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Archive for the ‘Leasing’ Category

Lease management software provider Odessa Technologies contends that automated workflow processing accelerates lease processing times, effectively manages related processes, and optimizes workforce efficiencies in any decision making environment. Any workflow process, whether it be for the decision on lease applications or vendor payments (check requests), can be accommodated by an automated workflow system that is built with adequate versatility. In fact, the automation of decision making can fundamentally change the way an organization works, forcing it to confront its bottlenecks and find new ways to create efficiencies.

Workflow model applied traditionally
A standard workflow that can be managed through an automated workflow system is the lease application process. Typically, a lease application traverses through various departments or stages before an approval or rejection decision is made. An application may, for instance, first go to the credit department, then funding, and finally to the legal department before getting approval. Moreover, certain applications (i.e. those which exceed a certain pre-defined dollar limit) may have to make two (or more) stops in the credit department before moving forward. Workflows such as these can be easily modeled in an automated system; further, based on certain user-defined conditional logic (such as a credit limit), the application can even move through different paths within the same workflow.
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In the last article we looked at a few of the things you should consider before leasing that first office or storefront for your business. To recap, you should not only consider the old standard “location, location, location,” but also consider things like sufficient parking, the number of employees who will be working onsite, and future growth projections. I stressed that it was important not to get caught up in the moment. You should take your time to find the space best suited for your business for the long haul, not just for today.

This week we’ll discuss the most important aspect of the process: signing a commercial lease (insert dramatic music here). One of the biggest mistakes many entrepreneurs make when leasing commercial space is not reading the lease. Forget reading the fine print. When it comes to a lease its ALL fine print.

Don’t believe me? Let me tell you the true story of my friend, Homer, whose name I have changed to protect the ignorant. Homer signed a two year lease on a suite of offices for his business. As the owner of the business Homer signed on the dotted line and agreed to personally guarantee payment of the lease and to abide by its terms. Homer moved in and it was business as usual until the end of the two year lease term drew near. It was then that Homer discovered that failing to read the lease was going to be a very costly mistake.

Toward the end of the two year lease period Homer decided to relocate, but when he gave the landlord what he thought was the customary 30 day notice, he discovered that the lease had automatically renewed for another two year term at the 60 day notice point. In other words, Homer didn’t realize that the lease required a minimum of 60 days notice to let the landlord know that the lease would not be renewed. Because Homer did not know that he was required to give at least 60 days notice of his intent to vacate, the lease automatically renewed for another two years. And there was not a darn thing Homer could do about it but reach around and slap himself in the back of the head for not taking the time to read the lease.

What was the landlord’s position when Homer pointed out that he had not read the lease and therefore was not aware of the 60 day notice? The landlord, while sympathetic to Homer’s plight, stuck to his guns and told Homer that he would have to honor the lease, which meant that even if Homer moved out as planned, he was still on the hook for paying the rent for another two years.

Does the fact that the landlord chose to enforce the lease agreement rather than let Homer off the hook make him an evil man? Not at all. From the landlord’s point of view, he had no choice but to enforce the terms on the lease. He had a signed contract that told him his space was going to be rented for the next two years. He had not planned on the space suddenly being vacant. Being a landlord with unrented space is like being a business with no paying customers. Empty space means no revenue from rental fees which means no money to pay the mortgage payment. As the old saying goes, “It’s just business…”

Sure, any landlord with a heart might feel bad that Homer was ignorant of the auto-renewal clause, but not so bad that they are willing to risk their own financial well-being by having Homer’s space sit vacant. The bottom line is this: whether Homer read the lease or not is irrelevant. Homer signed the lease, thereby agreeing to its terms, and therefore he must hold up his end of the bargain, period.

As of this moment, Homer is relocating his business in spite of not being able to get out of his old lease and he will continue paying the payment on the vacated space for the remaining two year term of the lease or until he can sublease the space. Even then Homer is not fully off the hook because he will still be considered the legal tenant unless his sublessor agrees to sign a new lease with the landlord. Hopefully he will just have someone else making the lease payments.

Again, the moral to this story is READ THE LEASE. Or even better, have an attorney read it for you. I have learned over the years to never sign a legal document of any kind without letting my attorney review it, especially if the document involves money and my first born child.

Here are a few other points to ponder before signing a commercial lease.

How is the lease payment calculated? The most basic equation for calculating a lease payment takes the number of square feet times the cost per square foot, then amortizes that over a 12 month span. For example, if you have 1,000 square feet and the cost per square foot is $12, the annual lease payment would be $12,000. Divided by 12 months the monthly lease payment would be $1,000. Again, this is a simplified scenario. These days most commercial leases include additional factors that affect the final price, such as rent increases, operating expense escalations, common area charges, etc.

Who pays for what? It’s important that you understand exactly what you are paying for. Are you responsible for any costs other than the rent? Will you be responsible for paying your own utilities, for example? Will you have to pay for parking privileges or janitorial service? Who handles maintenance and repairs?
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Is Signing that Lease Agreement Right for You?

The real estate market is booming across the United States, especially in select areas of California as well as Las Vegas. Even the sleepy town of Boise, Idaho is experiencing record breaking primary residential development. Where ever you happen to live, you have probably noticed it’s not so easy to get into that coveted house you have always dreamed of, despite the favorable mortgage rates. So what should you do?

Lessons Learned from the Past

With such uncertainty around the real estate market, perhaps it is best to stay away from owning your own property. Many so called experts predict the housing market in the US has finally reach bubble status, and expect that bubble to burst in the near future. They may have submitted their predictions a bit early, but their advice should be considered. If we learned anything from the stock market bubble and subsequent crash of 2000, we realized frequently a conservative approach to investing serves us well when uncertainty surrounds the market.

Protect yourself and consider the advantages of renting or leasing versus buying your own home. A renter assumes far less risk by signing his/her name to a lease agreement than when closing on a house. Typically a rental agreement locks you into a contract for a short period of time, relatively speaking, during which the rental rate is locked as well. Such a contract can protect you from the downswings of the real estate market, especially the volatility frequently demonstrated by adjustable rate mortgages. Granted, as a renter you don’t stand to gain any equity in the house should the market turn up. However, you also don’t expose yourself to the violent downswings in housing values wrought by an oversaturated market. Should you buy a house now and a year later need to move to pursue a new job opportunity, what happens when your realize those inflated prices you paid for your house are not so inflated anymore, and suddenly you owe more on your house than it is worth? That is called negative equity, and instinctively you realize no good can come of such a situation. Hence renting offers flexibility, both financially and physically speaking.
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Over the past few years, the popularity of car leasing has soared. When you compare leasing with buying a car and suffering the humongous monthly installment fees, leasing provides a better and more viable financial option.

For auto leasing, you need to know the tricks of the trade so that you will not end up paying more than when you directly buy the car. There are car dealers and manufacturers who can give you your money’s worth if you want to go for this option.

You will get a better deal out of the car dealers if you appear knowledgeable about the auto leasing industry, so read up.

‘Auto Leasing Defined’

You would “lease” a car by paying for the costs by which the vehicle depreciates in value. You can calculate depreciation costs by subtracting the car’s value by the time that the lease ends, from its original value. There are cars which depreciate more than other brands. The rule of thumb is, the smaller the amount that your car depreciates, the lesser the costs to lease.

Once you decide to go for leasing over buying a vehicle, you may choose the one with the least depreciation value.

If you decide to go for this option, you need to learn about “lease term”. This is the number of months that the vehicle is leased. Typically, leases last for 24, 36 or 48 months, depending on your contract.
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