlord’s broker represent them, all negotiating leverage is lost and the landlord is in control. So, even if you plan on renewing your lease, you must find alternatives to your existing lease to show the landlord you have other options and that he could lose you to a competitor. The easiest and most effective way to do this and regain control is to engage a tenant representation broker to represent you on your lease renewal, research other options and create the negotiating leverage and freedom for you to move if you choose to. Besides, your broker will do all the work and they simply share the landlord broker’s fee, which is paid in full whether you are represented or not! We can renew or renegotiate your commercial real estate lease at almost any time and create opportunities for you to benefit from substantially reduced occupancy costs, greater operational efficiency and flexibility to grow or downsize, as well and realigning your real estate with your business plan. Examples of deal points we can negotiate in commercial lease renewals:
Landlords often discourage tenants from seeking tenant representation so they can negotiate higher rents and lease terms that are onerous to the tenant. The landlord’s broker may also discourage you from hiring your own broker so they don’t have to share their fee. Furthermore, lease renewal terms offered to existing tenants are often less attractive as lease terms offered to new tenants. This is because landlords know that a tenant that doesn’t have a tenant representation broker to advise them on the most attractive lease terms achievable is more likely to accept the landlord’s terms and assume they are getting a & fair deal and less likely to take advantage of more beneficial lease opportunities elsewhere. So while you may have a good relationship with your landlord and believe you are getting a great deal on your lease renewal, beware! No matter how good you think your relationship is with your landlord, they are in the business of maximizing their profits by getting the most rent possible, period. Until you create competition for your tenancy and hire an experienced tenant representation broker, your landlord will consider you a captive tenant, willing to pay asking or above-market rents on your lease renewal or renegotiation. Lease renewals and negotiations can be complicated and time consuming. There is much more to negotiate than just the rent. And how do you know you’re getting the most attractive lease terms anyway? Parking charges, operating expense pass throughs and add-ons, security deposits, tenant improvement allowances and endless complicated and misleading lease terms and conditions, with far reaching financial and operational implications, are all up for negotiation. Only with the benefit of a tenant representation broker can you be guaranteed exposure to every opportunity and the negotiating power to secure the best terms available on your lease renewal or renegotiation. At First and Main RE, we manage the entire process from start to finish so you don’t have to, saving you valuable time and money and exposure to risk while you focus on running your business. Our lease renewal process provides you with the strategy, market knowledge and negotiating expertise to guarantee you access to every alternative option available in the marketplace and advise you on the most attractive lease terms achievable on a lease renewal or renegotiation. We audit your lease to determine the options available for reducing your occupancy costs and building flexibility into your lease to achieve your business goals. We then create significant negotiating leverage with your landlord by identifying competitive alternative opportunities to secure the most cost-effective, risk-free lease terms possible on a lease renewal or renegotiation. We do all this in a professional manner that won’t damage your relationship with the landlord.  Commercial real estate leases will introduce you to a whole new set of vocabulary, which can make it difficult to fully interpret documents. To make dissecting the fine print simpler, familiarize yourself with these common terms that you need to know: 1. Right of First Refusal If you a sign a lease that includes a right of first refusal clause, your landlord is required to offer you additional space to lease before offering it to the general public. This gives you the opportunity to lease more office space in an in-demand building if it becomes available and can be highly beneficial if you anticipate major growth in the coming years. 2. Sublease Clause A sublease clause may or may not be included in the contract. This clause either permits or prohibits a tenant from subleasing their space to another individual or business. A sublease occurs when the tenant rents to someone else only a partial amount of time during the remaining time of the lease. Make sure you know if you are permitted to sublease in case an emergency arises. 3. Usable Square Footage The amount of space inside the office or building that you are renting is known as the usable square footage. It is the space that your company is actually occupying within the facility. 4. Rentable Square Footage Rentable square footage includes the usable square footage plus a portion of the square footage that you share with other tenants, such as bathrooms located in hallways, reception areas, on-site gyms, elevators and cafeterias. Landlords base your rental rate on this number, rather than the actual usable square footage in your space. 5. Parking Ratio The parking ratio is the number of parking spaces that are reserved in the lot for your employees. Take the total rentable square footage of your space and divide it by the number of parking spaces. This is usually as a ratio of spaces per 1,000 square feet. 6. Load Factor Also known as the core factor, this number is used by the landlord to determine how much common area square footage to assess to each tenant. Your prospective landlord should be able to explain how this number was calculated, so that you can determine whether or not your rent is being calculated with a fair rentable square footage. 7. Common Area Maintenance Common area maintenance, called CAM for short, refers to the cost of operating expenses for a building that you are responsible for paying a share of with some types of leases. As with load factors, landlords should be transparent about how the common area maintenance fee is calculated and exactly what it covers. 8. Request for Proposal One of the first steps in finding new space to lease is to sit down with your commercial real estate broker and figure out both what you need and what you want in a space. As you find spaces that you think might suit your needs, you can submit those wants and needs in a request for proposal (frequently referred to by its initials -- RFP) document. That RFP lets the landlord know what your general needs are so that they can then begin negotiating with you. Knowing these terms will put you in a better position at the negotiating table, but you should still be prepared to encounter other terms with which you may not be familiar. That's why it's important to have a tenant representative to assist you throughout the process. POSTED BY: JENNIFER MUSSATO
Jennifer Mussato is president at Denver-based First and Main RE powered by Keller Williams, a real estate group that specializes in commercial leasing, acquisitions, dispositions and investment strategies.  Investors who have commercial properties they wish to acquire or dispose, landlords seeking tenants to lease space in the commercial properties they own, and tenants seeking to lease space in a commercial property, all hire a commercial real estate Broker. So, how does a commercial real estate Broker get paid…and who pays them? Commercial Real Estate Brokers Get Paid on Commission. All commercial real estate brokers get paid on commission based on the representation of the two parties in a transaction. In a sale transaction this would be the buyer and seller, and in a lease transaction this would be the landlord/owner and the tenant. The amount a commercial real estate Broker receives on a commission is calculated as a percentage of the total commercial property sale price or lease value. While it’s illegal due to anti-trust laws to set a market- or industry-wide standard for commission percentages, most Brokers earn anywhere from 4% to 8%. The manner in which a CRE Broker is paid, and who is responsible for the payment, depends on whether the commercial transaction is a sale or a lease. Commission on Commercial Real Estate Sales: Commercial real estate Brokers receive a commission on the sale of a commercial property by representing an owner, a buyer, or both. The amount of the commission is calculated as a percentage of the final sale amount. If there are two different Agents involved in the transaction they will split the commission 50/50. For example, say the negotiated commission rate on a commercial property is 6% and it sells for $600,000, that is $36,000 is commission. The full $36,000 will go to the listing Broker (representing the owner) if they are the one who procured the buyer. If another commercial real estate Broker brought the buyer, then the two Brokers would split the commission 50/50 each earning $18,000 on the deal. In most commercial real estate sale transactions it is the responsibility of the property owner to pay all commissions upon closing. Commission on Commercial Real Estate Leases: Commercial real estate Brokers receive a commission on lease transaction by representing a landlord/owner, a tenant, or both. The amount of the commission is calculated as a percentage of the total lease value, also called total consideration. If there are two different Brokers involved in the transaction they will typically split the commission 50/50. This is, unless otherwise noted in the lease agreement. For example, say a tenant signs a 5-year lease for a 3,500 square foot suite at $10 per square foot. 5 years x (3,500 SF x $10) = $175,000 Total Lease Value If the negotiated rate is 6%, the total commission on this lease will be $10,500 ($175,000 x 6%). If there were two commercial real estate Brokers on the deal (one representing the landlord/owner and one representing the tenant) then each broker will earn $5,250 ($10,500./ 2). In leasing transactions the landlord/owner of the commercial property is the one who pays the commission fee. Typically, half at lease signing and the remaining half upon tenant occupancy. Seeking a Commercial Real Estate Broker? Whether seeking to invest in properties, dispose of current assets, lease up your building, or find space to lease, the brokerage experts at First and Main RE have the transactional experience and market knowledge to get you the best deal possible. Contact us today to see how we can help you see the highest return on your investment. Posted by: Jennifer MussatoJennifer Mussato is president at Denver-based First and Main RE powered by Keller Williams, a real estate group that specializes in commercial leasing, acquisitions, dispositions and investment strategies. A modified gross lease is a type of real estate rental agreement where the tenant pays base rent at the lease's inception but in subsequent years pays the base plus a proportional share of some of the other costs associated with the property, such as property taxes, utilities, insurance and maintenance. For example, under a modified gross lease, a property's tenants might be required to pay their proportional share of an office tower's total heating expense. Breaking Down Modified Gross Lease - Commercial real estate leases can be categorized by two rent calculation methods: ‘gross" and ‘net’. The modified gross lease - at times referred to as a modified net lease - is a combination of a gross lease and a net lease. Under a gross lease, the owner/landlord covers all the property’s operating expenses including real estate taxes, property insurance, structural and exterior maintenance and repairs, common area maintenance and repairs, unit maintenance and repairs, utilities and janitorial costs. A net lease, which is more common in single-tenant buildings, passes the responsibility of property expenses through to the tenant. Net leases would most likely be used in conjunction with large single tenant properties such as national restaurant chains. Modified gross leases are a hybrid of these two leases as the operating expenses are both the landlord and tenant's responsibility. With a modified gross lease, the tenant takes over expenses that are directly related to his or her unit, including unit maintenance and repairs, utilities and janitorial costs, while the owner/landlord continues to pay for the other operating expenses. The extent of each party’s responsibility is negotiated in the terms of the lease. Which expenses the tenant is responsible for can vary significantly from property to property, so a prospective tenant must ensure that a modified gross lease clearly defines which expenses is the tenant’s responsibility. When Modified Gross Leases are Common - Modified gross leases are common when multiple tenants occupy an office building. In a building with a single meter where the monthly electric bill is $1,000, the cost would be split evenly between the tenants; if there are currently 10 renters, they each would pay $100. Or, each tenant might pay a proportional share of the electric bill based on the percentage of the building’s total square footage that the tenant’s unit occupies. Alternatively, if each unit has its own meter, each tenant will pay the exact electrical expenses it incurs, whether $50 or $200. At First & Main, we're experienced in all phases of lease negotiation and renegotiation. We know what to look for and how to protect you from potential pitfalls. Remember, there is never a cost to the lessee in a lease negotiation! And we're happy to review even existing leases to advise you how to handle renewals The letters “NNN” sometimes strike fear in those renting space. A NNN lease, also known as a net-net-net or triple net lease, is a type of real estate lease that requires the tenant to pay, in addition to rent, all of the property's associated costs. The three nets in a triple net lease are real estate taxes, property insurance and maintenance costs. Because the landlord shifts these extra costs to the tenant, the rent he charges for a triple net lease is almost always less than for a comparable lease in which the landlord assumes these costs.
Benefits to Landlords: Any type of real estate transaction can utilize a triple net lease. This includes residential, commercial and industrial real estate. That said, this type of lease is used most often in commercial real estate transactions, particularly ones involving freestanding buildings. Many large companies that operate under the franchise model, such as McDonald's, lease buildings to their franchisees under the triple net structure. Companies that make money by investing in and leasing out multi-million dollar commercial properties often cannot be bothered with keeping up with things such as maintenance. They circumvent that responsibility by lowering the rent and shifting the extra costs associated with the building to the tenant. Triple net leases are also gaining popularity in residential real estate. In snatching up inexpensive properties in the wake of the 2007-2008 financial crisis and turning them into rentals, many investors find they do not enjoy dealing with maintenance and insurance issues any more than larger commercial investors enjoy these issues. As a result, they are taking a page from the commercial playbook and passing those costs to tenants by way of triple net leases. At First & Main, we're experienced in all phases of lease negotiation and renegotiation. We know what to look for and how to protect you from potential pitfalls. Remember, there is never a cost to the lessee in a lease negotiation! And we're happy to review even existing leases to advise you how to handle renewals If you're thinking of starting your own business, or if you're getting ready to change locations for your current business, you're probably anxious to get out the door and start looking at some properties. But rushing into a new location is one of the worst things you can do. You might get incredibly lucky and end up in the right place with the right lease terms — but you're more likely to land in an unsuitable location or sign a lease whose terms will make you miserable for the next five years.
If you're starting a new business, sit down with a pad of paper or a new document on the computer and begin thinking about the following factors that will impact where you look for commercial space: How much can I realistically afford to pay for space? How much space do I actually need? Where do I want to be? Your location is more than geographic. In a shopping center or mall, the availability of parking, the ease of getting into the complex, and your location relative to other stores are all very important factors. Should I look at undeveloped properties? If you're moving an existing business to a new location, your list of questions might be slightly different. After all, this isn't your first rodeo. But even veteran renters can make mistakes, so take a few minutes and ask yourself a few questions: Why am I moving? What benefits do I hope to gain by moving? What's my least favorite thing about my current location? What's the best thing about my current location? What kind of space configuration and basic square footage do I need? When do I need to move by? Answering these questions will not only help you find the most ideal spot for your business and your budget, but will also decrease the time your commercial agent spends finding it for you! When negotiating your commercial lease, there are a few things that you should absolutely consider. Including all of the following items in your lease is strongly recommended:
• Corporate entity • Renewal options • Assignment rights • Tenant inducements • Signage • Parking • Exclusives Clauses to Be Apprehensive About in Your Commercial Lease Just as it's important to include certain key terms in your lease, you must also be cautious about what terms are in the lease to begin with and how they may affect you and your business down the road. You may want to remove or adjust some of the following items: • Holdover • Percentage rent • Radius restrictions • Demolition clauses • Default clauses • Relocation clauses At First & Main, we're experienced in all phases of lease negotiation and renegotiation. We know what to look for and how to protect you from potential pitfalls. Remember, there is never a cost to the lessee in a lease negotiation! And we're happy to review even existing leases to advise you how to handle renewals. |
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