Thought Leadership

Ways To Manage Your Risk In Commercial Real Estate Contracts

Every time your company enters into a contract or agreement, there is potential risk. Times are changing and so should your contracts. Most owners and/or leaders sign standard forms every day without fully understanding what they are signing. This has the possibility of leading to financial disaster. It is money well spent to have your contracts reviewed, updated or revised, by legal counsel. By assessing the contract risks, and highlighting how they may impact your business, you can manage the outcome.

Cost of Supplies:

One area of concern is contracts or arrangements with suppliers. You may find cost overruns or overages due to the looming inflation in the market place. By having language in your contracts regarding price escalation, can help keep a project in check. This may include price caps, or triggers based upon the Consumer Price Index (CPI).

Supply Chain:

We all know the supply chain has, and still is, an enormous factor of our everyday spending, including furniture, appliances and baby formula. In particular, the supply chain is greatly affecting construction materials such as steel and lumber. The shortage of supplies due to the breaks in the supply chain is driving up the prices and delaying projects. Once again, be sure that your contracts have a mechanism to account for such situations to minimize damages for default due to delays.

Insurance/Safety Inspections:

Whether you are purchasing a new policy or the renewing an existing policy, a commercial inspection is a must for several reasons. You may be under insured. With the appreciation of real estate and cost of building, it is prudent to review your risk and replacement coverage. An inspection can also help in the unfortunate event of unforeseen disaster. Take for example, the recent $997,000,000 settlement involving the collapse of the Champlain Towers South Condominiums in Surfside, FL. The catastrophic event killed 98 people. Confirming that you have the most appropriate policy is of the utmost importance. Although the exact cause has not yet been determined, there have been references of prior building inspections that revealed that the building had failed waterproofing which led to its structural damage. Regular inspections can minimize your exposure for safety risks.

ABOUT THE AUTHOR

Kylie E. Kaminski
Phone: 952-460-9298
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