How much Security Deposit should you expect when making an industrial
Two months is an accepted norm, but sometimes one month is satisfactory
to an owner.
If the company is new, or if the assets are in a foreign country,
the tenant should expect to pay up to 4 or 6 months of security
deposit, some of which can be refunded when its financial statement
has been improved.
The Security Deposit is held by the owner until the tenant has
vacated the property and surrendered the property as required in
the Lease. The Lease will normally require that the tenant repair
the building BEFORE the end of the Lease. This means that there
should be a preliminary walk through by the owner and tenant a couple
of weeks prior to the end of the Lease, and a check-list should
If the owner is a professional property owner, or has a property
manager, they may provide an estimated price for repairs, make the
repairs, and deduct the cost from the Security Deposit. This relieves
the tenant of the responsibility of managing the repairs, and any
problems with the quality of the work.
Otherwise, the tenant should get those repairs done before vacating
the building, because the lease will normally hold the tenant responsible
for the rent until the repairs are completed.
The Value of a Sprinkler
An owner is always better off if his building is sprinklered.
Insurance rates are lower, and most businesses prefer a sprinklered
The tenant is better off with a sprinkler system because
the insurance rates for his product will be lower, and because the
business is likely to suffer a shorter interruption if a fire is
However, if the tenant stores metal materials that would suffer
more from the water damage, he/she may prefer not to have a sprinkler
It is important for the tenant to speak with its insurance company
about this before beginning the process of looking for a building,
in order to determine the difference in insurance rates for its
particular product. We have seen a difference in insurance that
amounted to as much as 5 cents per sq. ft. additional cost for certain
companies if they did not have a sprinkler system.
Also important to note, some buildings will have a fire sprinkler
monitor that indicates water flow - which in turn indicates a possible
fire. This water flow triggers an alarm system, and the fire department
can be immediately dispatched.
Gross vs. Net Lease
A Net Lease means that the tenant pays for the property taxes,
property (fire) insurance for the building, and all maintenance
including the roof. A tenant can figure that, for typical buildings
in Southern California, these costs can add from 3 cents to 6 cents
per sq. ft. to his rent.
A Gross Lease means that the owner pays for the property taxes,
property (fire) insurance for the building, and roof maintenance.
The tenant pays for increases in the property tax and property insurance
over the life of the lease.
The tenant maintains the interior of the building, including doors,
windows, air-conditioning, and plumbing.
You should be aware of seismic earthquake faults, but you
should also have knowledge of "liquefaction." This is
a process in which the soil becomes soft and liquid-like during
strong ground shaking. The soils where this is likely to occur are
loose, water saturated, fine grained sands and silty sands that
lie close to the ground surface.
It is really not possible to accurately predict when a specific
earthquake fault will have movement. However, we can be informed
about the liquefaction component that will most certainly affect
property regardless of which nearby fault creates the earthquake.
We have maps available for our clients that will show them the
seismic faults and the liquefaction-susceptible soil conditions.
We will help you to be informed about this most important
factor in owning and leasing real estate.
When is a Lease "Really"
A lease has a beginning and ending date. This seems simple
However, I was recently advised by my attorney that the owner needs
to give the tenant a 30 day notice prior to the expiration date
to insure that the lease is, indeed, over. This is extremely important
if either the owner or the tenant does not plan to continue the
If the owner is marketing the property to obtain a new tenant,
he needs to have a definite date on which the new tenant can occupy
the property. Therefore, our advice to owners who we represent is
to give that 30 day notice before the end of the Lease, and again
give a written notice if a new lease is entered into before the
expiration date of the old lease. In both letters, the owner may
want to include some legal admonition of the legal dangers if the
tenant does not vacate on time.
We schedule reminder calls to our owners so that this important
detail is not missed.
Under a Gross Lease, the owner is required to carry property
insurance, for fire and other perils, and liability insurance. Any
increase in insurance cost will be paid by the tenant. (See "Gross
vs. Net" article)
Under a Net Lease, the tenant is required to carry the property
Under both Gross and Net leases, the tenant is required to carry
Limits of liability and grade of insurance carrier should be spelled
out in the Lease.
Proof of insurance coverage that the tenant is required to carry
must be provided to the owner.
The tenant should also have personal property insurance to cover
its fixtures and inventory.
First, some definitions:
- Truck high (or dock high) loading: The
warehouse floor is approximately the same as the height of the
truck bed, which eliminates loading from the truck down to the
ground, or loading from the ground up to the truck. A pallet jack
or tow motor can be used to pull material from the truck to the
floor of the warehouse.
- Ground level loading: The level of the
warehouse floor is the same as the level of the ground.
- Turning radius: This refers to how much
room there is in front of the loading doors for the trucks to
position themselves for loading and unloading.
- Dock height: The height of the warehouse
floor, from the ground to the floor of the warehouse.
- Who should have truck high loading: For
some companies, truck high loading is absolutely essential. The
savings in labor, and the ability to load and unload quickly is
especially important to warehouse and distribution operations.
However, if flat bed trucks are used, ground level access may
Some buildings offer dock high loading through the use of a "truck
well", which means that the ground is excavated, and then
sloped down below the level of the building. This can allow a
truck bed to be level with the floor. The slope of the truck well
can sometimes be too steep, allowing material to fall over or
slip as it is being loaded or unloaded.
- How high should the dock be: How many
inches from the gound to the warehouse floor? The modern truck
high building will be constructed with the floor approximately
48 inches above the ground, and this will accomodate most trucks.
The dock height of many older buildings varies from 24 inches
Smaller trucks may have a truck bed that is less than 48 inches
above the ground.
In conclusion, measure the truck beds' length and height (the standard
width is 8', so this usually presents no problem). Consider using
load levelers to adjust the floor to the truck beds; this is especially
important when trucks with various bed heights are being used.