By Stacy Hofinger
Jones Lang LaSalle
For any tenant, hearing that an owner is selling a building or that a mortgage has been transferred to special servicing may be cause for concern.
Will building maintenance suffer? Will the new owner scale back services? Will the new owner try to change the lease agreement?
These questions are common and understandable, but there’s no need to panic.
If you get the news that your building is being sold (perhaps in the form of an estoppel), or even if you hear market speculation, it’s best to first collect the facts, ideally by approaching ownership directly.
Before doing that, though, be sure to touch base with your real estate or lease administration team to refresh yourself on your current lease arrangement, reviewing the tenant and landlord obligations and terms such as rent, duration of lease or other conditions of occupancy. If you are receiving any amenities not specifically listed in the signed lease agreement, approach the owner immediately to get it in writing.
New owners must honor the terms of the lease agreement that a tenant has with the previous landlord. However, the new landlord will likely try to increase rent or operating expenses (associated with renovating building amenities) for any new lease. If your lease expires during financing of a new owner’s lender, your position to negotiate increases dramatically.
Regardless of your relationship with the previous owner, new ownership creates a clean slate for an strong relationship. Schedule a meeting with the new ownership (they will likely already be trying to communicate with building tenants) to discuss any previous relationship or building service concerns. A new landlord does not want an unsatisfied tenant to move at the end of a lease and will likely address concerns.
As landlords almost always request financial information from tenants, it is fair to request the same from the landlord to determine solvency. Understanding creditworthiness of your landlord can often ease default concerns. Work with your real estate team to conduct an annual landlord solvency report, which asks questions related to loan type, maturity, debt obligations, rollover exposure and reserve funds for capital improvements.