Five Points to Consider When Leasing Construction Equipment
As the construction industry starts to rebound from a down market, rentals of project equipment are on the rise. Whether you are an owner, principal contractor, or specialty trade subcontractor, you may very well be renting equipment for use on an upcoming project. Here are five important points to bear in mind:
1. Do not accept the equipment without thoroughly inspecting it first. Failure to do a full, visual and utility inspection on a rental product could mean that you may be held responsible for existing damages or defects in the equipment. If damage is not documented prior to acceptance of equipment, it will be your word against the lessor’s—and the lessor is likely to have favorable contract language on its side. The best way to avoid this fight is to conduct a thorough inspection while recording (perhaps by taking digital photos) every aesthetic or operational issue with the equipment. Conduct the inspection in the presence of the lessor, provide the lessor with documentation or notes of all existing damage, and retain a copy of the documentation. Also be sure to reject the equipment if it does not appear to be fully functional.
2. Be sure to obtain insurance coverage for the rental, or confirm in writing that coverage is otherwise in place. Under the lease agreement, the renter is typically charged with the duty to obtain insurance coverage for the equipment, both in the name of the renter and the lessor. Failure to have required coverage in place pursuant to the terms of a lease agreement will mean that you are responsible for casualty or loss to the equipment.
3. Make sure your operating team is well-trained on the equipment’s maintenance. Required maintenance will often be spelled out succinctly in the rental agreement. If so, be sure to train your team to abide by it. If not, ask the lessor for its suggested maintenance in writing. If you fail to conduct required maintenance, the equipment may be damaged and you will be stuck with a hefty repair bill, or worse, you may be forced to purchase it —whether you want it or not.
4. Meet the scheduled equipment return deadlines. Per most rental agreements, you will be charged an entire extra day (or week or month, depending on the duration of the rental) if you fail to return the equipment by the allotted time set forth in the contract. For large pieces of machinery, this could mean a significant price.
5. If the equipment runs on gas or diesel, return it with a full tank. Much like national car rental companies, an equipment lessor can charge you significantly enhanced amounts for fuel if you neglect to “gas up” before
you return a piece of construction equipment. These amounts can add up and hurt your bottom line if your project teams are consistently leaving the gas bill to the mercy of your lessors.
With these points in mind, rent wisely and build safely, timely, and well.
2012 is likely to be similar to 2010 and 2011 in many segments of the real estate industry.
The Illinois General Assembly has recently amended the 
I may be over-selling this post a bit, but not by much. There’s no doubt for most small businesses and start-ups that the first, and perhaps only, real estate transaction the firm will enter into is a commercial lease. Whether it is for a retail store, manufacturing or studio space, or a restaurant, there are a few things the small business owner should keep in mind while reviewing that first lease.
In Part I of our series on the particulars of Green Leasing, we discussed Lease Term and Operating Expenses. Now we turn to a robust area for implementing sustainable processes between Landlords and Tenants:
As more workers and entrepreneurs are requiring space to hold meetings and appointments outside the company office, there is a growing need for locations away from homes in which to "plug in", make phone calls without the background music and noise of a Starbucks or other such cafe. The industry which addresses this need is referred to as the "co-working office space industry."
As the movement to increase energy efficiency and create sustainable operations has swept across the real estate industry, more and more commercial tenants and property owners are expressing interest in “green leasing.”
Walmart has opened its supercenters in many if not most urban and rural communities. Where do they go next ? With the over abundance of strip store space just about everywhere Walmart has many options. Walmart is embracing the concept of 'in-flll" with three concept store formats with which they are experimenting:
I then tried to explain to him that this was not a case of the Tenant trying to take advantage of a down market, or exploiting some perception of leverage. Rather, this retailer was different from other retailers when considering their product mix and customer base. And so it was a special business issue, not trying to take advantage; and I meant it !
The ubiquitous refrain at any gathering of commercial real estate professionals in the past 24 months can be summed up in a few short questions: Are you busy? Who is lending? No, seriously, who is lending? And -- of course -- when will this end?
Landlord's have gone to fixed CAM to reduce administrative expenses and disputes with their tenants. The government could accomplish the same by going to a flat tax - no need for complicated tax regulations that create unintended consequences; no need for intrusive audits where the government is at odds with its constituents; in fact maybe no need for the IRS. Take for example the so called "
Remember Enron and off-balance-sheet accounting scandals? The efforts to clean up these accounting practices are still in the works and are about to hit the world of commercial real estate—arguably at the worst possible time. The Financial Accounting Standards Board (FASB) (which is endowed with the power to decide U.S. generally accepted accounting principles) and its international counterpart, the International Accounting Standards Board (IASB) are hoping to enact a new lease accounting standard by 2013. The Securities and Exchange Commission in a 2005 report to Congress estimated that the current lease accounting standards which went into effect in 1976 allow tenants to keep about $1.25 trillion in future liabilities off-balance-sheet. 
The current economic downturn and the corresponding contraction of the retail sector have resulted in a glut of vacant “big-box” retail stores in shopping centers across the country. Vacant big-box spaces pose special challenges for landlords and communities. While the number of vacant big-box spaces is daunting, there are glimmers of hope as landlords and communities have become increasingly creative in their re-adaptive uses of these dark spaces. For creative landlords who are willing to invest in redesigning and redeveloping vacant big-box spaces, big boxes can provide opportunities for both landlords and communities.
The typical co-tenancy clause provides that if occupancy at a shopping center falls below a certain level and/or certain other key tenants close, the tenant gets rent relief and at some point the right to terminate its lease. In the current retail environment, all sophisticated tenants demand some sort of co-tenancy protection. Landlords have generally accepted the fact that they must agree to some sort of co-tenancy if they are to get the tenants they desire.
I was recently in the offices of the FBI Cincinnati Division attending the FBI Citizens' Academy program, and it made me think about a leasing opportunity (in addition to thinking about what an awesome job our FBI really does and how dedicated and effective are our FBI professionals). The recent economy has resulted in higher vacancies for our commercial properties and less demand for the resulting vacant space. In a general sense, our government has stepped in as consumer to invigorate the economy. Maybe our government also represents an opportunity for the commercial real estate market. The government has to occupy space, whether by lease or purchase. I have represented a landlord who leased space to a governmental office (a state judge), and there are several issues that arise which are not present on a typical retail or office lease. For example, the background of the Landlord becomes an issue, there are restrictions on the parties the Landlord hires at the site and the terms of such engagements, security is extra important and the tenant may require the right to terminate if its budget is changed. In addition, certain government offices may not be desirable in a a multi-tenant property. So while the government may be an opportunity, be mindful of their needs and the costs to comply with the same.
Almost all new build shopping centers are mixed use - they include some combination of office and residential in addition to the retail space. Elizabeth Hamilton, in house Real Estate Counsel at Office Depot, recently reminded me of the special problem this presents in allocating CAM, taxes and insurance. Some portion of each must be allocated to the office and residential components, but should it be on a strict per square foot basis for all users? Taxes and insurance should be allocated among all users equally on a per square foot basis. This means the dominator of the fraction defining a tenant's pro rata share should include all retail, office and residential space. (Of course, creating separate parcels eliminates or reduces the problem.) 
An interesting situation has come up several times just recently (these issues come in droves – after never confronting the issue for a really long time, all of a sudden you get the same issue coming up again and again):
When a prospective tenant speaks to a landlord about leasing space, one of the major points of discussion is usually the amount of square footage to be leased. The tenant will naturally need to rent sufficient space for the operation of its business, and the parties will often base the rent and common expense charges upon the square footage. However, although the parties may both use the term “square footage,” they may not be talking about the same thing. As a tenant, the natural inclination is to think of square footage as the amount of space you can actually use for your business. This is often called the “usable area.” In contrast, the landlord may view square footage as the amount of space for which he can charge his tenants rent. This is referred to as the “rentable area” or “net leasable area.” .jpg)
Recently, David Birdsall, Chief Development Officer for Phillips Edison, spoke to a group of real estate industry executives about the state of the retail industry and its impact on retail real estate. Dave believes we are at the dawn of a new/old retail era. Dave showed how the internet is changing how consumers shop and will continue to evolve to present easier and perhaps more desirable shopping experiences for consumers. We have already seen retailers changing their strategy to have one or two stores in a market at the top locations with the internet covering the rest, instead of trying to "store" the entire market. Dave says successful retail will instead be "experience" driven. Shoppers will come to a retailer or a shopping center for the experience. Thus, restaurants may become the new anchor. Authentic, local, family owned retailers may have a new special appeal. Retailers will not be looking at mass openings but will concentrate on improving existing operations. New developments will be scarce. Existing "distressed" centers may need to be redeveloped for other uses. And successful retailers and landlords will be those who are really good operators - not just good financiers. 
Vacancy rates are up; occupancy rates are down. This spells opportunity for tenants and challenges for landlords. The instinct which once prevailed in the real estate industry was to "go for the jugular" and cut the best deal you possibly can. But real estate professionals know that today's "tenant market" will become tomorrow's "landlord market." So, savvy real estate professionals are approaching the present "soft" market with a creative approach which has the intention to make everyone a winner. 
So by now you’ve been to at least three conferences which tell you the economy has hit the bottom, it’s a U curve, 2010 will still be slow with savings and not consumption being the key characteristic, 2011 is a comeback year, but real estate will never get back to the boom boom days of only a few years ago. So what does it all really mean to the real estate professional?
The following clause was in a first draft of a lease I recently reviewed for a client in the boilerplate provisions at the end under the heading “Mediation.” It is reproduced here verbatim (not kidding):
In October, 2009 Morgan Stanley published its Mall and Lifestyle Center Handbook. (Special thanks to 
When it comes to taking care of our own health, all too often we rely upon reactive maintenance. For example, you ignore your doctor’s warnings and continue to eat fast food and fail to exercise on a semi-regular basis. You had the chance to help control the situation with some basic preventive maintenance, but you were too busy working and focused on more immediate issues. Now, crisis strikes suddenly in the form of a heart attack. Assuming you survive, you are now left with complicated reactive maintenance, hoping to repair the damage that has already been done. But could this have been avoided with simple preventive maintenance?
When representing a tenant, I always want an SNDA so that if the landlord defaults on its mortgage my client is assured that it can remain in the space as long as there are no tenant defaults.
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It is certainly no surprise that the commercial real estate leasing market has turned into a "tenant favorable" market. How long this will last is anyone's guess. Give the current leasing market conditions and overall economic conditions tenants should take precautions to prevent becoming victims of their landlord's potential financial defaults and inability to obtain credit. 
It seems like every day another retailer files bankruptcy. Many more have frozen new deals, cancelled scheduled openings and even closed open stores. A shopping center landlord must monitor tenant monthly gross sales reports and tenant public filings to anticipate which of its tenants are or could become problem tenants. The landlord should also act quickly to declare a default of a tenant which is not paying rent and other charges timely. One strategy for a tenant is to withhold rent to build a war chest before it files bankruptcy. A landlord that terminates a lease prior to the tenant filing for bankruptcy protection has significantly improved its leverage. A well drafted lease, including tight permitted use clauses, can also increase the landlord's bargaining power.
Recently at the January monthly 