Leasing Office Space – Part 14 of 23 Letter of Intent

in Lease

You Mean There is More!

Other issues which you may want to address in the letter of intent include expense escalations, eminent domain, foreclosure, maintenance standards, definition of the amount of leasable space, personal guarantees, purchase option, subleasing, dedicated parking, who is responsible for obtaining variances related to signage and usage of the office space, expansion options, first right of refusal, can the tenant keep the TI allowance not needed for construction, can the landlord relocate the tenant if the space is needed to accommodate another tenant, late payment fees, the mechanics of providing notice of default and any options for the tenant to cure the default, mechanics of dispute resolution between the landlord and tenant, and a right to terminate if your business is not successful.

Complete LOI First

Complete and obtained an executed copy of the letter of intent before beginning on the lease agreement. The primary objective of the letter of intent is to negotiate and agree upon the business issues. The lease documents these agreements. Discuss fees to negotiate the lease with your attorney. Agree upon an hourly rate and estimate of the total fees. Agree the attorney will call it that appears the cost is going to exceed the estimate.

The following sections of the leasing office space article focus upon issues that merit commentary.

Renewal Options

Renewal options -- tenants love them and landlords prefer to avoid them. In general, a larger number of shorter renewal options is better for the tenant. In addition, shorter notice periods to announce the tenant’s intent to are desirable for the tenant. Landlords prefer as much notice as possible regarding whether or not the tenant plans to renew.

Renewal Option Rental Rates

Renewal option rental rates -- tenants typically want fixed rental rates for renewal periods. Landlords typically want the rental rate based upon market rent. Agreeing upon market rents can be difficult and expensive. Reasonable people can disagree regarding the level for market rent for a office space. For example, should the premium for a great view be 5% or 25% .

The Market Research and Consulting division of O’Connor & Associates provides information necessary to make decision to commercial real estate professionals. Occupancy and Rental Data, ownership and management information are routinely gathered for four major land uses – multifamily, office, retail and industrial. This information allows investors to compare competitive properties, facilitate business decisions and track market and submarket performance. In addition the data is useful to brokers who for example continually monitor Houston retail space leasing, Houston office space leasing, Houston industrial space leasing, Houston apartments, Dallas apartments, Ft. Worth apartments, Austin apartments, and San Antonio apartments.

This capacity to research, analyze and interpret market trends and the impact of specific transactions is a major reason for why developers and acquisition experts rely on O’Connor & Associates for market study, real estate market research, feasibility studies, rent studies, tax credit studies, project design guidance, property performance evaluation and lease audits. O’Connor & Associates is an acknowledged source of trends in real estate investing and market activity.

 

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Patrick Oconnor has 51 articles online

Patrick C. O'Connor has been president of O'Connor & Associates since 1983 and is a recipient of the prestigious MAI designation from the Appraisal Institute. He is also an registered senior property tax consultant in the state of Texas and has written numerous articles in state and national publications on reducing property taxes. He continues to set the standard in direction and quality of our appraisal products, adding services ranging from business valuations and business appraisals to cost segregation analysis for income tax reduction.

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Leasing Office Space – Part 14 of 23 Letter of Intent

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This article was published on 2012/03/26