Commercial Warehouse Lease Questions
I have an undivided commercial warehouse that has been in private use (leased to a family member) for the last seven years.

Last week, I was approached by a group of guys that want to lease the property from me.

Apparently they want to rent the place together and use it for at least three separate purposes but for only one year.

Obviously, I intend to run background checks on them and I intend to hire an attorney to render the lease.

What other steps do I need to take to limit all liability from the operation of a car repair / tire repair and trailer construction business?

I obviously want to be absolved of all environmental liability.  What else should I be considering?

Should I even consider a one year lease?  What about this apparent multi-tenancy?

What other pitfalls can you steer me from as I consider becoming a first time commercial lessor?

Thanks in advance for any information.
[{"id": "fiqmq24", "text": "I\u2019d want them to be jointly and severally liable for the whole lease and I\u2019d want a lease longer than 1 year.", "replies": [], "depth": 1}, {"id": "fiqo4p3", "text": "&gt; I obviously want to be absolved of all environmental liability. \n\nThat isn't going to happen.  You need to decide if the risk is worth it or not.  If you own the property that comes back on you for cleanup.  You can sue them I guess, but good luck getting some guy who dumped oil out back rather than properly dispose of it to pay you.  This doesn't even get into stuff like employees making 12$ an hour being jackasses and doing stuff the owners don't see.\n\nAs soon as its an auto repair place expect that to get flagged on phase 1's and any future sale to need additional testing.  If it passes or not depends on if your tenant was good or not.\n\nCredit wise, 3 seperate businesses that are going together and can't commit to more than a year sounds like they may not being paying rent in a year anyways.\n\nI'd nope the hell out of that plan personally.", "replies": [{"id": "firpj84", "text": "Thanks for the detailed reply!", "replies": [], "depth": 2}], "depth": 1}, {"id": "fiqodyi", "text": "1 year is a nothing burger. Make it worth your while (at least 3 IMO)\nAsk for a detailed business plan. I agree w/ /u/goodtimesKC by making them all Jointly &amp; Severally liable. Require them to carry ample insurance and have you additionally insured on the policy.", "replies": [], "depth": 1}, {"id": "fiqofqr", "text": "Environmental as you mentioned is very important.  I personally would not offer any credit for tenant improvements or rent credit If they are not willing to commit to a  longer lease. I would also check with your insurance agent to see if they will evan allow a tire repair shop under your current policy..", "replies": [{"id": "firphgo", "text": "&gt;I would also check with your insurance agent to see if they will evan allow a tire repair shop under your current policy..\n\nExcellent.  This is one of the reasons that I asked here.  Definitely need to know.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fiqs53h", "text": "Is your property zoned for that? If you pull any sort of permit the inspector will make sure the bathroom is ADA compliant, so make sure everything is more or less up to code first. \n\nDo you own the building outright or is there a mortgage on it? Do you have the requisite insurance? Do you have separate meters / how will you account for gas / electric / trash.\n\nWhat kind of permits exist in your area regarding the storage and disposal of hazardous substances? \n\nRead through something like this to familiarize yourself with what a commercial lease should contain. \n\nhttps://www.aircre.com/site/wp-content/uploads/2019/06/STG.pdf\n\nOne year is not a lot of time and comes at great expense to yourself. Most industrial leases are for 5 years and these tenants seem very micky mouse so you can expect some headache.", "replies": [{"id": "fiqtvu2", "text": "The building is owned outright and is zoned mixed use.", "replies": [{"id": "fiqxuic", "text": "Is it permitted to be divided this way?  Ie if fire or code does a walkthrough to sign off on any if their business licenses are they going to flip out about no seperation between units, lack of access to bathrooms, multiple egress from units?\n\nIts a bit of self reporting but if it were me id discuss this with the city or an architect before you even consider it.\n\nIve seen a lot of inexperienced owners and tenants agree to stuff thinking the city never catch on then what happens is the tenant cant open so they dont pay and you wind up sueing each other because you were smart enough to see that coming but foolish enough to think just stating you werent responsible means theyd pay you for an entire lease that is for a space they cant operate in.", "replies": [{"id": "fiqy8rc", "text": "The property is in an unincorporated location but your point is taken.\n\nResearch is required.", "replies": [{"id": "fiqzk5i", "text": "If you want to go the mostly free route call a few architects and ask for a consultation.  Bring a floor plan and just explain you are considering dividing this building for multiple tenants as your lease expired and were wondering how feasible that was and what kind of costs you are looking at.\n\nIf they tell you they can do an assessment and produce plans for a couple grand but it looks mostly complaint you maybe got your worst case.  \n\nIf they tell you that you need to add two bathrooms, rated fire walls, and ask if you already have a sprinkler that tells you a lot too ;)", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fiqtp9w", "text": "Not worth for 1 year", "replies": [], "depth": 1}, {"id": "fireuqg", "text": "Don\u2019t do it. Too many red flags. Only willing to sign one year and needs 3 different uses? Sounds like they are dabblers hoping one of these business will land. If they can\u2019t commit to 5 year\u2019s and show past history run away.", "replies": [{"id": "firn2su", "text": "I personally thought that three years was more-or-less standard.\n\nAgree on the history.  Research needed there as well.", "replies": [{"id": "firq5ge", "text": "3 is fine if you don't need to dump ti and they are an otherwise stable tenant", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "firldgu", "text": "the attorney that renders the lease should cover all your liabilities - environmental, etc.\n\nHowever, this coverage is only as good as the tenant -- if they are worth $500K and the environmental problems costs $2 million, you are out of luck.\n\nAs for the multi-tenant situation, I don't understand. Have the group sign the lease and allow them multiple uses - that is just one tenant taking 100% of the place. The attorney can draft this easily.\n\nThe 1 year thing is a bit weird - very short and you will probably not recover the legal fees to draft the lease as well as the expenses of owning the property.", "replies": [{"id": "firoapf", "text": "&gt;As for the multi-tenant situation, I don't understand. Have the group sign the lease and allow them multiple uses - that is just one tenant taking 100% of the place. The attorney can draft this easily.\n\nWell, this is what I had hoped for.\n\nHowever, I'm wary of being liable for things like:\n\n* soil contamination (can I stipulate that oil recovery tanks &amp; service be provided by the tennants?)\n\n* tire disposal (what if they trash the adjacent properties - what liability will I be exposed to?)\n\n* trash disposal\n\nObviously I could stipulate these things in the lease but would it be better if I just charged for them a la carte?", "replies": [{"id": "firq3qs", "text": "you could.  do you really want to babysit three different tenants day to day operations?  Will they be ok with that?  Will you be compensated for that in any way?", "replies": [], "depth": 3}, {"id": "firqxq4", "text": "you would stipulate all this in the lease - you will place the liability on them per the lease (but as I stated, if they cannot cover the liability, you will be on the hook)", "replies": [], "depth": 3}], "depth": 2}, {"id": "firodo0", "text": "&gt;The 1 year thing is a bit weird - very short and you will probably not recover the legal fees to draft the lease as well as the expenses of owning the property.\n\nI may actually be agreeable to this term under the right circumstances and to a decent tennant.  The property is currently not under lease and is therefore costing me money (taxes, insurance, upkeep).  Some abatement is better than no abatement (so, **maybe...**).", "replies": [{"id": "firpxhg", "text": "its not.  I hesitate to give specific advice but just honestly it rarely is.  \n\nIt sucks to bleed money and I get that, a bad tenant means you bleed money and have to pay more money before you can get a good tenant that you make money on, and after you pay to fix the nightmares from the bad tenant you get to bleed money while you find the good tenant.\n\nYou are just paying money to get back in the same spot you are in now", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]