Questions to ask before signing a lease

The Manila Times
Business Times
Monday, March 10, 2003
http://www.manilatimes.net/national/2003/mar/10/business/20030310bus14.html

LEARNING AND INNOVATION
By Moje RamosAquino
Questions to ask before signing a lease

I know that you have been going around looking for an appropriate location for your business. May I remind you of the words of Larry Zimmerman, chief financial officer of Xerox: “Perseverance and resolve are 90 percent of the battle if you want to accomplish anything of worth.”

You might have all the financial capital in the world, but without perseverance, firm commitment and creativity, it is hard to succeed in anything. Inder Guglani, cofounder and CEO of AZZmoonlighter.com says, “Tap into creativity before you tap into capital. Capital is never cheap.” Creativity is free, a gift from God.

And so we shall go on with our Journey on Entrepreneurship. We are still in the issue of your business location, a decision that you should not make lightly or quickly. Looking for a business site is akin to a movie director or producer looking for the ideal location for a scene.

Rebecca Rice of DStudios, an independent film production company in Dallas, Texas, wonders: “Is the look going to be right for the story? The look is equally important to the quality of sound we can get. A lot of locations may not be noisy, but may have real bad acoustics, so we have to be cognizant of that. We have to know whether we have enough access to electricity to run the camera and the lights. Availability is a big issue. Can we get the location the way we need it, for as long as we need it?” Finding the right location is critical to the success of their filmmaking business.

Or your business. As a location scout, you need to look for a location that is right for your business. That which will give your business, no matter what size, the power to attract customers and sell your products that will translate to profit.

As we know a lot of big businesses today started from the garage of their house, e.g. Microsoft and Amazon.com. Your garage, your own house, your present office, your backyard, your kitchen—they all will do. They are there, available and won’t cost you extra. Good for start up for certain business like retail, baked products, distribution and others. At some point, you need to move out to a real business location before you start tripping on your baking paraphernalia or crowding every nook and cranny in your house with boxes of goods.

Will you purchase property and construct a new business structure? Will you just modify an existing building to meet your requirements? Will you lease a ready site? What are the issues to consider in making this decision? I suggest that you consult with, possibly, a lawyer, an accountant, and a real estate professional for assistance and information.

If you are leasing a site, take some tips from Alan Whitson, author of “327 Questions to Ask Before You Sign a Lease.”

• Does the lease specifically state the square footage of the premises? The total rentable square footage of the building?

• Is the tenant’s share of expenses based on total square footage of the building or the square footage leased by the landlord? Your share may be lower if it’s based on the total square footage.

• Do the base year expenses reflect full occupancy or are they adjusted to full occupancy (i.e. base year real estate taxes on an unfinished building are lower than in subsequent years)?

• Must the landlord provide the detailed list of expenses, prepared by a CPA, to support increases?

• Does the lease clearly give the tenant the right to audit the landlord’s books or records?

• If use of the building is interrupted, does the lease define the remedies available to the tenant, such as rent abatement or lease cancelation?

• If the landlord does not meet repair responsibilities, can the tenants make the repairs, after notice to the landlord, and deduct the cost from the rent?

• Is the landlord required to obtain nondisturbance agreements from current and future lenders?

• Does the lease clearly define how disputes will be decided?

The last is particularly important here in our country where false advertising and big promises are given during the selling period and are unilaterally modified or canceled after all agreements are signed.

A case in point is the new Sta. Mesa Mart beside SM Centerpoint. I signed up and paid for a stall. The advertisement said it would open March 1. Additionally, we were promised that we could actually open on February 15 without paying any rent. Also, they promised to provide the rollup shutter door.

I started buying goodies to sell. Everyday, I visited the site and wondered how we could open our business on time since construction seemed to be going very, very slowly. It was already February 17 when the Construction and Occupancy Guidelines were faxed to my office and only when I asked for it. Our particular stall was finished (ceiling and walls) only on February 26 upon our constant prodding. When we questioned them about the delay, they said that we were the only tenant in that row, therefore, they did not find it feasible to construct only one stall. Huh? Also, we were told that we needed to provide the door because they would only provide doors to the stalls opening externally.

I talked to the manager who was not willing to listen and who, instead, arrogantly offered to give me back my reservation deposit in full when I started to rattle off my complaints. That was last week but, until now, I haven’t gotten even a shadow of my money. Sta. Mesa Mart is owned and operated by JTQ Securities Corp.

No wonder that it has not formally opened until now and there are still a lot of vacant spaces there. Not that there are no tenants, but I understand that a number of tenants have quit for obvious reasons. They have been trying to get tenants since May last year.

In business, there are such things as commitment, respect and integrity. Arrogance has no place in it. In business, as in life, there is “karma.”

More power, A.I.M.! I attended the Asian Institute of Management alumni homecoming at the Greenbelt Park last Friday. It was like a grand meeting of prominent entrepreneurs, CEOs, COOs, CFOs and other business leaders from the Philippines and other Asian countries. The Madrigal Singers and the Apo Hiking Society provided songs from the 70s, 80s and 90s. Sayang, I did not see any of my classmates in Air Transport Course (ATC ’93). Mabuhay, A.I.M.!

Moje RamosAquino is president of Paradigms and Paradoxes Corp., a business and HROD consulting company, and invites your feedback via moje@mydestiny.net.