A Lessor’s Search-Guide For The Right Match

With the productive rise that the commercial leasing industry is witnessing today, many perspectives are coming up for the Lessee to consider before occupying a space. Since the investment of time and money is long-term, the considerations to be made are multi-fold. And while it is true that the Lessee (whether MNC or an individual’s firm) does have to scrutinize multiple spaces before coming across the desired project, a Lessor too bears an equal weight, if not more, whilst selecting the right Lessee for their property. This burden is all the more substantial when the deal involves a long-term lease.

This article is a peep into the Lessor’s side of the story. For simplicity, in order to draw a relevant connection, I will be using the terms landlord/lessor for the person/company who owns an office/showroom space to be leased out; and the terms tenant/lessee for the individual/company that intends to occupy this office/showroom space in the project.

To begin with, it is the Lessor has a lot at stake, as his investment in the property has been considerably higher compared to the Lessee’s rentals, which is why, the Lessor needs to make sure that the incoming tenant/Lessee will not only suit his preferences, but ensure the well-being of his property.

Now, a Lessor-Lessee relationship is a business version of a marriage. Once you are in it, you are in it for a good decade (as long-term lease deals go these days). Just as in marriage, both the partners -, the lessee & the lessor here, are involved equally in this relationship too. It might seem that Lessor has an upper hand as he owns the property & is collecting the rent, but the truth couldn’t be farther from this.



More often than not, the Lessor bears the humongous burden of investing into the property long before the Lessee comes into the picture. Even after getting the Lessee on-board, a process that can take anywhere between a month to a year, the Lessor doesn’t yet walk out of the project. He is still responsible for all the maintenance of his building, for any & every damage done by Lessee (if any) to the building, for the issues that the Lessee might face with the neighbors, for any complaints that the Lessee raises, for all legal liabilities of the property, etc. In fact, it would appear that the Lessor bears the greater of the burden in his relationship with the Lessee.

This is why, it is essential for him to get the right match – a Lessee that would compliment & facilitate the Lessor’s job. So how does one ensure that the enquirer today will be the ‘Right Lessee’ tomorrow?

These are some important lessons that I have learned, about points to remember before signing the LOI with an incoming Lessee:

  1. GOOD CREDIT:

    This is the early stage of prospect finding, when a probable match has approached you, but you want to understand if they are as good for real, as on their bio-data.

    Point in case – Checking their economic well-being.

    There are so many things that a good line of credit tells about the organization:

    • Financial Discipline – this can indicate whether payments can be expected without reminders
    • Responsibility – if the firm has been paying their due bills on time, then they will probably be an on-time-paying tenant as well

    In my experience, due diligence, as needs to be done before signing on any long-term deal, if done by the following some basic steps, as follows, can ensure a stable Lessee for him:

    1. Figure out what vendors the firm has been working with and ask the vendors about their payment habits
    2. Check the company’s balance-sheet and find out what profits they have made in the last 3 years
    3. Check the company’s future expansion plans
    4. Check the background of the company’s directors or owners
    5. Ask the company for references in the industry and verify with those contacts of the business habits of this company

  2. HISTORY:

    Drawing a parallel with a marriage proposal again, a little bit of survey is what everyone does: Finding out about the family, their relationships in general as well as about their reputation.

    So should you, as a Lessor!

    In order to have a stable tenant, do ensure some things beforehand:

    1. Did the tenant pay their rent on time to their previous LESSORS?
    2. Was the tenant of decent work-behavior with the other tenants, in his previous abode?
    3. Why is the tenant moving out of his current premises? Was the tenant evicted for non-payment of rent or for breaking the landlord’s rules?
    4. Did the tenant give notice prior to moving?
    5. Did they cause any damage to the office space other than normal wear and tear?
    6. Were they respectful of their neighbors?
    7. Did they complain often?

    A lot can be understood about the firm by just investigating into these basics, in order to evaluate their behavior and relationship standing for a long-term lease, especially! One might not get all the data but try to dig out as much as possible.

  3. MISCELLANEOUS:

    There are a lot more things that come up as points-to-be-taken-into-account, after having checked the above. These, more often than not, are questions of equivalent, if not more, priority as well:

    • Is the lessee seeking a warm-shell space? If yes, then this is a good sign as this indicates that they are intending to invest in or design the space further as per their needs – which is always indicative of serious, long-term interests.
    • Is the Lessee willing to invest in the space as well, in the form of furniture, décor etc.? If yes, then he intends to remain in the premise for a long-time, which should put the Lessor’s mind at ease.
    • Is the industry that the lessee functions in, a stable one, or is it a bubble/dying one? Always choose the former to have a long-term lease.
    • Is the lessee’s business a reputed one amongst his competitors? Good word of mouth affects a business’s growth more favorably than you may think.

    Everything said and done, this is my giveaway to the Lessor: Always Trust Your Instinct!

    There are times when everything checks positive on the list, but your gut feeling tells you not to ahead. If experience has taught the world anything then it is this – Gut feeling is solid information that is way too fast for the brain to process.

    So trust your instincts, no matter what! That’s it!

    Wish you luck, in finding your right match!


    4. Amit Bhatia       10 October, 2018


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