Chelsea Drinkard No Comments

What Are My Options to Eliminate My Office Space Rent?

The market has plummeted and now your business is taking a hit. Furthermore, you are not able to go into your office because it is not considered “essential” or out of the risk of your employees’ health and safety.

Every lease is written differently but there could be a few clauses that may be arguable in your favor. We are not attorneys and can’t provide legal counsel, however, we have identified and selected attorneys who are experts in Force Majeure and Impossibility Clause. Below are 3 action steps you can take to minimize any financial overhead you have with your Landlord.

PPP Loan.
The PPP Loan can be used towards office space rent, utilities and interest on a mortgage. If you have not already and missed the first round of funding, take advantage of the second round. You will want to apply directly through your bank. It is recommended you apply through your existing bank.

Make an Appeal to Landlord.
Ask your Landlord if you can forgo rent for the next ninety days. Not all Landlords would be accepting to this but it does not hurt to ask. A way this could be presented is the next ninety days is waved and then owed in addition to your next rent payment. For example, rent for May, June and July could be waved and on August 1st rent May-August will be due. Another scenario, you could tack it on to the end of the lease or spread the rent over the next several months. There are several ways this could be accomplished depending on the Landlord’s appetite and the Tenant’s ability to pay.

Review Your Lease.
As we stated in the beginning, every lease is different. Dig up your lease and you will want to review for two clauses, Force Majeure and Impossibility clause. Both of these clauses could provide means to bring to your Landlord but that would be for a Real Estate Attorney to advise. Force Majeure is defined as “unforeseeable circumstances that prevent someone from fulfilling a contract”. Impossibility is defined as “is an excuse for the nonperformance of duties under a contract, based on a change in circumstances (or the discovery of preexisting circumstances), the nonoccurence of which was an underlying assumption of the contract, that makes performance of the contract literally impossible.”

Additionally, the State of Florida is a very Tenant friendly state in regards to laws between Landlords and Tenants compared to other states. Having a Tenant Representative provides a competitive advantage to understand the pulse of the market and insider only, knowledge. Give our team at Office Space Brokers a call 813-289-3700 or email at cd@officespacebrokers.com to evaluate your company’s office space solution and walk you through this process to minimize your financial risk while you business is at a standstill.

Chelsea Drinkard No Comments

The Most Common Types of Commercial Real Estate Leases: Full Service, Modified Gross and Triple Net

In commercial real estate, there are typically three different types of leases structures. Knowing the characteristics ensure you know what to financially expect and budget for with your monthly office rent. In Tampa Bay, a particular type of lease structure parallels with a different type of space and location.

Two main items to consider, location and type of buildings.

For example, if you are leasing office space in the Tampa in a large building in Westshore or Downtown Tampa, nine times out of ten you have a Full Service office lease. Compared to if you are leasing office space in Carrollwood you would come across more Modified Gross or Full Services leases.

The type of building can also play a role but there are exceptions. If you relocate your office to a different type of building (from a multi-story office building to a single-story building) the kind of lease structure can vary.

What is the Difference between Full Service (FS), Modified Gross (MG) and Triple Net (NNN) Leases?

In commercial leases there are three typical types of leases that can be negotiated between a tenant and a landlord: “Full Service Gross” (FSG), “Modified Gross” (MG) and “Triple Net” (NNN). In some cities, one type of lease may be more prevalent than the others. In general, full service usually applies to a multiple story office building, MG single story office space or warehouse and NNN applies to retail space. Usually, the differences between the three lease types relates to how (and by whom) the “triple net” costs (taxes, insurance and common area maintenance (CAM)) are dealt with.

Full Service:

In an FS lease, the triple net costs and any additional costs such as utilities and janitorial, but excluding the costs of phone/data, are bundled into the base rent. FSG leases provide the tenant with the highest level of certainty regarding their complete occupancy cost; however, the downside is that the annual escalator will increase the base rate of the lease regardless of any real fluctuations in the operating expenses.

Modified Gross:

An MG lease typically includes all the triple net costs but excludes utilities and/or janitorial service. An MG lease has similar advantages/disadvantages to a FSG lease; i.e. taxes, insurance and CAM are typically bundled into the base lease rate. A unique disadvantage is that the tenant will have two additional variable costs to consider: utilities and janitorial. It is important to note that a modified gross lease can be “modified” to include or exclude any individual expense within the base rate “bundle.”

Triple Net:

In an NNN lease, the tenant is responsible for their pro-rated share of the “triple net costs”: taxes, insurance and CAM; in addition, the tenant is also responsible for utilities and janitorial. The primary advantage to an NNN lease is transparency; all of the building’s operating costs are available for the tenant’s review. The primary disadvantage is that the triple net costs are not guaranteed in the Lease and are subject to increase or decrease, increasing is much more typical.