Lease Administration Tips for Commercial Real Estate Agents

Lease administration forms part of the leasing and management services offered to Property Management clients in commercial real estate today.  It is a specialised service and has major impact on the property under management.

The real estate agency staff involved in the management and leasing of a commercial or retail property, really do need to know what they are doing when it comes to lease administration.  When done well the process will help the landlord client achieve income and tenant benchmarks in the property that would otherwise fall short of expectations.

Why do things in investment properties need to be ‘administered’?   The answer is quite simple; the market is constantly changing and expectations of the tenant mix, income, and local area will change.  Top agents work ahead of the changes and they know what is going on in all comparable properties.

Here are some factors that you can merge into your lease administration system for your clients.

  1. Review all leases as a priority.  In this way you will know what is coming up with each tenant and occupancy.  When you are managing and leasing larger properties, the task is complex.  For this reason, any lease review should involve a ‘synopsis’ process where key issues from the document are extracted and noted in an appropriate document and diary system.  In this way you can be prepared for the major events well before they happen.
  2. Check out the rent reviews coming up for each tenant.  The market rent reviews will be the hardest to predict and negotiate.  Any market rent reviews should be flagged for early attention.   You will need some good comparable market rental evidence from the local area and this takes time to locate.
  3. Options for lease renewal can be a good and a bad thing, depending on the property, the tenant, and the landlord.  Leases should have an early window of time where any option that exists can be negotiated and finalised.  In high quality shopping centres, the process of giving an option for a further lease term is not desirable; it places far too many limitations on the tenant mix and how the client landlord can work their shop ‘clusters’.  As a general rule, any top quality property should not give ‘options’ as a standard offering in any lease negotiation.
  4. All leases will have factors that need action at some time during the year or the lease term.  Typically those things are insurance certificates of currency, rent reviews, options, renovation dates, and make good provisions.  Get to know your leases so the critical dates area correctly actioned well in advance.

Attention to detail in lease administration is really important.  This means that all actions and correspondence should be correctly recorded and implemented.  All of this action should be supported by a good property management and leasing fee.