It sounds simple. You need 10,000 sq. ft. of warehouse space to house your inventory, and to do some light manufacturing or assembly. You drive around the local warehouse districts and industrial parks, and you find a place that suits every one of your needs. So, you sign a lease, and you are ready to move in.
Just as the moving trucks have been scheduled, you find out that you can't use the property for your intended purposes. Think it can't happen? It can, and it does. Worst of all, most lease language puts the onus of finding out whether you can use the space on the tenant. So, you would remain responsible for payment of rent whether you can use the space or not.
Many cities, including South San Francisco (for example), have re-zoned entire quadrants of their towns for other uses. With Genentech and others eating up portions of South San Francisco, some large areas have been re-zoned for bio-tech and other uses. Yet, there are furniture warehouses, organic produce warehouses, and many other similar uses throughout the area. If you drive through there, you'd think that it would be no problem opening an inventory warehouse. Unfortunately, unless your use is grandfathered in to a particular location, you are probably out of luck.
When the dot.com boom occurred several years ago, high tech businesses were eating up downtown retail locations. In an effort to maintain the character of their downtown areas, many local cities enacted statutes requiring occupants of the downtown storefronts to be retail in nature. They often define "retail" as someone with a high percentage of their revenue derived from the sale of goods. If you are a karate or yoga studio, a tutoring facility (like a Sylvan learning center, for instance), you don't qualify as retail.
Here's a third example. Some cities have imposed a moratorium on new restaurants in certain areas. If you find a space in an area with a lot of restaurants and sign your lease, only to find out that you can't open your restaurant there because of a moratorium, then you are in a bad spot.
Many tenants, especially mom and pop operations and franchisees that don't have good representation, just drive around the area looking for spaces. They see a bunch of "for lease" signs, and they pick what they think is the perfect spot. However, any number of things can stop you from being able to occupy, including zoning laws, moratoriams on certain uses, hight and density restrictions, parking restrictions, and many other things.
It's better to be safe than sorry. Before you sign your lease, make sure that you can actually occupy and use the space that you lease. It isn't the slam dunk that it appears to be in some cases.
Comments(14)