Recently I was referred to a local retail business in Huntington Beach, CA. The owner of the small, home-decor, store front was frustrated with her landlord just 6 months into a 5 year contract, and she wanted to find a new space. Uh-oh…these scenarios present a myriad of problems for CRE professionals.
The problem arose from delivery trucks for neighboring tenants which park directly in front of her store front, blocking her well dressed windows and preventing clients from finding her retail street frontage. It was also a nuisance to parking; sometimes her clients wouldn’t be able to leave their parking spot until after the delivery truck had completed its drop off. You may be asking yourself, “Why on earth would some one lease a space in front of a drop off zone?”. Well the answer is, she was never informed of the problem. Evidently this landlord is fully aware of the dilemma with this particular problem spot in his center, but his unethical nature prevented him being….well….ethical about it. When my new client found this space, she was not represented by a CRE professional – which was probably her biggest mistake. According to my client, during the negotiation (which took place over dinner…yes, that’s right – he wined and dined her) the landlord:
- never said anything about the drop off zone, which isn’t adequately marked, and which prohibits visibility of the units 50% of the time.
- promised her the lease would be M2M, but that he needed her to sign a 5 year lease so he could obtain financing from the bank for building improvements
- pushed her into spending $5k on deferred maintenance to the unit; not tenant improvements…deferred maintenance….
Needless to say, my client began having problems on day 1 of her occupancy when she noticed the consistency with which delivery trucks would park outside of her store. By the time she was referred to me, she had already spoken to the landlord about the problem and had begun talking with her neighbors about her dilemma. To her surprise, she discovered that the landlord has a reputation with his tenants for being a shyster. She also learned that he has a team of lawyers he leans on to get him through his legal shenanigans; the guy’s a professional schmuck. Even the attorney that I referred my client to had heard of this guy and his unethical standards. Unfortunately for my client however, the schmuck and his band of merry attorneys do a great job dancing on the line of legality.
Because my client had already begun negotiating a resolution to these problems with the landlord, and because the landlord had been playing chicken with her during the negotiation, I advised my client to make the landlord an offer he would have to refuse. I advised her to:
- keep track of every truck that parks in front of her store,
- to back track and keep a log of as many conversations she could remember wherein the landlord made a promise that hadn’t been kept
- I also advised her to write a letter giving the landlord notice that in order for her to stay her rent would need to be cut in half. The letter also gave credit for the $5k she had spent in deferred maintenance on her unit, putting her monthly rent at a quarter of her contract rent for an entire year.
The fact of the matter is: he is renting a retail store front with street frontage and visibility. By blocking access and visibility, he is not performing to the terms of the lease, and therefore the landlord is in default of the lease.
To make an already long story a bit shorter: the landlord has acquiesced. He has asked her to get out by the end of April (this month), and the unit is already up for lease. In fact, according to my research the listing was never taken down. A sign that the landlord is fully aware of the parking dilemma he has with this particular unit. In fact, the landlord showed the unit the other day, and during the tour the landlord asked the delivery trucks to park elsewhere, but only for the tour. Once the tour was over, the trucks were back in front of the unit, according to my client. One of the truck drivers even asked my client if the tour was over so he could move his truck back to that spot. According to my client, she has been told by other neighbors in the center that the landlord has threatened legal entanglement unless they’re quiet to new tenants about this problem or any other issue he’s had with other tenants. Wow. The balls of this guy.
The moral of the story here folks: HIRE A COMMERCIAL REAL ESTATE PROFESSIONAL TO NEGOTIATE YOUR LEASE. In this particular case, I would have never agreed to have my client pay $5k in deferred maintenance on the unit, nor would I have agreed to a 5 year lease that was really M2M. To be honest, there’s a really strong chance I wouldn’t have even taken her to this center; and if I had, it would’ve been one of near 20 that we would’ve seen and the chances of her leasing that space would’ve been much less. If we did end up negotiating on this space, the truck issue might have snuck by me because the landlord was hiding the issue, but once it began to be a nuisance, I would’ve had my client out of there within a month, as opposed to the 6 or 7 months that she has spent in that unit.
And one last thing: never go to dinner with a prospective landlord. That’s just weird.