CREJ

Page 26 — Property Management Quarterly — July 2021 www.crej.com Management decided to close its doors at the end of its lease term. After market- ing the space for six months prior to the end of the lease term in hopes of finding a similar user, it was determined that the space was to be returned to shell condition. The tenant vacated the space and “didn’t want to deal with” removing the climbing walls and other equip- ment, leaving it to our team to “deal with.” The tenant paid $3.50 per sf in base rent and the landlord spent $9 per sf just to remove the climb- ing walls and other equipment. The security deposit was minimal, and we were only able to collect a small portion of the remaining balance – two weeks before the tenant filed for bankruptcy. It is not a given that you will col- lect the overage above the security deposit, so landlords often take a hit on these unwanted expenses. n So how do we avoid situations like these? Following are six steps to con- sider. 1. Is there sufficient lease language that covers the condition in which a space is to be turned over at the time of move-out? Typically, you will want it to interpret that a space is to be turned over in the same condition as move-in, less normal wear and tear. Some leases call for “broom clean” condition, but that can be viewed as vague and up for interpretation. 2. Is there lease language that any tenant-performed alterations to the space are to be preapproved by the landlord? A good practice is to provide written approval of the requested alterations, along with a stipulation that the alterations must be removed and the space returned to its original condition at the time of move-out. There could be an exception that the landlord gives prior approval to leave the altera- tions in place. 3. Get in contact with the ten- ant at least 60-90 days prior to the scheduled move-out date. Walk the space with the tenant and discuss the expectations of how the space should be turned over at the end of the lease. Take photos of the condi- tions at that time. At 30 days, follow up and schedule a second walk- through, if necessary. Again, take photos. 4. Coordinate repairs with contrac- tors, building engineers, etc., for the tenant, as requested. Make sure the tenant understands the cost would be out of its pocket. If the security deposit is not enough to cover out- standing expenses, a good prac- tice would be to collect the money upfront to avoid collections after the tenant has vacated. 5. Continue your partnership with the tenant until the space is vacated. By setting expectations and being involved during the move, you are more likely to part ways peace- fully and get the space back in the expected condition. 6. Be sure to explain to the ten- ant that if the agreed-upon condi- tions are not met, the landlord has the right to return the space to its original condition at the tenant’s expense, typically via a deduction from the security deposit. The No. 1 focus for a smooth move-out is to be proactive. As much as we are forced to be reac- tive in this industry, this is one instance where we can be proac- tive. As property managers, we are responsible for protecting our assets and the financial performance of our properties. Holding your tenants accountable to their lease is half the battle. s adarvill@bkmmgmt.com Continued from Page 1 After the tenant did some clean-up and the landlord painted, grinded the floors and retrofitted the existing light fixtures to LED, the property was ready to be listed again. owner of the building and obtaining approvals on policy changes are criti- cal. Collaborating with teammates, reinforcing new procedures and main- taining an open line of communica- tion will benefit the tenants and the property overall. With a comprehen- sive plan in place, property managers can limit disruption and give clients the exceptional service they deserve. Adaptability is critical, and organi- zations will have to prepare for both the short- and long-term impacts of the pandemic. New priorities will become apparent, and new approaches will be required. At every step on the path toward the new future of work, flexibility, adapt- ability and responsibility will define companies. s jill.muckler@am.jll.com Muckler Continued from Page 6