All Forum Posts by: Tamas Z.

@Account Closed I get that if I sell it, the lease goes to the property. But my point was, if I were to take the lump sum option, and then sell it afterwards, that buyer would have to be okay with having a cell phone tower with a 50 year easement, and no payments (since I grabbed the lump sum). I don't yet have enough of a feel for this industry to know whether that will make my property WAY less desirable, or if it's just a regular thing people don't tend to care about.

Hi all,

I wanted to put a question out there, since I know some of you have more experience than I do on this.

My property came with a cell phone tower. That was really convenient, because of the reliable source of income.

Then, all of a sudden, a bunch of options have sprung up, and I need to make a decision soon:

The cell company just contacted me, and asked about updating the lease for the longer term (they're going through a network redesign, etc.)

The options are:

1) Set up a lease similar to what I have now (renewable 5 year terms for around 30 years), but with strikingly lower rent. They say "based on market analysis", but the price they've put out dropped considerably (like, by 25% of the original amount), whcih I don't like.

2) They pay a lump sum, and get a 50 year easement

3) They pay 5 annual lump sums (total is slightly higher), and get a 50 year easement

On the one hand, I'm very tempted by the lump sum options... I could put it towards principal, and be debt-free in a few years.

On the other hand, I worry about the implications that might have when selling the place, because the prospective buyer won't get any money from them, and is stuck with a cell phone tower for basically as long as the company wants. Not sure if that would make the place highly unattractive to buy in 5 years. But then, the neighborhood is just getting into a gentrification boom, so it might not be too much of an issue...

Finally, and I bet non-coincidentally (timing is too close), I got a call from some other company, wanting to buy out the lease. I have no idea what the implications of that are, and whether I should even entertain it.

So, my questions are:

1) What are some general points of advice about which option to take? How would you more experienced people make the decision? I sort of get the implications, but have no practical feel for how much they matter.

2) What's the deal with the companies wanting to buy out the lease? Are they typically sharks to be avoided, or could it be legit, and more lucrative than just sticking with the current telecom? He said their agreement mirrors the lease, so the current company would be obligated to fulfill the terms of their own lease. Sounds like they just want to buy the space...

FWIW: I have about 4 years left on the current term, so one other option is to just do nothing. I don't know yet if I expect to sell before 2021.

Thanks a ton! I love the value I get from these forums.

Thanks, everyone, for the thoughts!

@Roy N.: That sounds like an elegant way to do things. Is the rebate approach mainly to minimize changes to the lease, or even to just have the rebate be a separate contract that's not part of the lease at all?

Are there tax implications to doing that? Do those rebates count as regular "expenses"?

@Martin Z.: There's definitely an assignment clause, but if the lessee is "the business", then selling the business doesn't really change whom the lease is assigned to, because it's the business entity. Unless I put the owner personally on there as well, with some kind of languaging, which would require a lease change anyway for the name swap when he sells.

@Joel Owens: Thanks for this insight, this is really neat. I don't think there's anything in there asking tenants to disclose their income.

Hi all,

I'm in the process of drafting a new lease for a tenant whose lease is up for renewal.

This tenant is a bit of a special case: Basically, a personal friend with a really good rental deal.

He is starting to look into selling his business, and it's not clear when that will happen. I want him to keep paying the "friends and family" discounted rent, but if he sells the business and the new owner takes over, I want the new owner to be subject to the "regular" (non-discounted) rate.

The "discount" for the friend is basically, a reasonable base rate, but while we take care of the NNN operational costs (so, no additional rent for tax/insurance/operations).

The approach I want to take with the lease rider is to say something like:

"While <business> is owned by <friend>, 'friends and family' package applies. If <business> is taken over by any other owning entity, the 'friends and family' package no longer applies"

(and then describe the terms of the friends and family package).

That way, I can comfortably set up a longer term lease, without getting stuck with the lower rental income when he does sell and transfer his business to a new owner.

Is this doable? If not, I'd love to hear what advice those with more experience have to offer about this kind of thing.

Thanks!

Alrighty, thanks for the info!

Hello,

What are some of your standards on how much security deposit you collect for your commercial leases? Is it something based on credit score, e.g. "fair = 3 months rent, good = 2 months rent, very good+ = 1 month rent"? I'm not yet calibrated to what's considered pretty standard, though I realize it really changes case-by-case, depending on other improvements and things that are part of the deal. But suppose there's no such special provisions, what's a good baseline?

Also, I believe for residential, you have to pay interest on the security deposit when you pay it back, but am not finding any info about whether that applies to commercial leases as well. Maybe it's a state-by-state thing, and I'll definitely look into it, but maybe there's just a blanket law about it that someone here knows. I'm in WA, btw.

Thanks much!

Brilliant, thanks for the responses!

@Joel Owens: What does "TI" stand for? Tenant Insurance?

@Jim Shepard: take a second what? Background check? Or do you mean get a lien or somesuch on their personal property as collateral, if appropriate?

Cool, many thanks!

Hi,

General question about prospective tenant screening for commercial space: If a new applicant comes in, and their business doesn't really have enough history to have a good background picture (e.g. new biz), is using a tenant screening service you'd normally use for regular rental screening a legitimate way to go?

Would using something like MySmartMove with the individual business owner of an applicant be okay? I'm not sure if there are any standard laws preventing that from being a legit avenue.

Thanks again!

Yup, it's in there, specified as part of the lease assignment section.

The main points seem to be:

1. Not without written consent of Lessor
2. ... which will not be unreasonably withheld

So yeah, looks like it's there, but that "unreasonably withheld" is kind of vague. I was hoping to find something very clear online about what it actually means more specifically, but am having no luck.

So normally, under that standard languaging, if consent is requested to assign a commercial lease, does "performing a standard screen/background check on the new would-be tenant, as if it were a completely new application for an unoccupied space" count as something I can legitimately do? Or is there basically a loophole that would allow someone I normally would screen out to get grandfathered into a lease?

Thanks again!