We know that finding the right property manager is an important decision, and we’re happy to answer any questions you have. For your benefit, we’ve listed and answered a few of the questions we get most frequently. Please contact us with any additional questions at (310) 323-1550, and our knowledgeable associates will be happy to help you.
- How much security deposit should I expect to charge when creating a lease?
- What are the insurance requirements in gross and net leases?
- What expenses can I pass through on net leases?
- Could you help me to understand truck loading with regards to industrial and commercial property?
- Should I be worried about earthquakes or liquefaction?
- Do I need a sprinkler system in my building?
How much security deposit should I expect to charge when creating a lease?
The typical security deposit in this market is two months of the lease rental rate, and occasionally owners will agree to one month. However, if the tenant is a new company, or if its assets are in a foreign country, he should expect to pay up to four to six months, some of which can be refunded under agreed-upon financial conditions.
The owner holds the security deposit until the tenant has vacated and surrendered the property as required in the lease. Because the lease typically requires that the tenant repair the building before the end of the lease, we recommend that the tenant and owner do a walk-through of the property well in advance of vacating it so that a checklist of repairs can be created. If the owner is a professional property owner, or has a property manager, he may provide an estimated price for repairs, make the repairs, and deduct the cost from the security deposit. This relieves the tenant of the responsibility of managing the repairs and any problems with the quality of the work.
Otherwise, the tenant should get any repairs done before vacating the building because the lease will usually hold the tenant responsible for the rent until the repairs are completed.
What are the insurance requirements in gross and net leases?
Under a gross lease, the owner is required to carry property insurance for fire and other perils, and increases in insurance costs are passed on to the tenant. The tenant is required to carry business liability insurance which lists the owner as an additional insured. .
Under a net lease, the tenant is required to carry both the property and business liability insurance.
Any requirements with regard to the insurance carrier should be included in the lease. The tenant will be required to provide proof of insurance to the owner. The tenant should also have personal property insurance to cover fixtures and inventory.
What expenses can I pass through on net leases?
There are three main types of property expenses: common area maintenance (CAM) expenses, property insurance, and property taxes.
In a “net” lease the owner passes through the CAM expenses, which may include such common area items as the parking lot maintenance, landscape maintenance, and exterior lighting.
In a “net-net” lease, the owner passes through the property insurance as well as the CAM expenses.
Finally, in a “net-net-net” lease, the owner passes through the property tax, property insurance, and the CAM expenses.
Could you help me to understand truck loading with regards to industrial and commercial property?
First, some definitions:
- Truck-high (or dock-high) loading: The warehouse floor is approximately the same as the height of the truck bed, which eliminates loading from the truck down to the ground, or loading from the ground up to the truck. A pallet jack or fork lift can be used to pull material from the truck to the floor of the warehouse.
- Ground level loading: The level of the warehouse floor is the same as the level of the ground.
- Turning radius: This refers to how much room there is in front of the loading doors for the trucks to position themselves for loading and unloading.
- Dock height: The height of the warehouse floor, from the ground to the floor of the warehouse.
Who should have dock high loading? For some companies, dock high loading is absolutely essential. The savings in labor and the ability to load and unload quickly are especially important to warehouse and distribution operations. However, if flat bed trucks are used, ground level access may be necessary or preferred.
Some buildings offer dock high loading through the use of a “truck well”, which means that the ground is excavated and sloped down below the level of the building. This allows a truck bed to be level with the floor. The slope of the truck well can sometimes be too steep, allowing material to fall over or slip as it is being loaded or unloaded.
How high should the dock be? The modern truck-high building will be constructed with the floor approximately 48 inches above the ground, and this will accommodate most trucks. The dock height of many older buildings varies from 24 inches and up. Smaller trucks may have a truck bed that is less than 48 inches above the ground.
Should I be worried about earthquakes or liquefaction?
As an owner or tenant, you should be aware of seismic earthquake faults and “liquefaction” as they relate to your property. The Granger Company has maps available for clients showing regional seismic faults and liquefaction-susceptible areas.
Liquefaction is a process in which the soil becomes soft and liquid-like during strong ground shaking. The soils where this is likely to occur are loose, water saturated, fine-grained sands and “silty” sands that lie close to the ground surface. While we cannot predict when an earthquake fault will move, we can be informed about how liquefaction will affect property if an earthquake were to happen.
Do I need a sprinkler system in my building?
The answer to this differs depending on whether you are a building owner or a building tenant.
An owner is always better off if his building is sprinklered because insurance rates are lower and most tenants prefer a sprinklered building.
A tenant is better off with a sprinkler system because the insurance rates for his product will be lower, and because the business is likely to suffer a shorter interruption if a fire is extinguished early. However, if the tenant stores metal materials that would suffer more from the water damage, he may prefer not to have a sprinkler system.
It is important for the tenant to speak with his insurance company about this before beginning the process of looking for a building in order to determine the difference in insurance rates for its products. We have seen a difference in insurance that amounted to as much as 5 cents per square foot additional cost for certain companies if they did not have a sprinkler system.
Furthermore, some buildings will have a fire sprinkler monitor that indicates water flow, which in turn indicates a possible fire. This water flow triggers an alarm system, and the fire department can be immediately dispatched.