COMMERCIAL SPACE, P.2

3) Move quickly to check assets

If a tenant does start to fall into arrears, you need to move quickly and find out whether the company has any assets. "It's imperative you try to make sure there is something in your records or files — if there are any bank accounts that are in the area that you can put a judgment against. That is key," stresses Kornfeld. "I have tenants who are foreigners — they keep a minimum amount in a bank account here, so you can never collect" when and if there is an issue of arrears.

4) Think about investors

Consider selling their leases to an investor, who would then own the space and pay the monthly rent. The income for the building would be as secure as your investor, but you loses the right to say no to unwanted tenants. "Some buildings don't want to give up the retail leases because they want to dictate the terms of the lease," says Kornfeld.

The biggest problem for boards right now is that many have never been through a down market. "It's really been a landlord's market for a long time," observes Eric Anton, executive managing director of Eastern Consolidated, a real estate investment sales company, and the vice president of his co-op board. "Now you have a situation with a good tenant approaching the board saying he needs a reduction in rent. The co-op's been a little bit spoiled. They haven't had to deal with tenants going bust. So as a board you face the challenge," he says.

His advice? "I'd rather keep a tenant in the space [and] have some rent coming in than have a vacant space. It's just not a good market now."

Illustration by Danny Hellman

Adapted from Habitat May 2009. For the complete article and more, join our Archive >>