With more than a dozen large retailers filing for bankruptcy last year, commercial real estate owners, investors and landlords need to take steps to protect themselves against the financial consequences of lease defaults and vacant properties.
For many of these enterprises, the solution may involve requiring tenants to obtain lease payment (TLP) bonds and, in lieu of cash or letters of credit, lease deposit bonds to secure their commercial space at the inception of each lease agreement. Besides protecting their cashflow, requiring tenants to produce a TLP bond improves the ability of investors and owners to finance their projects, obtain refinancing and facilitate securitization.
Lease payment bonds and lease deposit bonds are purchased by tenants from a surety company to protect the landlord or real estate investor from a potential default. The bond guarantees the faithful performance of the terms of the lease. If the tenant breaches the terms of the lease, and is placed in contractual default, the landlord can seek payment from the surety for the ongoing lease payments or damages as stipulated in the lease agreement.
Lease payment bonds and lease deposit bonds, both of which guarantee multi-year commercial rent payments according to the terms of the lease, may be purchased in one year renewable or prepaid non-cancellable multi-year periods. Premiums can be added to lease payments, amortized with the fit up costs, or paid periodically by the tenant.
Unique Surety works with commercial property owners, investors and landlords throughout the U.S. and internationally to provide a wide range of contractual risk management solutions that help address the financial consequences of contractual defaults. For assistance with your commercial real estate bonding needs, telephone 1-833-266-3765 or email aliciawalter@bondwithunique.com. You can also visit www.suretybondsbyunique.com.
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