Pre-leasing reviews by Facilities Management help reduce future operating costs and meet end-user needs.
The role of Facilities Management (FM) has long been seen through a narrow lens, often viewed primarily as a maintenance function focused on the upkeep of buildings and facilities.
I have always advocated the multi-dimensional scope of FM. For instance, in the context of a property management function, when companies are leasing spaces, the facilities management review helps assist building managers, owners, and tenants with various aspects. Beyond maintenance and conventional facilities management responsibilities, it encompasses property administration, including supporting tenants in reviewing their leasing contracts. This extends to critical areas that impact tenants’ essential business needs, such as examining building lifecycle management protocols and conducting conditional surveys. These aspects directly affect their utility and maintenance costs and involve considerations for public safety preparedness and infrastructure, such as emergency protocols and common area facilities like parking, elevators, and access points, all tailored to the requirements of occupants and users.
Reviewing these elements before lease finalization is crucial. While such tasks are often assumed to be handled by in-house teams, involving FM professionals offers significant advantages and added value. However, in reality, I rarely see tenants engaging FM companies for this purpose.
For commercial tenants expecting significant public footfall, it is essential to thoroughly evaluate specific facilities management services related to occupiers’ and users’ comfort. These elements safeguard tenant interests and should be clearly outlined in the leasing contract. Unfortunately, tenants often overlook such critical reviews, leaving them grappling with day-to-day issues that impact business continuity. Many companies find themselves bound by long-term leasing contracts with little flexibility to address mission-critical concerns for their operations.
Therefore, I strongly advise commercial tenants to consider the following key aspects:
- Facilities Upkeep:
a. Common Area Maintenance (CAM): Understand how shared spaces (e.g., lobbies, hallways, parking areas) are maintained, whether performance standards are established by the landlord, and who bears the cost.
b. Turnaround Time for Repairs: Ensure clauses specify how quickly repairs will be addressed. There should also cover planning and management of refurbishments to ensure landlord and tenant coordinate to minimize impacts due to lifecycle plans.
c. Cleaning Services: Ensure regular cleaning of public and private areas, particularly high-traffic zones like entrances and restrooms.
d. Pest Control: Confirm that pest control measures comply with hygiene standards and are included in the contract.
- Safety and Security:
a. Security Services: Review provisions for security personnel, CCTV surveillance, and access control systems.
b. Fire Safety: Verify compliance with fire safety regulations, including extinguishers, sprinklers, alarms, and evacuation plans.
c. Emergency Protocols: Ensure the availability of 24/7 emergency support for repairs or medical incidents.
- Utilities and Infrastructure:
Commercial tenants should request detailed breakdowns of common area utility costs, verify fair allocation and negotiate caps on increases. When reviewing common area utility costs in a commercial lease, tenants should carefully examine the following aspects to ensure transparency and fairness in their financial obligations:
a. Definition of Common Area Maintenance (CAM) Charges: Ensure the lease clearly defines which utility costs (electricity, water, gas, HVAC, etc.) are included in CAM fees or if they are billed separately. Verify whether utility charges apply to actual usage or are based on an estimate.
b. Allocation Method (Pro Rata Share): Determine how utility costs are divided among tenants (e.g., square footage basis, occupancy levels, or fixed percentages). Check if anchor tenants or certain businesses receive preferential terms or exemptions from certain costs.
c. Metering & Sub-Metering: Confirm if utilities are individually metered, sub-metered, or if costs are distributed as part of a general pool. If sub-metering is used, review how readings are taken and whether administrative fees are added.
d. Utility Cost Adjustments & Reconciliation: Understand how and when landlords reconcile estimated costs with actual utility expenses. Look for any provisions allowing landlords to adjust charges retroactively and whether there are caps on annual increases.
e. Maintenance & Administrative Fees on Utility Costs: Check if the landlord is adding a markup, management fee, or profit margin on common area utilities. Review lease clauses to ensure charges reflect actual costs rather than inflated expenses.
f. Energy Efficiency & Sustainability Considerations: Ask about the property’s energy efficiency measures (e.g., LED lighting, water-saving devices) that could impact long-term utility costs. Inquire if renewable energy sources (solar, wind) are used and how savings (if any) are passed to tenants.
g. Utility Rate Fluctuations & Pass-Through Costs: Review clauses that allow the landlord to pass through increased utility rates or surcharges. Check if tenants have any rights to contest excessive increases.
h. Exclusions & Special Cases: Ensure tenants are not charged for vacant spaces or the landlord’s own usage. Clarify if any capital improvements related to utilities (e.g., new HVAC systems) are being passed through as part of CAM expenses.
i. Audit Rights & Dispute Resolution: Confirm whether tenants have the right to audit utility bills and CAM charges for transparency. Check dispute resolution processes in case of billing disagreements.