Your offer has been accepted, you’ve completed your due diligence, and you’re closing on your commercial property – so, what’s next? Whether you are a commercial property owner or tenant, there are still more details to attend to. From preparing your space for occupancy to budgeting for long-term capital expenses, these are the must-do’s now that you’re closing.
1. Prepare the Space for Occupancy
Now that you’ve found the perfect space for your business, or secured the ideal tenant, it’s time to begin making it your own. You’ll need to retain a qualified architect and designer to create a functional and visually appealing layout and to obtain the proper permits. You’ll also set up your utilities and possible infrastructure needed such as internet connectivity, and make sure to update your address with vendors, and on your website and business cards, etc. Also, make a plan for the financial organization of your property by establishing which bank accounts you will use for bills, and think about hiring a CPA advisor to help you navigate taxes and other financial matters. It’s also a good idea to introduce yourself to your neighbors, and local fire and police departments, and consider joining the local chamber of commerce. Lastly, it’s time to think about building security, such as lighting, security guards or access control, surveillance, and alarm systems.
2. Property Taxes
Whether you are a building owner-to-be or a tenant under a new lease, understanding who is responsible for property taxes is imperative. As a building owner, many factors can impact your tax liability. In Central Ohio, commercial property values have increased significantly, and property taxes are following. Working with a trusted advisor will help you to navigate the ways you can limit your exposure, or even qualify for a tax reduction. Additionally, depending on the property use and circumstances, you could qualify for reduced taxes, a tax exemption, or other economic incentives. It is also important to understand how your taxes will be prorated and when your first bill will be due. As a tenant, it is important to review your rental agreement so that you understand who is responsible for taxes. Some owners may pass on a portion of property taxes to tenants, and your lease rates could also increase as taxes do.
Being underinsured can be catastrophic to your business and property. One way to prevent this is to understand the lease language which outlines which party is responsible for what coverage. This can reduce your exposure to risk. Additionally, more detail is better. Terms like “may” are ambiguous and should be changed. Furthermore, take into consideration the current economic conditions. Currently, both labor and materials costs have increased. That means it will cost more to rebuild if there were a catastrophic event. Additionally, a shortage of labor has extended the time it takes to rebuild. This lost time equates to more lost revenue and even the potential loss of valuable employees who can’t afford to wait a year or more for you to rebuild, so reevaluating your coverage is prudent. Lastly, if you’re a tenant, you should get a certificate of insurance naming the landlord as the additional insured as a means of ensuring both parties are protected.
4. Property Management
If you are a building owner, now is the time to think about the management and maintenance of your property. Property management is critical to maintaining the functionality, appearance, and profitability of commercial properties. As a building owner, you will need to determine if you will manage the property on your own or hire a property management firm. Additionally, consider hiring an engineer to conduct a capital reserve study to identify major common area repair and replacement expenses and develop a reserve funding plan to pay for these expenses.