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Time is of the Essence

Two weeks ago in this column I talked about several examples of what I believe is highly unprofessional conduct on the part of some — I said, some — commercial real estate agents. I cited practices that defy good business etiquette and even the basics of how people in general ought to treat one another.

Abusive “take-it-or-leave-it” negotiating tactics, the miserly policies on tenant improvement allowances, the onerous security requirements, soaring prices for parking spaces, lack of good faith in dealing with agents as well as leasing and building managers who are outright incompetent were the more deplorable situations I took issue with on these pages.

Given the scathing mail, e-mail messages, faxes, phone calls, and notes on my car windshield I’ve received since then, you’d think that I offended virtually every commercial real estate professional in the city. I was scolded, rebuffed, chastised, and yelled at for, among other things, having the nerve to air our industry’s dirty linen in public, denigrating the image of our profession, causing unwary office tenants to panic, and a host of other cardinal sins. As far as they were concerned, I had indicted everybody in the business.

My detractors failed to take into account two things: The sentence in the column that proclaimed: “There are, in fact, many who really do understand market competition and know how to do a good job for both the building owner and their tenants. We need to multiply their numbers, however …,” and the nagging fact that I wouldn’t have a case to make if there wasn’t dirty linen to air.

The goal of this column is to identify and discuss issues affecting commercial real estate, principally the office space market in the San Diego region. All’s not well in this market segment. There are many issues that aren’t pleasant to behold. There are abuses aplenty and despite my focus on the incompetent few, there are many commercial real estate operatives — building owners, property managers, and leasing agents — who are well equipped and even committed to helping to solve the problems. They just need to do so.

I’ve used this column as a call to arms — to create awareness of abuses or dysfunctional practices and in doing, hopefully marshal the necessary forces to deal with them. For decades, landlords have been taking advantage of tenants. While I might offend some of those in the old school of landlord representation, my job is to give tenants a level playing field. Simply put, my job is to vigorously represent — and protect — office tenants. If I’ve stepped on people’s feet, it’s been because their feet have been out there to step on.

The balance of this column is intended for those many — let me say it again, many — professionals interested in solving yet another problem that plagues the office leasing market. The issue is the undue amount of time it takes an office tenant to obtain approval from the landlord to sublease office space.

It typically takes 30 days to obtain “landlord consent” — a procedure that shouldn’t take any more than an hour at most. The age-old and universal admonition in our business, “time is of the essence,” hasn’t been applied to this practice area. And, there’s no good reason that it shouldn’t.

Think about it. A tenant who wants to sublease office space usually has a very compelling reason to do so. The user may have financial difficulties and need to trim expenses right away. His or her very survival may depend on being able to do so. Shouldn’t good and reasonable people who are landlords and building managers care about trying to help their customers (tenants) survive? One would hope so.

However, present practice seems to suggest otherwise. Subleasing space, at best is a time-consuming process. The tenant first hires a broker to find a subtenant to take the excess space. The broker markets the space and with any luck, eventually finds a suitable subtenant who can step in and relieve the original tenant of the financial burden. Once the negotiations are completed between the tenant and subtenant, the tenant then is required to obtain landlord consent for the sublease — a reasonable requirement on the part of any landlord who wants to monitor and have a say about who is occupying his building.

What’s not reasonable is the length of time it takes to obtain the consent. Keep in mind, the landlord is not being asked to assume any additional financial liability. In fact, the reverse is true. A sublease does not relieve the original tenant from ultimate financial responsibility for the lease. If the subtenant fails to pay for the office space being sublet, the original tenant is financially responsible. In effect, the landlord now has a form of double rent protection.

No broker worth his or her salt is going to bring a subtenant to the table who can’t pass the “sniff test” in terms of being acceptable to the landlord. That’s not been an issue at all in rationalizing the inordinate amount of time it takes to obtain landlord consent.

So, what’s been the factors that have caused the delays in obtaining routine approvals in subleases? Unfortunately, it’s lethargy. Many, if not most landlords farm out the approval of subleases to their law firm. After all, the tenant is responsible to pay for all legal costs associated with such transactions. The law firm typically puts the matter into its “get-to-it-in-30-days” basket. Meanwhile, the tenant is forced to sweat it out by having to pay an extra month’s rent and the subtenant is forced to wait before moving in for something that is routine. In many cases, the consent form is summarily approved as is once the attorney gets to it. In some instances, the attorney will do minor “word-smithing” that, frankly, doesn’t contribute anything to the protections already in place in the original lease.

The landlord consent problem can easily be solved by means of a standard or uniform landlord consent form that can be executed more routinely and expeditiously. Such a document would offer the landlord full and continuing protection without requiring attorneys to “reinvent the wheel” and the tenant and subtenant would be able to act quickly and get about their respective businesses.

It’s an idea for reasonable — and yes, competent people in our business to consider and hopefully put into practice.

Jason Hughes is founder of Hughes Marino, an award-winning commercial real estate company with offices across the nation. A pioneer in the field of tenant representation, Jason has exclusively represented tenants and buyers for more than 30 years. Contact Jason at 1-844-662-6635 or jason@hughesmarino.com to learn more.



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