What Landlords Need to Know About Commercial Lease Applications
June 26, 18
For those that aren't familiar, a commercial lease application is a form that landlords use to screen potential tenants prior to signing a commercial lease.
Generally, the lease application will give the landlord an idea of the prospective tenant’s credit-worthiness.
We’ve compiled a list of some of the most key things to look for on a tenant’s commercial lease application. Get ready to take some notes!
Fully Completed Application
This one may sound redundant but it’s kind of like looking over one’s resume. All answers should be filled in and answered to the best of their knowledge.
The commercial lease application is often the first point of contact between the landlord and the tenant, so incomplete and missing information could be a red flag.
For any start-up business, it may be essential as a landlord to ask the tenant for a formal business plan.
It’s important to know how the business plans budget the rent. It should also give you an idea of where they project their sales to be over the course of their lease term.
Make sure that the business plan is precise and to the point.
Another key thing to look for on a commercial lease application is financials. Obviously, this is most important because you will need to choose tenants that have strong financial stability.
This is critical if you want a tenant that can fulfill the terms of their lease without having to break the lease.
Documents that qualify as sufficient proof of financials can include the company’s previous year tax return, an audited profit and loss statement, or if they’re a new business, a bank statement.
Finally, we have the tenant’s credit history.
As a landlord, it is your responsibility to be aware of any overdue collections or broken leases on a prospective tenant’s credit history.
Consistently late, unpaid collections can be a sign of financial instability. Be sure to fully review the tenant’s report and ask questions if necessary.
Wrap up on a Commercial Lease Application
Overall, when looking at a commercial lease application always keep in mind, it should be fully executed, it will include a clean and detailed business plan, it will provide strong financials and have a clear credit history.
If you need additional information on what to look for on a commercial lease application, contact us today!