Commercial Leases in Kansas City – A Landlord's Perspective

During the course of practice as a business attorney in Kansas City, I have had the opportunity to work with both tenants and landlords in regard to commercial leases. In past posts, I have commented on some of the things tenants should be aware of prior to entering into their Lease Agreement. Now, I will take a moment to discuss some of the issues landlords should be aware of.

Here in Kansas City, new strip malls, offices, and residential buildings seem to pop up around every corner. Investing in real estate and acting as a landlord can be an incredibly fulfilling and lucrative opportunity for many people, but there are quite a few things one should consider before signing a commercial lease to a residential or commercial tenant.

One of the number one recommendations I can offer you is to do your homework as a commercial landlord. Do not enter into a lease with a business without:

1. Performing a thorough background check on the business that wants to rent your property. (Do your homework!)

2. Obtaining references from previous landlords.

3. If a start-up business, ask for letters of recommendation from their investors.

4. Google (Research) the company to see if it is in the news and why.

5. Have a face-to-face meeting with the company, and not just their representative.

Having a face to face meeting with a prospective client can give you a better feel for their business goals, and trustworthiness as a tenant. A prospective tenant does not have an obligation to answer your business-related questions, but one that obliges will give you more confidence in them as a tenant.

Commercial Vs. Residential Leases

“Everything is Negotiable”

Commercial leases do not have as many standard clauses as residential leases. What this means is that you can negotiate terms and conditions that will protect your interests and address any potential problems that could lead to disputes.

I would suggest limiting the rights of the tenant to sublet or reassign the lease without your approval. Other important tips when negotiating lease terms would be to outline who is responsible for upgrades, repairs, and property damage. Define the common elements of the lease like parking garages, elevators, etc. And lastly include any additional costs above their base rent you expect them to cover.

Bankruptcy

Recently I had a commercial landlord in the Kansas City area reach out inquiring how to handle a bankruptcy for one of his tenants. This can be a challenge when leasing to a business,

because they are protected by federal law. I would say that failure of a tenant’s business is the number one reason commercial landlords accumulate bad debt. When addressing a tenant’s bankruptcy, you are forced to immediately stop trying to recover back rent, you cannot evict at this time, and you cannot use a tenant’s deposit to recover any money owed without the permission of the court.

If you own commercial properties and are looking to protect yourself from potential surprises and would like to review your rights as a landlord with a business lawyer in Kansas City, contact Jeff today.