6 Tips for Understanding the Tenant/Property Manager Relationship

Successful CRE investors need to understand their tenants. Here's how to create and maintain good tenant/property manager relationships.

6 Tips for Understanding the Tenant/Property Manager Relationship Close
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6 Tips for Understanding the Tenant/Property Manager Relationship

Posted by Gary Ashton RE/MAX on Saturday, April 16th, 2022 at 10:19am.

Tenant/Landlord Relationships For Commercial Real EstateUpholding a professional relationship between tenants and landlords is a critical aspect of being successful as a commercial real estate property manager. Property managers have a set role in assisting investors in many ways, including finding tenants, maintaining the property, collecting rents, and handling any tenant disputes. Avoiding tenant turnover in commercial properties is the goal to ensure a steady income stream and increased property values. If you want to make money with commercial real estate, keep reading to become an expert on tenant and property manager relationships.

Understanding the Commercial Lease Agreement

Commercial lease agreements are legally binding documents that define the landlord/tenant relationship in detail and are typically handled by the property management company concerning keeping tenants in compliance. Property managers decide how to handle specific aspects based upon the lease, as they are bound to the agreement along with tenants.

A lease is a tool that sets out the guidelines between tenants, owners, and property management companies. It will clearly define who does what and who is responsible for repairs, collecting rents, improvements, evictions, and the like. Essentially, the lease is the final word on how things related to the property and tenants are handled. A solid lease helps minimize potential disputes between investors and tenants, which increases long-term retention rates.

Common Issues That Can Cause Tension Between Property Managers and Tenants

Property managers are responsible for collecting rent and paying bills on behalf of investors or owners and then distributing the proceeds to a specified account by specific dates defined in the lease. Late payments are the most common issue that property management companies must contend with.

Late payments can delay the transfer of funds that investors may be relying on to cover their bills and the mortgage on the property itself. This is why the lease is so essential, as it will define late payment fees and the process for evictions should tenants fail to pay.

The second most common challenge for property managers and tenants falls within the maintenance category. Who pays for what and how much for necessary repairs and upkeep? Each lease is unique, but owners typically have their property management team handle the maintenance of common and shared elements of the property. At the same time, tenants are tasked with basic interior upkeep.

However, for major problems like plumbing, broken windows, and other high-dollar repairs, the management company and investors will often cover the damage to commercial properties. Reporting issues fall on the tenants, and they must put in requests for repairs in writing to prevent being held accountable for any further resulting damage to the property.

How Property Managers Can Maintain a Strong Relationship with Tenants

Keeping the tenants happy and the property in good condition is essential for property management companies and those they hire as subcontractors. The goal is to retain lessors and keep financials flowing for the investors. Hence, here are some ways that the tenant and property management company can improve relations for a smooth rental experience.

Having Stipulation Plans for Vacancies

Tenants won't occupy their space forever, and property managers should have a solid plan for dealing with vacant commercial property. They need to be ready to market the property, interview potential tenants with screenings, and be aggressive concerning tenant retention and locating new ones when necessary. This keeps the investor happy and the management company itself more profitable.

Having a Detailed and Legal Lease

Leaving room for confusion in commercial tenant leases can lead to dissatisfied tenants and investors. Property management companies typically have a legal team to create air-tight leases to define each party's responsibilities. Inclusions ideally will be both fair and legal for both tenants and investors.

Being Diligent with Commercial Property Maintenance

The lease should stipulate who is responsible for maintaining each property area. Property management companies and tenants must both work together in handling issues expediently. Tenants must inform the company when work or repairs are necessary, so problems can be resolved as they occur.

Management companies are typically responsible for maintaining exteriors and common areas. They are expected to perform routine inspections of the property to ensure things remain in working order and that the structure and shared areas are attractive. Tenants are likely to find a new place to run their business when the property falls into disarray or repairs aren't made in a timely fashion.

There are other benefits to doing so beyond tenant retention, including:

  • Preventing minor issues from becoming more extensive and more costly
  • Lowering maintenance costs
  • Helping maintain property values
  • Keeping the property looking attractive
  • Preventing injuries or accidents that could result in legal action

Healthy Relationships Are a Two-Way Street

Tenants who routinely pay rent and fees on a timely basis may have the occasional incident that forces them to pay late. While regularly waiving late fees isn't a good idea, having a bit of empathy for those rare incidents helps develop a stronger sense of trust and loyalty between tenants and property managers. Another opportunity to boost the relationship is to make concessions for minor repairs that might otherwise fall under the tenants' responsibility. Such actions can go a long way towards creating a prolific and profitable commercial investment property.

Create a Solid Relationship with Tenants

These tips can help establish a better relationship between tenants, investors, and property management companies to ensure win-win outcomes with commercial real estate investments. Reputation and reliability are vital in the real estate industry, so everyone should be willing to do their part to keep the property in good shape and filled with happy tenants.

 

Gary Ashton

The Ashton Real Estate Group of RE/MAX Advantage

The #1 RE/MAX team in the World!

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