Beware of costly lender delays when executing tenant improvements – Daily News

on Jan20
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I have recently encountered some instances of business owners being caught in a financial squeeze due to lender delays for tenant improvements and equipping their business.

In one of those cases, a business owner was assured of securing their construction and equipment financing to build out their food services business, then came the delays by the lender as they sought to modify their lending terms and conditions.

While the negotiations between the business owner and their lender took an additional two months, the business owner lost those two months for their build-out construction period as the lease was already signed with the clock ticking away.

This delay would have caused the business owner to start paying rent approximately two months before their opening.

Because these rent payments, which totaled nearly $12,000, were completely unanticipated, it put the business owner in a bind as there were so many other expenses being incurred.

It is very important for prospective business owners to research and confirm their timelines as best as possible with respect to securing their financing. Once a lease has been signed and a certain amount of free rent or build-out time has been negotiated, it is very hard to negotiate for additional time due to unexpected lender delays.

It is recommended that prior to signing a lease, the business owner lines up financing with their lender and have certainty as to when the loan will fund.

For this case, new negotiations were required with the landlord. In most cases, the door would be closed for any type of extension, but in this situation, the landlord was sympathetic and agreed to a build-out time extension provided the lease was extended commensurate with the additional time.

This was a best-case scenario for the business owner who was able to get open just in time and did not suffer the consequences of paying rent while not open for business.

There are other methods to negotiate with the landlord in the event adding on the additional lost time to the lease term does not work, such as amortizing the two-month extension cost over the lease term. This would still allow the business owner some breathing room while paying back the extension of time in monthly payments.

If a business owner discovers financing issues after a lease has been signed, I suggest communicating with the landlord to try and work something out as there is nothing to lose by doing so. There are other related issues in the lease associated with these types of delays such as paying high rent penalties for untimely openings that occur past the negotiated build-out time periods.

I suggest during the lease negotiation process, once terms are agreed upon, to ask for changes in the lease language for a grace extension period of at least 30 days to avoid those penalties.

It is always best to have an independent unbiased professional specializing in the field of commercial real estate leases to assist in the review and modification of those documents before they are signed.

Todd Dorn, president of The Lease Doctor, can be reached at 888-413-7699 / 951-659-3163 or at, and

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