Due Diligence: Know your Leases

[Charles D. Smith]

1. Whether you’re buying an apartment building, shopping center, or commercial office building, it’s wise to make sure you know what is in your leases. Details can get missed in a seller or broker’s offering materials. Through a review of the tenant leases, you may learn that certain tenants have lease termination options Maybe it was your impression that any HVAC repairs were handled by the tenant only to learn that the Landlord is in fact responsible. On the flip side, you may learn that tenants should be reimbursed for more expenses than the current landlord is collecting which when corrected could allow a new owner to instantly increase the property’s net operating income and value.