Who pays for damage when a jet crashes through your warehouse?

Occasionally, it’s a great idea to clear the inbox of your mind. Today, I unpack several issues clogging my consciousness.

The unexpected does occur

I received a call last Thursday from a colleague of mine. A friend of hers was panicked. An F-16 had just crashed through his space. He needed to move – FAST! But what about his remaining lease term, the damage to his inventory, the gaping hole in the owner’s roof? That’s why we have insurance, for both owners and tenants.

Note to owners – make sure your occupants have updated their policies and their premiums are paid!

When is an owner “unreasonable”?

It’s no uncommon to hear that a building occupant has too much or too little space. If they lease their premises this can be problematic, especially if lease term remains. You see, a tenant cannot simply “walk away” from a lease because it’s a contractual obligation. Therefore, the options are threefold: sublease, a buy-out or make do.

A sublease is the most common route taken. Language in most leases allows an occupant to find a replacement or sub-tenant to fulfill its term. The owner has the right to approve any assignment and cannot unreasonably withhold permission. But what is “unreasonable”?

An owner will consider the creditworthiness of the proxy tenant, their building use, portion of the space taken and the term to form his or her approval. If all of the boxes are checked, a refusal may be construed as unreasonable.

Small business owner attitudes

As 2019 dawned I sensed a shift in outlooks. After all, the government was shuttered, the stock market was wildly gyrating and interest rates were rising. The stench of uncertainty wafted. Now, with almost half the year in the books, attitudes have improved as unemployment has dropped to record lows and interest rates have fallen. Candidly, the housing market performance and tariff hikes still have me wary. But we will see.

Lawyers

I love the legal profession! So much so I nearly went to law school. But, I chose commercial real estate instead. Too many in my profession find themselves at odds with counsel. In order to succeed as a commercial real estate professional, you have to learn to peacefully co-exist with attorneys.

Just understand, we get paid to solve a deal’s issues. If an attorney irons out a problem too quickly, the fees stop and liability begins. Our job is to negotiate economic points — price, term, deposits, concessions. Inherent risk is involved when transacting, however. Enter lawyers. Most want the same result — a closed deal. Just allow them to have their say.

Networking is not selling

Networking is about giving, not receiving. Doubt what I say? How many times have you attended a Chamber meeting, Rotary lunch or Provisors gathering to buy anything? Bingo!

So, if none of the attendees are there to buy, why would you show up to sell? You’ll be sorely disappointed. You might as well spend that time knocking on doors or making prospecting dials. Discover how you can help another achieve their goals and networking will become a gold mine of strategic contacts.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104.

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