Landlord Service Level Agreements: wishful thinking?

Posted On Thursday, 24 March 2011 02:00 Published by eProp Commercial Property News
Rate this item
(0 votes)

Typical landlord leases have about 3 pages of Tenant Obligations and maybe 5 lines of Landlord Obligations, and given that they have drawn up the lease, you wouldn't expect the bias to be any different

Michael SchirnigBut occupiers need to begin pushing back for a minimum level of service delivery - if we were spending as much money on say a 5 year fleet outsourcing contract as we do on rentals, there'd be a 30 page contract with that company, so why not an SLA for our landlords? 

It'll take some doing, and persistence, though.
 
The shock on the landlord's face was palpable, in a recent office negotiation, when we asked him to reduce his obligations related to security (number/grade of guards), preventative and aesthetic maintenance as well as cleaning (frequency) to writting and only eventually conceded due to the high vacancy rate in his office park. But it should have been a straightforward copy-and-paste of the key SLA points he had in place with his service providers...unless those also didn't exist in any meaningful detail.

Retail landlords on the other hand, even when dealing with global brands (admitedly only with small footprints), have been quite resistant to the idea of an SLA, pandering only to the needs of anchors.
The granular (and sometimes arbitrary) detail of security standards, landscaping and utilities etc may seem minor in comparison to the big ticket negotiating items like rental rates, but they're crucial to identify and quantify up front - just ask anyone whose parking lot looks terrible due to dying plants, or who has tried to operate efficiently for prolonged periods in >35 degrees heat because the landlord's cashflow constraints limit how quickly they can fix the airconditioning...  
 
The concept of a landlord SLA of course has to go hand-in-hand with remedies and related time-frames, should the landlord default, with lease cancellation as the ultimate step. But the objective is not to be vindicative and build in an automatic exit from the premises - 1st prize is always to get the landlord to provide habitable/profitable space as soon as practical after any default.  
 
Our recommendation is to carefully consider which aspects are most mission critical for your type of business, put a timeline on how long you can do without that service and then build in appropriate timeframes for landlord responsiveness.
 
And then batten down the hatches for a prolonged negotiation - the landlord SLA is a breathtaking concept (for landlords!) and will take time/energy to convert them to this line of thinking.



Last modified on Wednesday, 21 May 2014 17:09

Most Popular

Residential property market gathering momentum, says Eazi Real Estate

Nov 18, 2020
Parklands_3_bed_sale_R1.999m_Eazi_Real_Estate
In this last quarter concluding in December 2020, the residential property market…

Lockdown impacts buying trends of generations of home buyers

Nov 15, 2020
Andrew_Golding_Golding_PropertyGroup
The Covid-19 pandemic and lockdown has been a catalyst for highlighting the different…

Second-hand shopping is being revolutionised and expanding the circular economy

Nov 18, 2020
EPP CEO_Tomasz Trzoslo
Conscious consumers are championing the resale of goods to reduce waste and extend the…

Pam Golding Properties awarded Best Real Estate Agency in South Africa in International Property Awards

Nov 18, 2020
IPA Awards Pam Golding Properties 2020 - 2021
Competing against real estate companies from around the country, this is the 14th year…

SA commercial real estate delivers in excess of 12% yield on equity

Nov 18, 2020
Steven_Brown (1)
A silver lining amongst the many dark clouds dominating South Africa’s current economy…

Please publish modules in offcanvas position.