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Blair James

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    Marcus has hit the nail on the head here Ben. His response summarises the options you have at your disposal. Incentivising potential tenants with an abatement on the rent, or prior access, or possible fit-out/furniture etc. are all good carrots to dangle. Don’t be afraid to provide your preferred agent/s with funds to further promote or advertise your property through online and social platforms. You may instead prefer to promote the property yourself, but be aggressive on both the promoting of your tenancy and the price you would accept to surrender the lease in terms of a surrender fee/agency fees/landlord legal fees/all of the above. Keep close communication with your landlord, I suspect the radio silence is your landlord also knows that a replacement tenant may be hard to find and would prefer to retain the status quo scenario of you fulfilling your lease obligations. Your Landlord cannot unreasonably withhold a new tenant from taking over all, or part of the space so you may look to even carve up your tenancy into smaller offerings in the hope of attracting more tenants, or even a smaller subtenant to help subsidise your lease commitments. Failing this, speak with your solicitor and have them review the lease to check how water tight it is. All the best.

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    Great work on starting a new venture. A great idea and very timely given the buoyancy of the property markets. An app would certainly help both improve your efficiency and streamline your processes especially if you looked to collaborate the full workflow i.e. invoicing, document storage, client portals etc. In terms of developing an app this falls outside of my property expertise, but I imagine there would be a number of development companies or even freelance developers that you could buy a coffee to get an indication of the cost, timeframe and capabilities of your app. If it were me I would seek out google or possible development pages on social media channels or chat forums to dig deeper into who may be able to help you here.
    https://www.puttiapps.com/ could be a good starting place for you here.

    All the best with this new exciting venture.

    Cheers!

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    Hi there.

    I’m sorry to hear of your position and it is disappointing to hear the newly appointed property manager, nor the Landlord communicated to you this new expense was fully recoverable from you as the Tenant through your operating expense lease obligations. Given the significant hardship this will cause your current already stretched financial position, I would recommend meeting face to face with your Landlord and coming cap in hand stating you cannot simply afford to fund this additional cost at such a turbulent time. Given your Landlord has already offered you rent concessions, they have demonstrating their willingness to support you and hopefully this will be further demonstrated by working with you to keep your business afloat. Whilst it may appear your back is against the wall, you are in a strong position from a negotiation perspective in that you will not be able to meet these additional costs and the only other option is the Landlord may have an upcoming vacancy. The flipside of this is if you are paying a below market rental, the Landlord may have another Tenant up their sleeve, or feel the property is highly desirable etc. The best door is the front door on this one and by meeting face to face, hopefully they will be pragmatic about the unfortunate timing of engaging a property manager. If the Landlord really needs the property manager, they could offer to pay these costs, if it is a simple building to manage, they could also take back this responsibility and eliminate the cost altogether. Either way, a meeting in person should flesh out these points.
    Front foot this meeting and try do it swfitly to show you are being proactive about this.
    MOst importantly, good luck 🙂

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    Hi Sarah,

    Amanda’s response is outstanding and covers all of your bases as far as your lease obligations and options go! All I can add is we are conducting a number of subleases at the moment for tenants in similar positions to yourself and there is considerable demand in the market place for these offerings where they traditionally haven’t been. Pre Covid, there has been a stigma associated with the term “sublease” and active tenants looking for space prefer to have a direct relationship with the landlord. Since Covid, businesses are more inclined to work together, or even share space to help lighten each other’s loads.

    Be wary there is still an expectation that a sublease offers cheaper renting options, whereby the head tenant (i.e. you) would top up any shortfall in rent or outgoings. This can work as a point of difference from other lease vacancies, but a word of caution none the less.
    Most pragmatic Landlords realise now more than ever the importance of looking after and working with their tenants particularly given property holding costs associated with mortgages have dropped. It would be worth highlighting your willingness to work with the Landlord and perhaps come up with a new lease payment plan where the rent payments due over say the next 12 months can be discounted and then added onto monthly payments in years 2 or 3 of your remaining 3 year term, if your cashflow forecasts can manage this.

    Good luck with the meeting on Monday!

    Cheers,

    Blair

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    As per Chris’s comments above, this will depend on your lease document.

    Forgive me for my long-winded response, I’m thinking out loud here and using a process of elimination to help you arrive at my answer simply if it were me in your shoes and again making several assumptions with my answer.

    Most businesses we have experience with, use an ADLS (Auckland District Law Society) Agreement to Lease, or Deed of Lease. It will also depend on the edition of this document if it is in this format. I also assume the emergency lighting is to illuminate the exits to the building in the event of an emergency? On the most recent edition of the ADLS Agreement to Lease, line item (4) of the outgoings schedule states “New Zealand Fire Service charges and the maintenance charges in respect of all fire detection and fire fighting equipment.” are payable by the Tenant, again assuming you are on a net lease (i.e. responsible for paying all opex) and this line item of the outgoings has not been deleted, then as a general rule of thumb, Landlords are required to provide the fire fighting equipment, the Tenants are then responsible for maintaining said equipment. As this is neither fire fighting or fire detection equipment, I have looked into line item (7) of the outgoings schedule which states “Cleaning, maintenance and repair charges including charges for repainting, decorative repairs and the maintenance and repair of building services to the extent that such charges do not comprise part of the cost of a service maintenance contract, but excluding charges for structural repairs to the building (minor repairs to the roof of the building shall not be a structural repair), repairs due to defects in design or construction, inherent defects in the building and renewal or replacement of building services.” Personally, I would classify the emergency lighting as “building services” – here is also a link to give examples of building services https://www.designingbuildings.co.uk/wiki/Building_services and as per this section (7) of the Outgoings in the ADLS Agreement to Lease FIFTH EDITION 2012 (4) this would imply it is the responsibility of the Landlord.

    If your Lease is not in this format, I would speak to your solicitor.

    Hope this helps 🙂

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    Hi Georgie,

    I’d offer to help, but I think we are up to speed with your offering? Feel free to get in touch with me or Rach from James Group if we can help further 🙂

    Great to see you hustling on this platform also!

    Cheers,

    Blair

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    Week one of alert level 3 has been very busy for my industrial agency team each conducting a number of viewings this week showing signs of the economy waking up. Salespeople are eternal optimists of course, but I do believe this is somewhat of a bounce effect from the pent up levels of enquiries over the alert level 4 lockdown. Using the trusty crystal ball, I think it would be optimistic to think the same activity levels in terms of tenant demand to continue over the coming weeks.

    Chris’ comments above are excellent noting Industrial stock is definitely the star performer of the 3 main commercial property types (office and retail being the other two). Lloyd is right also, the e-commerce market is booming and the back end of that is underpinned by the industrial property to support the supply chain network associated with online shopping.

    However, the market is more of a Tenant’s market right now kicked off by the rent concessions offered by many astute landlords realising they need to retain and support their tenants to meet their own financial commitments.
    Lease incentives have not been prevalent pre-lockdown, but, we are already seeing rent holiday requests, reduced face rents, prior access clauses and shorter terms being offered to give tenants greater flexibility and financial support. The latter point would be a good one for you to think about when committing to a 3 – 5-year lease term. We are working with a number of businesses keen to get back up and running or expand based on the surge in online shopping activity, they are unsure how long this will continue and are asking potential landlords to work with them to offer an initial shorter-term trial phase, before then committing to a longer lease term once there is greater certainty around their particular market place.

    As a business owner, the first thing businesses did at alert level 4 was review their financials and look at cost-cutting initiatives wherever possible. Rent is generally the 2nd highest business expense behind wages and salaries and it is already clear businesses are looking closely at optimising their existing space or look to cheaper rent offerings for like for like stock advertised in the market place. Make sure you do your homework on the rates available in the areas you are looking at leasing. Think about the initial term you are willing to commit to- Landlords are generally more amenable to incentivise you to make a longer-term commitment so there is upside to the 5 year term you discussed, I just want to play devil’s advocate with you to ensure you play your cards right.

    Cheers!

    blairjames@jamesgroup.co.nz

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    Great question and one at the forefront of a number of both Tenant’s and Landlord’s minds right now. We operate a property management company and have spent the best part of April carrying these out and every case is different.

    Here is a useful link that adopts a pragmatic approach to this and provides some further insight into the origination of clause 27.5.

    https://www.hobec.co.nz/news-resources/2020/april/update-the-adls-lease-and-epidemics

    Tenants are more important than ever right now and you will know how attractive your building is to determine how tough of a stance you want to take with your tenant. If it is a highly specialised building, i.e. there won’t be a huge demand pool out the other end of this Covid turbulence, even more reason to work with the tenant.

    It sounds as if you feel your tenant is being unreasonable. Ask yourself how important your tenant is to your own financial position and what you would be prepared to do to keep them. Many landlords we have been working with have offered 50% for April and then a further gesture into May and even June to help tenants get back on their feet. The requests of your tenant are not out of line with what we have heard from the market, however, it sounds as if the delivery of their rent discussions could be improved.

    Lloyd made a good suggestion to extend the lease term to the value of the concession to the lease tail. It does sound like there is a bit of tension between you your tenant and the best way to win an argument is to avoid it. Tenants will remember their landlords when they needed financial support and if you are front footing the support to your tenant, this goes beyond the legal discussions and looking into the fine print of which there isn’t any for a pandemic and instead, let common sense prevail.

    Again, I am unsure of your own financial position and landlords in many instances are left holding the baby in that there isn’t any such discount or relief offered to them from their banks – merely a deferred principal and in some cases, interest plan, but it is still payable in full, so it is a tough pill to swallow.

    In my humble opinion if you can financially take the short term hit, do it for the long term gain.

    Cheers!

    Blair

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    On the flip side Max, and at the risk of stating the obvious. Look at extending your “burn rate” i.e. how much cash you have and how long can you survive for. If you can trim the fat on your expenses and stay afloat without the need to ask for more money right now, the market sentiment will improve. There is still plenty of money in the economy, if anything, adopt the sniper approach and pick a small sample size of investors who you believe are your target market and ask for their opinion, test the waters, after all, most people love talking about themselves. Cheers!

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    On the flip side Max, and at the risk of stating the obvious. Look at extending your “burn rate” i.e. how much cash you have and how long can you survive for. If you can trim the fat on your expenses and stay afloat without the need to ask for more money right now, the market sentiment will improve. There is still plenty of money in the economy, if anything, adopt the sniper approach and pick a small sample size of investors who you believe are your target market and ask for their opinion, test the waters, after all, most people love talking about themselves. Cheers!

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    Hi Patrick, Whilst it’s important to show empathy and sensitivity to clients or customers in your market. The Kiwi “can-do” attitude is very much alive and kicking and the general sentiment of so many business owners, managers and staff members is they are eager to help do what they can to get our economy back into gear. 4 weeks in a lockdown environment has given many people a chance to think, perhaps too much at times and reconsider what their plans (both business-related and personal plans) post lockdown may look like.

    Offer general information that people can relate to, movie recommendations, home utensils that have multi-function capability, cost-effective meal recipes, energy-saving initiatives, look to boost morale, communicate confidently without giving off the notion of having “commission breath”. You will find you naturally relate to people and opportunities will arise organically this way.

    Good luck!

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    Hi. You may already be well ahead of the consenting phase given you mention commencing the “development work”. If you haven’t already, get ahead of the curve on the consenting front as it sounds like the building is not worth a bandaid approach of sorts by investing in a short term holding income solution. Commission a local design firm to put together artist impressions of what the two dwellings will look like on the off chance you can secure a purchaser, or you may even look for a JV partner who has money to invest. With your expertise in landscaping (sharp-looking website by the way) and your builder contact, you already have a lot of resources a lot of developers or investors are looking for giving you a competitive advantage. Cheers!

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    Hi Trudy,
    I would post your question on the Property forum as there are astute business owners and experts who may be able to assist in the absence of a construction specialised forum. If you don’t ask, you don’t get 🙂 Cheers!

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    Hi Dee,

    Good idea on the social media/marketing courses front. The social media platform, in particular, I predict to be an increasingly influential marketing medium.

    Without knowing the type of AirBnB properties it is difficult to comment. If they have the ability to convert to be longer-term residential offerings, this would be a wise move. If they are more tourism-based i.e. holiday homes/baches, the New Zealand domestic tourism market should strengthen over time, particularly if the border restrictions stay in place as anticipated for the majority of at least 2020 so this would be a good space to keep an eye on particularly as kiwis will look for cost-effective local escapes from the current lockdown environments we are all becoming so accustomed to.

    Look at fixed-term contracts rather than periodic tenancies to help give your Landlords greater financial security and approach current tenants on your books now also. Tenants will also appreciate the opportunity for greater certainty. Keep the communication levels high and check in with both your tenants and landlords alike – they will appreciate the service. Cheers!