Mixed Use - Need Help - Can I rent apartments as NON-Residential?

Question

It is time to ask for some help making a new strategy for my mixed-use property.

Background:
I have a mixed use multi-family building in a commercial district zoned as Urban Mix. I've owned it for 7 years and it has not gone well with the residential units. I operate another business out of the ground floor storefront. There are four apartments on the upper floors.

The neighborhood is 10 years into the early-artist phase and shows signs of other development activity happening, but is still has a lot of drug and prostitution activity. The people willing to live there have made horrible tenants. Because of this I have rented two of the apartments to people using them as office/meeting space. They have been good as tenants, but I'm charging well below market with the agreement that the units are as-is and non-residential.

The building is partially renovated, partially demo'd, has ancient plumbing and electrical. New roof.

Questions and Concerns:
The non-residential lease I had them sign was just a modified residential lease. I'm looking for feedback on what distinctions need to be in a lease like this. They are basically renting an apartment with a kitchen and bathroom, but I am telling them they are not allowed to live there. I also put in exclusions for the water heater and furnace so that they are responsible for those.

What type of language will make the AS-IS language stick and make it very clear that they are required to maintain the heating and water systems?

What requirements am I opening myself up to if the units are being used as offices or group meeting spaces?

More generally, what is an overall strategy for a building on a commercial street with a storefront and multiple apartments?

Thank you for any feedback or answers.

Gregory Wilson · Answer

Yea, that area of Northside is just not quite there yet. That is in the City of Cincinnati so you have to comply with Cincinnati ordinances as well as Ohio landlord tenant law. I am not aware that a tenant can waive any of those. Your actual knowledge that they are living there is probably enough to hang you. You should get legal or at least property manager advice so if something bad happens it will not be a colossal problem.

The zoning of CN-P includes live work and some commercial uses.

I'd walk over to 305 Central Ave and talk to a zoning plan reviewer. Just don't explain what the current situation is.

The zoning of CN-P includes live work and some commercial uses.

I'd walk over to 305 Central Ave and talk to a zoning plan reviewer. Just don't explain what the current situation is.

Nathan Currier-Groh · Answer

I have obtained a copy of a commercial lease and I'm going to review with my lawyer.I've also reviewed the zoning to get a better sense of the potential uses. A mixed-use building with an Urban Mix zoning is not easily summarized. But, it does appear that all of the current uses are permitted. It's just the paperwork I need to tighten up. I wonder if other mixed-use landlords have clauses in leases that address the mixed nature. Something in the residential lease about the commercial tenants and vice versa. Or a way of prioritizing one or the other in disputes.Thanks for the feedback everyone.

Carl Stenberg · Answer

I recommend you get a good RE attorney to take a look at the lease, perhaps a bit expensive upfront but could save you some headaches down the line.

Gregory Wilson · Answer

I agree with Michael above  that you should start with a commercial lease and have an attorney review it. For my part, before I retired, it took me more time to review and correct someone else's lease than to revise and publish one I had already done. So you might want to start with the attorney and see if he has a lease he already knows and likes.

One thing for sure, put the prohibition on living in the space in bold type with a nice little initial block next to it for the tenant to initial so the tenant cannot come back and say it was intended to be a live/work space. If they are living there you are going to have to comply with everything. From maintaining Winter and Summer temperatures to deposit alternatives, etc.

Michael Smythe · Answer

Recommend you just Google "commercial lease" and copy & paste to get what you want covered.

If you want commercial tenant to be responsible for the building, that's known as a Triple Net Lease (also shifts taxes & insurance liability).

Then you should have a real estate attorney go over and approve your copy & paste creation.

Gregory Wilson · Answer

I was thinking of the "live/work" use that came up earlier.

When commercial space is converted to residential there is the zoning and landlord/tenant issue on the one hand, and the Ohio Building/electrical/fire code on the other hand. I am not at all sure that a first floor formerly retail space like we have so much of in OTR can be converted to residential use without full code compliance even when the building is zoned for mixed use. So we tip toe gently through that area here in OTR.

Gregory Wilson · Answer

No matter what you put in the lease, if you know people are living in the space you have to comply with the City and Ohio landlord laws.

If you are permitting mixed use, I would start with a residential lease tailored to the City of Cincinnati and add the permissions and restrictions on commercial use.

Nathan Currier-Groh · Answer

Thanks for the reply Gregory. This property is the one in Camp Washington and it is zoned Urban Mix. The non-residential tenants are not living there. They're the type of tenant I'm trying to get. But since I'm used to residential leases I was looking for tips and advice on making leases for the non-residential types. I'm wondering what lease clauses people are using for like remote-workers wanting their own office, or artists renting an apartment but not living there, or an online shop that just needs space for storage and a computer.

Mixed Use - Need Help - Can I rent apartments as NON-Residential?

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