Managing Commercial Tenants Benefits, Drawbacks and Considerations

While having goods and services like retail stores, banks and dry cleaners on-site can be convenient and viewed as a positive by co-op or condo unit owners and neighbors, not every commercial tenant is a good fit for every community or HOA. Leasing space to the right businesses—and really understanding the nature of the association/commercial tenant relationship—is key to a successful, mutually beneficial arrangement between the two parties.

Understand the Basics...

For boards and managers, the biggest issue is often misunderstanding the nature of the relationship between the business owner and the association.

“One of the biggest mistakes I have seen is where boards are so understandably excited about the new revenue that they fail to put the team together and ask questions prior to the tenant being found and instead wait until the tenant is found,” says New Bedford Management CEO Peter von Simson.

Eric Goidel, a senior partner at the Manhattan-based law firm Borah Goldstein Altschuler Nahins & Goidel, P.C., explains that condominiums rarely own commercial space, whereas a cooperative may own or control the allotted space or will own the building and lease the property. If the commercial unit is a common element owned by the association, the association is the landlord; however, a more likely scenario is that the sponsor or developer reserved a long-term master lease of the commercial space.

“If the co-op is the landlord of the property and the sponsor/developer is the tenant—they in turn sublet the space to commercial users,” says Goidel. “In the condominium, the residential and commercial units are owned by a deed and fee and typically it’s rare, if ever, that the condominium controls any of the commercial space.”

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