Preparing To Lease Buildings And Represent Tenants: Richard Muhlebach At NAR Annual 2011
Richard Muhelbach, CPM, CRE, SCSM, RPA, has four decades of experience in commercial deals on both sides of the landlord-tenant table. While that can’t be broken down into a mere two hours, that doesn’t mean he didn’t try to on a Friday morning in Anaheim, speaking before NAR Annual 2011.
Richard’s talk went in depth in six areas of the commercial deal:
Negotiating A Lease Listing Agreement
As with so much in commercial real estate dealmaking, the devil is in the details. Is the agreement excluisve? Open? Single-party – where the owner agrees to grant an exclusive on a space to a broker but only to a specific single tenant? Who pays for advertising? Does the broker have the right to put a “For Lease” sign on the building? Covering well over 30 items in this area, Richard turned on the lights for the entire agreement, including an especially interesting question when the topic of the right to reject prospects came up. A question from the audience: If you lease to a medical marijuana dispensary, are you potentially federal drug law violations? Richard: “You had better get your attorney’s advice.”
Create a letter of engagement when repping a tenant
This could be a one-pager on tenant’s stationery that gives the broker the exclusive right for 1 1 year period to find space. Of course, there is no single right way to do this, but the above format is common.
Prepare a registration letter and agreement
This letter protects the broker from losing out on commissions in various ways, including the possibility of commissions incurring from renewals and expansions. This is where you “get it in writing”.
Develop an RFP
In a checklist covering over 40 items, Richard discussed the rise of the concept of rentable square feet as opposed to usable square feet – saying the practice began in the early 1980s. He also covered the eventuality of how to handle lease cancellations when commissions have already been paid, suggesting that the unamortized commisson amount be paid to the broker.
Preparing to lease a building
First covering the shopping center side of the equation, Richard used customary thoroughness before encountering a new concept: the virtual office tenant. This is a form of deal that is not a lease, but a license agreement wherein a lessor or sublessor licenses a party to use the address of a “A class” building without taking occupation. Because the landlord could end up with an unwanted or controversial group as a “tenant” in this arrangement, this touches on assignment and subleasing provisions. Someone in the audience offered the scenario of a “virtual eviction,” which got a good laugh.
Richard finished up with a section on Preparing to represent tennants
Get a copy of Richard’s entire talk at PlaybackNAR.
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