Forum Replies Created
- Scott No Mates wrote:Opportunistic? Ambit claim? You/your agent aren't even on the invoice, how do they expect to tie liability to you? Gets you off to a really good start with the tenant.
To even confuse things even more, I received TWO invoices (along with my demand letter):
Original Invoice had tenant's name on it.
Subsquent Invoice had my PM's name on it and his post details (they didnt get hold of mine).Both above invoices have the same reference to the same job, site address etc. same amount but different descriptions.
Terryw wrote:Must be distressing.That is something you will have to argue about. Whats your lawyer saying? You might have to bring the tenant in as a party to any court case.
On the other hand legal expenses are likely to be high and hte risk of having to pay costs to the otherside if you lose. It may be worth considering just to pay it and claim the deductions to help offset the costs. It would have improved your building too and added value. Maybe you could talk the tenant into paying part of it.
My lawyer states there is really no case to answer….as there is 1) no contract 2) i/husband/pm did not contract his electrician.
Paying for it is not an option.
Terryw wrote:I see. In that case then the administrators can continue with the litigation. How much are they suing you for? usually they wouldn't bother as their fees would be more than the get back – good way to get paid though!$35K.
Thing is though, I never contracted them, it was my tenant who did…so he should cough up.
Terryw wrote:That must mean your tenant is under administration? What has happened for that to occur?No, the electrician (his brother in law) is under administration, not the tenant.
His electrician brother in law is currently insolvent.
Scott No Mates wrote:Has your pm served notice of breach of lease for unapproved work? Why not? The unauthorized works ie Fitout, 3 phase, additional lighting etc have any of these works been approved or could the tenant have assumed approval due to you/your pm not telling the tenant to cease? Did the tenant have to install a 3 phase meter & board? Were these discussed at the leasing stage? Who has appointed the debt collectors? Is the work covered under the security of payments legislation? (ie has the correct notice been served to the party on the invoice? & the act followed?) Send me a pm to discuss offline.
Hi Scott,When we entered into the leasing agreement, they verbally notified our PM who in turn notified us about the proposed fitout works.
In our contract, they did not issue in writing proposed works but they were allowed to do so if required. However, it does clearlt state us owners clearly will *not* contribute anything to proposed fitout works.
I don't think the debt collectors are involved yet at this stage in time, only liquidators of his brother in law.
All the invoice details is it is covered by the security of payments legislation on the last line.
Commprop.
Terryw wrote:Do you mean debt collectors? If so, then the electrician could have sold or assigned his debt. The new assignee would have the same rights to be paid as the original electrician – which is in dispute. It would be his arguments and evidence against yours still.At the moment, no. I believe it was the liquidators who wrote to my PM as an "outstanding debt".
If anything is to go by, a lot of the leases we see on the websites come with a "white/vanilla" box – i.e. 4 concrete/brick walls, roof and door. Anything else/improvements is generally at the tenant's expense.
melb15 wrote:We're about to sign a lease on a brand new warehouse/office. Downstairs is warehouse upstairs is the office. The place is brand new so it is like a blank canvas. We let the landlord know what modifications we required and they proposed the below allocation of who will pay for what. I just have two questions: 1. Does this allocation sound fair and standard for a commercial lease (it's our first commercial lease so I have no idea)? 2. If we have to pay for improvements to the property such as shower/kitchen etc we obviously can't easily remove them when we leave. Is there any provision we can make to recover some cost upon leaving considering we would have added to the value of the property? The items proposed are: 1. Phone and Ethernet sockets/cabling will be up to the tenant to arrange at their own cost. 2. Upstairs Heating/Cooling will be installed by the landlord and will be factored into the rental over the first 3 years of the lease agreement. 3. Downstairs kitchen with stove, exhaust fan, pantry will be up to the tenant to arrange at their own cost. 4. Downstairs shower will be up to the tenant to arrange at their own cost. 5. Bars on downstairs windows will be installed by the landlord and will be factored into the rental over the first 3 years of the lease agreement. 6. Alarm system will be up to the tenant to arrange at their own cost. (note; unit 2 installs are alarm installers) 7. Standard roll down blinds will be installed by the landlord and will be factored into the rental over the first 3 years of the lease agreement, any other type of blind (wooden slat etc) will be up to the tenant to arrange at their own cost. 8. Doorbell system will be up to the tenant to arrange at their own cost. 9. Upstairs to be painted (white) will be installed by the landlord. 10. Stair well to be painted (white) will be installed by the landlord. 11. Floor coverings upstairs will be installed by the landlord and will be factored into the rental over the first 3 years of the lease agreement. Thanks in advanceTo be honest, I'm surprised you got this far with the LL, perhaps the building is difficult to rent out, but we wouldn't even entertain these kind of requests.
Apart from the paintwork which is even questionable in itself, the rest of it sounds more like "furbishment" type works that most of the benefit will be received by the tenant than landlord…
Scott No Mates wrote:Will, each class has a different use hence produces a different return & different value. Warehouse has the lowest rental value however you get the largest area with a little for office/amenities. Ie you don't pay much for storage. Office space is generally better located to transport & cod. Rent & cost is greater. Retail is the most desirable & has the highest costs.Thanks Scott.
To be clearer, the reason I ask this is, a relative purchased a warehouse in a different subrub (but nearby – within a 3km radius) which is classfied as Industrial Zone 3 whereas mine is Commercial Zone 3. What is the main difference?
Reading through official documents by the DSE, it seems fairly similar. When we purchased the property, we were advised Commercial Zone 3 was better than Industrial Zone 3 generally speaking..(and quote, the agent used "if everything else was the same e.g. land size"…)
In practical reality sense, I don't think it makes much diff?
Regards,
Will.
Thanks Scott.
We kept with the current agent, in the end it was in my opinion, a case of right timing. As noted above in my old posts, I had set a time limit of 3-4 months before fielding other agents or even thought about doing the whole process myself and engaging a lawyer for the paperwork. I didn't tell him this of course, but I think it got to the point where he knew I was getting frustrated smart enough to read between the lines!
angelinsydney wrote:Hi willister,I'm not sure if you have found a tenant but have you ever thought of giving a rent free period to help the business operator a leg up?
If you could find a tenant, get them to pay all out-goings, so at least you don't have to pay the rates, etc.
I have never owned a commercial property so I really wouldn't know if this is do-able.
Just an idea.
Angel
Hi Angela,
Thanks for the advice…
We found a tenant (yay!) approx 2 months ago now…in the end, we gave him a free rent period of 1 month…which was in my opinion relatively lucky when considering that most others I know of asked for 2 and my friends who own commercial properties reckon 1.5 – 2 was the standard!
Regards,
Will.
Hi There,
I'm not expert, but what I can share is my experience, what you can get out of it is up to you and don't take it as advice but just a "story or shared experience:
I started off like almost every other commercial investor in the residential side about 10 years ago, was relatively young at 22 years of age. Let me just say that one of the most critical and often overlooked mistake that investors who "graduate" from residential to industrial/warehouse/commercial property is treating it the same.
To summarise my experience:
Commercial:
– You will not witness capital growth rates like residential (at least not currently anyway). A lot of this has to do with the fact you need at least 30% minimum deposit on a commercial property.
– Waiting periods generally average between 2 months to 9 months based on my experience, you won't find yourself a raft of choices to choose over too like residential.
– On the positive side, returns are GENERALLY higher – my property is considered a lot return and even it returns 5.5% p/a. On all of my past residential properties, I got nowhere near this return.
– Beware and I stress beware of dilapidated buildings, unlike a house which can be rebuilt relatively easily and also fix relatively cheaply, commercial properties tend to attract more expensive rates for everything from electrics to plumbing.
– You'll almost need an agent, commercial leases are much more complex, difficult to deal with and most of all, time consuming.
– Even if the building is brand spanking new, I almost always feel even the average commercial tenant has more issues than residential properties.
– Current demand seems (and even in the near future) seems to favour residential (if you are already in the market). Most factories are either offshore or struggling and even so businesses, but living space is restricted and demand is high….no brainer there.
– Tenant quality is a very very important factor in the sale price of a building! Their leases/options and also ability to pay pretty much affects what the owner is going to experience!
– Agents get a much higher rate of return and also charge the bull for getting a new tenant (most charge 1 months rent's equivalent) and 5% of rental per annum for their agent fees. This is almost double the ones for residential!
– Not saying residential is any safer or better, but from the stories I've heard there was a lot more issues with commercial properties. I've also witnessed more winners in residential than commercial!
– Residential was in my experience a much more enjoyable one – one property I've rented out for 10 years had about 3 different tenants but the repairs were cheap (nothing beyond $1K), maintenance was minimal and also I could manage the property myself, sometimes I was horrified at the thought of not engaging in agents for my CP!Hope you got something out of that.
Regards,
Willister.
By far plumbers are the most difficult to find! I have a trusted plumber, isn't cheaper than the competition but I would say does a decent job, doesn't overcharge and actual charges reflect quotes. Best of all, his jobs have been pretty good.
The only downside is that as he lives pretty far, sometimes he doesn't show up on time.
PM me if need be for his contact details.
BigTeddy wrote:How long do your commercial/industrial tenants normaly stick around?
What type of business do they have?
Do you find they want to break leases early?
Do you find there business is not a success and they close the doors?
What tenants stay around for a long time?
Is retail better?
Anything else you mite be able to think of?
Based on two tenants (on seperare warehouse properties) I have:
1. Both were on 3x3x3 leases, they chose to opt out after the 6th year.
2. First was a mechanic and second ran a gym/karate classes.
3. No, both refused the option of the 3rd x3 lease tenure, didn't break them "early" like within 3 years.
4. The mechanic I had expanded and needed a much bigger premise (1,000m2+), the gym/karate class guy opted out because of building facility issues that I had no real choice over. The building was aging and there was nothing I could do to keep him there. Faced pretty stiff competition from nearby (within a 10km radius) of newer and bigger named (e.g. Fitness First) gyms. The other problem was that my warehouse was too big for him to fully use. I have 1,000m2 of FLOORSPACE – he could only make use of about 500m2 max. I allowed him to sublet but he demanded lower rental rates, which I couldn't afford to.
5. Not sure, having said that, I would say 95% of all businesses wouldn't stay for a long time. Speaking to mates/agents in the warehouse industry, the only ones who can keep tenants in are shopping centres (goodwill invested, not easy to rebuild).
6. Don't know
7. As many may have mentioned to you, the commercial/industrial type property fluctuates and is heavily affected by the economy.
Take the above info with a grain of salt as this is purely on my experience, not a qualified expert!
From experience, CPI has never reached anywhere near % increase on rents.
The highest in recent memory was like 4.0%? Rest of the years has been well below 5% which is what I have on my old lease! Getting a tenant to agree to this, however, would be a challenge!
Disclaimer: I'm not an expert and please don't take my advice as professional advice.
Scott,
No, I haven't ditched him as yet…I had a face to face discussion with him over the weekend and decided to give him another "4 months" to prove himself. Having a look at the whole picture, I'm monitoring the surrounding properties and they don't seem to have moved either. Several were vacant circa mine was, so I'll keep a close eye. Also called several of the bigger companies and the gist was it is perhaps a low demand market issue, so changing the agent won't exactly solve things immediately and I would have to repay some fees such as internet advertising.
Michael,
Will keep you posted of any developments!
All,
What I can share is this, the problems I incurred were twofold:
1. A very slow paying tenant in the first place. I can't stress enough to anyone considering buying commercial property to make sure you check (by however means) that the tenant pays on time, maybe ask the agent if he is willing to provide statements etc.
2. A run down building, this coupled with a slow paying and troublesome client (constant complaining and requests for free rental periods as compensation…)
1 + 2 = Disaster…
Hi,
I'm pretty much in the same boat, only difference is being in Melbourne. I think with commercial property, biggest difference I felt vs residential is that the vacancy rates are much higher and longer!
It's up to the 7th month mark and I have analysed everything that has "gone wrong" with the property and put it in the best position to be rent out, fixed everything that could be fixed, revised the marketing plan as advised by other members here and also pressed my agent to "work smarter" on renting out the property.
Still fingers crossed for me…
Regards,
Will.
thecrest wrote:Might help to review in detail all the ways the agent is marketing the property, assuming you've been getting advertising invoices.
Put signs on the fence and building for those who want to expand in the area or are driving around prospecting.
List with 2 other agents, competition creates urgency and activity.
Insist on being included in tenant vetting procedure so you know about every enquiry before any are declined.
Letterbox drop the industrial local area in case anyone wants more space nearby.
Good luck
Cheers
thecrestThanks.
The current marketing strategy is to advertise on the web, we have a sign on the building (billboard like style so it's pretty big).
I'm not sure if he has a large database of existing tenants or if he has a large network of contacts, but I doubt it.
As to the vetting process…well, initially, it was relatively quiet, I didn't hear from him and vice versa. By the 3rd month, I had started call him for weekly updates on the number of potential clients…
This is the area in which I think I'm most concerned about – there appears and I think he is lying but to what extent, that I have had at least 1-2 people visit (according to him)….here are some of the excuses I've had so far:
Case 1: Was going to open up a cash and carry like shop/warehouse for African goods. Reason: No licence as yet.
Case 2: Mechanic Reason: Insufficient Credit Funds/No track record of doing business.
Case 3: Cabinet Maker (there appears to be a few in area) Reason: Complained about how dust would fall from roof.
Case 4: Mechanic Reason: Did not return call
Case 5: Karate Centre Reason: Did not return call.
Case 6: Import/Export Business Reason: Did not return call.I held my hopes up for all those chances and got pretty worked up about it too, only to be disappointed every time.
With case 6, he made it sound as if the deal was brokered!!!! Only to find out it was not on Monday!
Hi Scott,
Thanks for your response:
1. Located in Melbourne, Inner West to be exact.
2. Factory size is about 700m2 of usable space.
3. Business Zone 3
4. Rent is what I would consider market value of the premise, going rate is currently $28K + GST + Outgoings for 700m2. As I said in the earlier post, nearby rents are nearly double for half the space, but true, they do have high clearance and and are a lot newer.
5. Leaks have been all fixed and patched, I don't think you can fault it for the size and asking rental price.
