It’s January again, and that means it’s time for New Year’s resolutions. Maybe you’ve resolved to go to the gym more often or to learn a new language. But have you made New Year’s resolutions for your business? If not, consider this your invitation to make a resolution regarding the commercial real estate owned or leased by your business.
The Big Picture – Taking Stock
When you’re in the thick of things—working hard to meet deadlines, generating new business, and keeping the lights on—it can be easy to react to things as they come in, throw important documents in the filing cabinet, and keep moving. But January offers a good opportunity to slow down, take stock of your business’s position, and get organized for the year ahead. You should definitely do that with any real estate your business owns or leases. Spend some time this January getting leases, deeds, title insurance, notices, invoices, and all your other important real estate documents organized.
Why Should You Care?
This may sound like a lot of work, and it is. But it’s important to have all your important real estate documents in one place and organized—doing so will make your business easier to run and, when the time comes, easier to sell.
Without knowing what your lease says about additional rent and what you’ve paid in the past, how will you know if the amount your landlord requires you to pay this year is correct?
When you try to sell your business or hand it over to your children or other successors, how will you present your real estate assets in a clear and comprehensive manner?
In these and countless other situations, an ounce of prevention is worth a pound of cure. You don’t want to have to pull documents together on short notice—it would be much better to already have and understand all the relevant documents.
So, what does this look like?
Owned Real Estate
For owned real estate, organizing your important documents is pretty simple. You need to have all the important documents from the property acquisition in a folder.
These should include:
- the deed,
- title insurance,
- a survey if you have one,
- the settlement statement (sometimes called a “HUD”),
- and anything else signed at closing.
You’ll want to then add documents to this folder as you own and operate the property, such as tax bills, insurance policies, communications related to insurance claims, and any contracts for ongoing property maintenance or other services.
Leased Real Estate
For leased real estate, you may need additional documents on hand. Everything starts with the lease. You need to have the fully executed lease on file. This includes any guarantees, delivery or commencement date memoranda, and anything else signed with the lease or delivery of possession of your leased premises.
In addition to the lease, your file should contain as many of the following as possible:
- Documentation of renewals, extensions, and the exercise of any rights or options under the lease.
- Bills, invoices, and reconciliation statements relating to taxes, insurance, common area maintenance, and other charges payable under the lease.
- Landlord approvals and other documents relating to alterations.
- Assignments and subleases, and
- Notices from the landlord regarding defaults and other matters.
The more you have on file, the better off you’ll be when an issue arises or you try to sell your business.
How Can the Venn Law Group Help?
Just like with your personal resolutions, this commercial real estate resolution can be a lot of work, but it will result in a healthier, happier business that’s easier to run today and easier to sell or hand off to a successor tomorrow.
The attorneys in Venn Law Group’s commercial real estate practice group have experience putting together document files, as we’ve discussed in this blog post, and are ready to help you collect, organize, and keep track of your real estate portfolio documents. Contact us today to learn more about how we can assist you.
Edward B. Woodall is an attorney at Venn Law Group who works incorporate law and commercial real estate, including leasing, financing, taxation, business structures, and dispute resolution. He is passionate about helping business owners solve a variety of complex legal problems and has performed more than 100 hours of pro bono work. In addition to his law degree, he also has a background in history and Spanish.