Risky Business - it’s not just an 80’s movie

June 16, 2016

 

 

 

 

There’s risk in virtually everything we do. Every decision we make in business or our personal lives can expose us to unintended and unforeseen outcomes. Even the best intentioned, most sound, least perilous choices can at times take a turn for the worse. The dreaded tushy nibble. C’est la vie.

 

Entering into a property lease - whether on the tenant or landlord side of the table - is a territory ripe with hazards for both parties. It’s inherent with the venture and both parties should accept this basic tenant before engaging in business. If either party is uncomfortable with the myriad of potential hurdles involved in building a company or doing real estate transactions to the point of paralysis it may be advisable to switch careers. Navigated wisely threats can be mitigated, never eliminated. There are just too many unknowns and influences beyond a person’s control that can contribute to negative outcomes.

 

 

 

Landlords don’t control the operation of a tenant’s business. They don’t control the quality of their product or the efficacy of their service. They don’t control their marketing and customer acquisition practices. They don’t have influence over their customer satisfaction. They don’t control the personal lives or physical health of their tenant’s workers for whom when faced with adversity can diminish a person’s ability to operate at their full capacity. The success of business owners generally lies squarely on their shoulders.

 

Landlord’s gauge a tenant’s potential based not only on their financial and credit strength, but on the sum of their intended business plan. The warm and fuzzy feeling generated by a tenant’s ability to instil confidence in the landlord that they have the ability to execute their intended plan. It’s a factor which often contributes to bringing the parties together. Tenants need to - in other words - make their case to landlords in order to earn their confidence and approval.

 

 

 

Conversely tenants don’t control the practices of their landlord.  Location aside, there are risks for tenants when entering into a lease. Neglectful property managers and building owners who fail to keep their properties in a good state of repair can and do in fact have an impact on the success of tenants. Building aesthetics can influence customer perceptions of the businesses operating at the property - good or bad. The physical and mental health of the people working on site are affected by building mechanical systems, general property maintenance and the relationship with property management. Careless, inattentive and overly cheap landlords who don’t budget for, or address upkeep issues in a timely manner often dishearten tenants and cause undue stress which can permeate all aspects of their lives. Considering these points one can see with some clarity the risks tenants assume when signing a lease. For them only time will reveal the landlord’s devotion to the property and whether they care about the success of their tenants. Smart landlords do.

 

 

There’s no obligation for anyone to do a deal with a party they’re not comfortable with, but when they do each side must accept their decision without reservation. The proverbial buck cannot be passed to a third party.

Done right, taking these risks can lead to great rewards for landlords and tenants. I hope you get plenty.

Until next time.

 

                                    - Mitch Gauzas -

 

 

 

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