Managing Lease


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Managing Lease

  1. 1. Managing Lease Lecture 3 By Department of Construction & Real Estate Management Faculty of Technology Management (Session 1 2012/2013)13/11/2012 1 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  2. 2. Lecture outlines• Managing leases – Managing leases negotiations – Managing tenant relations – Managing reports and insurance – Managing office administration13/11/2012 2 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  3. 3. Managing leases negotiations• Discuss the role the PM plays in negotiating lease. The processes are: – Qualifying a tenant • Visitor registration • Special needs • Lease application • Evaluation of data – Identity – Fair housing – Rental history – Financial status13/11/2012 3 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  4. 4. Managing leases negotiations – Negotiating the terms • Controlling the process – Cooperating brokers – Role of attorneys – Security deposits – Concessions – When to grant concessions – Rent schedules and rebates – Free rent – Length of lease period – Tenant alternatives13/11/2012 4 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  5. 5. Managing leases negotiations – Signing the agreement • Prospect hesitancy – Is this the best space available at the price? – Do the concessions meet my needs? – Should I act immediately? • Closing techniques • Follow up13/11/2012 5 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  6. 6. Managing tenant relations• The success of PMs greatly depends on their ability to maintain good relations with tenants.• Dissatisfied tenants will lead to: – High tenant turnover – Space vacancy – Increase cost of promotion and marketing• Good communication system is vital for the effective PM.13/11/2012 6 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  7. 7. Managing tenant relations• Establishing landlord-tenant relationship – Move-in inspections – Servicing the lease – Clear understanding of lease terms – Manager’s personal efforts • Meeting with tenant • Newsletters – Handling maintenance requests • Requests in writing • Speedy response • Excessive demands • Role of maintenance personnel – Commercial and industrial variations13/11/2012 7 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  8. 8. Managing tenant relations• Rent collection – When to pay – Encourage prompts payments – Late fees – Billing notices• Lease renewals – The value of stable tenants – Bargaining factors • The length of the new lease term • The extent of repairs, alterations or redecorating to be done • The amount of rent to be paid – Concessions – Rental rate – Proper notice – competition13/11/2012 8 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  9. 9. Managing tenant relations• Rental increase – Fact of life – Avoid tenant protest – Increase services• Terminating the tenancy – Required notice – Exit interview (feedback form before moving out)13/11/2012 9 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  10. 10. Managing tenant relations – Fair housing compliance (giving notice termination upon expiring lease term) – Inspection of the premises – Return of the security deposit • Retention for damages • Last month’s rent13/11/2012 10 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  11. 11. Managing tenant relations• Terminating the tenancy in court – Reasons for eviction (breach of contract) – Notice before eviction suit – Eviction suit (process of eviction and repossession of property) – Process of eviction suit must be served on the tenants – Actual removal (e.g. secure court order until the tenant physically remove from the property)13/11/2012 11 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  12. 12. Group Discussion (L3-2)• Sayid Bajrai manages a 75-unit apartment complex. One of his primary functions is to manage tenant relations. In one week, Sayid had to deal with 3 unpleasant tenant situations. One tenant, A, has been late with her payment. For the last three months, A has paid the rent only after receiving the landlord’s official ‘pay or quit the premises’ eviction notice. This month, A is late again.• A second tenant, B has repeatedly requests for various services and repairs, most of which have not been the landlord’s responsibility. B just told Sayid that he wants his apartment repainted. When Sayid told him that the landlord was not obligated to repaint the apartment in the middle of his one-year tenancy, he became very upset and threatened to start a tenant revolt.• The third tenant, C, who has been a model tenant for 5 years, just told Sayid that he would not be renewing his leases when it expires in 2 months. When Sayid asked him the reason of terminating the lease, he replied that he was uncomfortable with present management policies. 13/11/2012 12 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  13. 13. Group Discussion (L3-2)• Questions – What can Sayid do to solve the rent delinquency problem with A? – What can Sayid do to head off the threatened tenant revolt – How should Sayid respond to C’s statement about present management policies?13/11/2012 13 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  14. 14. Managing report and insurance• Operating reports• Financial report – Budget comparison statement – Income and expense report • Income – Vacant rental units – Support space (storage, offices) – Vacant space under major repair • Expenses – Wages paid to building personnel – General operating expenses – Maintenance expenses – Administrative costs • Profit & loss account13/11/2012 14 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  15. 15. Managing report and insurance – Operating budget• Estimate conservatively • Prepare explanation • Examine discrepancies • Allow for an evaluation of management of skills• Cash flow statement for tax purpose• Determining profitability• Tax records• Risk management and insurance• Type of insurance13/11/2012 15 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  16. 16. Managing the office administration• Establishing the management office – Location and layout – Office design – Files • Leases • Correspondence • Work order bids • Financial files • Permanent files – Equipment13/11/2012 16 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  17. 17. Managing the office administration• Computers and PM – Hardware & software• Staffing the management office – PM executive – Property supervisor (field manager) – On-site manager and building personnel – Purchasing agent – Office manager (controller) – Cashier –bookkeeper – Clerical personnel – Branch officers13/11/2012 17 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  18. 18. Managing the office administration• Determining management expenses – Direct cost – Indirect cost• Calculating the management fees – Per-unit cost method – Adjustment to perunit fee – Percentage rate – Management pricing worksheet13/11/2012 18 UNIVERSITI TUN HUSSEIN ONN MALAYSIA
  19. 19. References• Evans, M, (2007), Opportunities in Property Management Careers, McGrawHill.• Kyle, R, (2000), Property Management, 6th Edition, Dearborn.13/11/2012 19 UNIVERSITI TUN HUSSEIN ONN MALAYSIA