Foreclosures Tax Consequences
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foreclosures tax consequences
Most landlords and tenants involved with commercial properties and industrials are aware of the contractual expenses related to a contract commercial lease, such as rent and late fees. However, there are some expenses that both parties should be aware.
The following are sixteen (16) expenses taken from a Standard Industrial / Commercial lease single tenant Gross that we found to be the most common:
1. Association fees: In addition to base rent, the tenant must pay the landlord any association or condominium fees imposed or levied on the property.
2. Current Situation: The tenant shall have thirty (30) days to inform the owner of any existing damage or construction does not in good working condition. After thirty (30) days, the tenant must make repairs or put these items in good working condition the sole responsibility of the tenant. This is particularly important because the tenant could be required to repair damage to existing property if the owner is not properly informed.
3. Capital expenditures: If a building code upgrade such that seismic retrofitting or building element is a point where the cost of repairs exceeds fifty percent (50%) of the cost replace the component, then it becomes a capital expenditure. Under the lease, the tenant must pay an amount equal to the cost of upgrading the property or replace that item, divided by 144. This amount is paid every month for the remainder of the lease term.
4. Security Deposit: The owner has the right to increase the tenant security deposit if the owner decides that there is increased wear on property and / or if the tenant's financial strength is reduced significantly. In addition, the landlord may increase the deposit in direct proportion with the increase in monthly rent.
5. Service contracts, the lessee may be necessary to maintain service contacts on building systems some, including but not limited to, HVAC, irrigation, alarm monitoring and fire extinguishers.
6. Privilege Completion Bond: When working with costs amounting to more than one (1) month's base rent, the Landlord may condition its consent upon Tenant providing a lien and completion bond in an amount equal to 150% of the estimated cost of such work.
7. The payment of insurance premiums Increase: the tenant must pay the increased premium of property insurance of the owner during the base year when the lease begins.
8. Payment of the insurance deductible: the tenant must pay the deductible for any claim insured losses. Said allowable shall not exceed $ 5,000 per event.
9. Insurance Requirements of the tenant: the tenant is required under the lease to maintain liability, business interruption, Personal Property Insurance and workers against accidents.
10. Failure to provide insurance: The penalty for the tenant does not provide insurance said is equal to 10% of the rent in effect at the time of the base or $ 100 depending is greater.
11. Payment of taxes: the tenant is required to pay for increased property taxes beyond the base year or the tax year in which the lease commences. This does not include complete reassessment when property is sold or transferred.
12. Application for Subletting: Tenant shall pay to the owner $ 500 for any request to sublease all or part of the property.
13. Late Fee: If the rent is not received within five (5) days to maturity, the tenant must pay the landlord a penalty equal to 10% of base rent or $ 100 depending highest.
14. Interests: Any monetary payment due to the lease, other than late charges, not received on time or within thirty (30) days from the date it was due to non-regular payments, bear interest from due date the rate of ten percent (10%) per annum.
15. Holdover: If the tenant remains in property after the date expiry of the lease without the consent of the landlord, the tenant must pay rent equal to 150% of base rent, then ongoing.
16. ADA: The Lessee shall pay for any Americans with Disabilities Act (ADA) Code updates following the tenant's use of the property.
These elements are not intended to be complete list of monetary lease obligations. Instead they are spending that we have treated as commercial / industrial brokers where our customers, both the landlord and the tenant did not know existed.
If Please remember to always seek the advice of counsel regarding the legal and tax consequences of any rental agreement that you run. In addition, retain appropriate consultants to review and investigate the status of all the property in question.
Thomas A. Holland, SIOR, CCIM, CPM and Jon R. Reno are commercial/industrial real estate brokers with The Heger Company specializing in the Central Los Angeles market. The Heger Company is a full service brokerage firm servicing all of Southern California and is an Accredited Management Organization (AMO) that manages over 5 million square feet in industrial properties. Please visit http://www.thc-us.com for more information. You can reach us at 5657 E. Washington Blvd, Los Angeles, California 90040, (323) 727-1144, th@thc-us.com, jr@thc-us.com
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