We’ve talked about the benefits of tech tenants for southern California property owners, the specific lease issues, and the new twists on old lease issues when dealing with tech tenants, but what about the new non-lease issues?
Designation of Building as Asset or Liability:
When dealing with ground-up developments, an emerging tenant will usually need their accounting firm’s review and approval of lease documents. (Their goal is to avoid the inclusion of the building as a capital asset). They aim to see it designated as a lease liability for the tenant. Coming to this determination requires consideration of numerous factors: tenant liability during construction, the ability of the tenant to participate in design of the structure, and tenant ability to participate in funding the building construction.
Resulting Liability & Risk for Landlords:
The definitions and interpretations of applicable accounting rules will vary between accounting firms and even between different teams at the same accounting firms. This can make negotiations difficult when attempting to develop solutions and come to a resolution that suits all parties. Southern California property owners should remember that accommodating a tenant’s accounting concerns is great as long as doing so does not significantly increase your liability or risk as the landlord.
Sensitivity to Intellectual Property Issues:
When working with tech tenants, property owners will often discover that there is an increased sensitivity regarding intellectual property issues. Do not let a tenant’s intellectual property concerns prevent you from maintaining your ordinary course of business (i.e. express permission for use of tenant’s name in marketing and offering materials, disclosure of lease and tenant info for annual financial reports, the appropriate maintenance of up-to-date and detailed project websites, etc.)
If you have any questions regarding non-lease issues with tech tenants for your southern California properties, please get in touch with one of the experienced business and real estate attorneys at The Law Office of Retz & Aldover LLP today.