A focus on deal timelines is a necessary evil in our commercial real estate world.
They are the threads that bind conditional lease and sale transactions. But what happens when issues arise which are beyond your control and negate those agreed-upon timelines?
Let’s explore some of the potential issues, and how to mitigate their potential impacts.
Contracting third parties in any type of commercial real estate deal can often impact timelines. From contractor quotes to code reviews, these companies have their own schedules we might need to work around. They aren’t necessarily sitting around just waiting on our call.
Before going to paper on a lease or sale transaction, it’s advised that you find out what kind of timelines you may be up against for third-party reports.
How long will it take to get an appraisal? What is the expected completion time for an environmental audit?
With the summer holiday season upon us it can be especially difficult to complete the due diligence you need as a tenant, landlord, buyer or seller.
If you don’t want to find yourself in the endless loop of extending conditions, do the math before you write your offer.
Getting approval for your transactions
No sooner do you think you have all your proverbial ducks in a row, than you realize you need to submit a permit to City Hall.
To be fair, they are swamped with residential and commercial permit requests of all varieties. Your timeline to finish a deal is of no concern to them.
As commercial brokers, we’re finding this especially cumbersome in change-of-use applications which are being more readily required for leases.
In an ideal universe, once financial terms are agreed to on a lease transaction, there may only be the lease review to contend with. When changing the use of a commercial space, however, the City of Saskatoon is now demanding a permit which can open a whole different can of worms.
This may involve a building code analysis to ensure the new use conforms with building code compliance. That is not acquired overnight and therefore can literally stop a deal dead in its tracks.
Even if a building code analysis is not required, the construction permit process can eat into precious fixturing or rent-free periods which the tenant has been granted.
It’s the story of the chicken and the egg. Which comes first?
In a lease or a sale transaction, there is a point where you may have to spend energy and money even though the deal is far from agreed upon. It’s a risk from a tenant or buyer’s side should the deal deflate, but it may be required to push the deal to the finish line.
This could mean starting any approval process required by the city prior to possession, which typically has financial implications.
Be responsive with stakeholders
There is little we can do to speed up third parties or city hall, though it’s a known fact that the squeaky wheel gets the grease.
I make no assumptions and follow up on behalf of clients to see if the committed timelines are going to be achieved. To that end, some might even say I’m annoying.
The only thing we can ask from our clients is that they be available and responsive when their input is required.
With a little patience and prodding, it’s our goal to get every deal done.