Managing Lease

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

Lecture outlines

• Managing leases
– Managing leases negotiations
– Managing tenant relations
– Managing reports and insurance
– Managing office administration

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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 status

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– 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 alternatives

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– 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 up

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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.
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• 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 variations
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• 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
– competition

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• Rental increase
– Fact of life
– Avoid tenant protest
– Increase services
• Terminating the tenancy
– Required notice
– Exit interview (feedback form before moving
out)

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– 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 rent

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• 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)
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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.
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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?

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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 account

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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 insurance

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Managing the office administration

• Establishing the management office
– Location and layout
– Office design
– Files
• Leases
• Correspondence
• Work order bids
• Financial files
• Permanent files
– Equipment
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• 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 officers

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• Determining management expenses
– Direct cost
– Indirect cost
• Calculating the management fees
– Per-unit cost method
– Adjustment to perunit fee
– Percentage rate
– Management pricing worksheet

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References

• Evans, M, (2007), Opportunities in
Property Management Careers,
McGrawHill.
• Kyle, R, (2000), Property Management, 6th
Edition, Dearborn.

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Managing Lease

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