Sopotnicki/Veer
lease terms and conditions, and more," says
the owner/manager of retail, industrial,
and ofce properties. "Sometimes they
modify the space, run wiring, install
equipment without the owner's knowledge (and are not compliant to the
lease terms or local codes). If they
get caught, they usually want the
ownership to pick up these costs
as it 'should have been included'
in the rental cost of the space."
Mom and pop tenants are
also a risk when they fall
behind on rents: Just one
default can put the whole
property at risk. "These
tenants are sometimes
working with very little
operating capital so a couple
of months where business is
slow can afect their ability to
pay rent," says an owner/manager of retail/ofce and industrial
properties with fewer than 10 units
each. "[Tey] have the ability to move
quickly and at a low cost if they fnd a
more attractive building in the market. If a
small tenant like this gets too far behind in rent,
it can be very difcult for them to catch up, so you
may be faced with the possibility of having to forgive
back rent just so the tenant will stay in the building or
making the decision to evict."
Most property managers try to avoid these problems by
qualifying tenants upfront, through credit, criminal, and fnancial
checks. "I ask for a business plan for new businesses and also contact
personal references in some cases," says the owner of two small industrial
properties. Other managers conduct their own Google searches to help
determine tenants' personal fnancial stability.
"Typically we review their fnancials and do credit checks on any
tenant asking for substantial tenant improvements," says the owner
of retail, ofce, and industrial properties. "If it's a one-of location for
them we seek personal guarantees. If they are unwilling to do the
personal guarantee, we are suspicious and less likely to do a deal."
"Tere are business people and there are nonbusiness people,"
comments one owner of a fve-unit retail plaza. In addition
to a good credit rating, "I try to qualify the best business
person," she says.
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