Mandarin Enterprise was an import/export company located in Montecito, Oregon. The owner of the company, Patrick Cook, was extremely busy traveling the world, looking for opportunities to expand his business. Now that Mandarin Enterprise was expanding, Patrick thought he should hire a reliable person to help him manage the business and take care of it in his absence. Hence, before making his next trip, he hired Martin Gambler as his new office manager.
Shortly after Patrick left for China, Martin decided that it was time to move since company was growing and needed more warehouse space. So he went shopping and found a 15,000 square feet space to move into. He organized the move, but left the day-to-day organization of the move to his assistant. As moving day came, the whole company cooperated and the move went very smoothly, that is until he got a call from his new landlord. "Hello Martin, I heard you have moved. I think we have a problem." He continued to tell Martin that Mandarin Enterprises had moved into suite 400 at the industrial park and that in fact, Mandarin was supposed to move into suite 500. The leasing agent had inadvertently given the master key to Martin since they had been discussing two spaces. Martin had assumed they were moving into suite 400.
As a matter of fact, Mandarin should never have had the master key. There were two drafts of the lease, one with suite 400 in the location description, the other with suite 500. Martin assumed they were moving into suite 400, the landlord assumed suite 500.
To compound the problem Mandarin Import and Export had moved in without an actual signed lease. The leasing agent and the landlord had not reviewed final versions and returned them to Mandarin Import and Export. Moreover, their existing lease for 6000 square feet had not expired yet; it had four more years to go. Martin discovered this when his old landlord called him in the morning and asked him why he had moved out.
Martin, a trained professional and a graduate of the prestigious Humberton MBA program, was truly stunned. How was he going to solve this conundrum and not get fired by his boss? In the mean time Patrick returned from his trip and was surprised to find out that his company had moved. He had to call Martin to get the new address.
At this point, Patrick was very confused. He was aware that that Mandarin had outgrown its previous space, and was excited to know that the new space was much better suited for their company. He was happy that they now had a badly needed show room, larger warehouse and a bigger office for him without having the slightest idea of the “behind the scene” problems that had arose. (At this point in the tale you may be wondering is this a salvageable situation, or if this actually could have occurred.)
Once Patrick came to know about the goof up, he decided to help Martin figure out how to solve those problems. Firstly, they negotiated with the new landlord and got him to agree to let them stay in suite 400 and actually signed a five year lease. Next, he went to the old landlord and got him to agree to a lease buyout and paid him a one year (of the rents) penalty and they were let out of the lease. Finally, he sat down with Martin. He issued a written warning. He said to Martin, "Your heart is in the right place, but you really screwed up on the details". He also told him that this was not a good situation and had cost Mandarin a lot of money to solve. In the end, Mandarin was able to grow its way out of its problems. Martin had learned a great deal and was lucky to keep his job.
Such situations can be prevented by following simple steps which include careful planning, requiring owner/officer signatures on leases, lease review by corporate or real estate attorney and by clearly managing the boundaries of the key people that work for you... and before I forget, you might want to think twice before you hire an employee with the last name of Gambler.
About the author
Clifford A. Hockley is President of Bluestone & Hockley Real Estate Services, greater Portland’s full service real estate brokerage and property management company. Founded in 1972, Bluestone & Hockley’s staff totals nearly 110 employees, including 20 licensed brokers. The company’s property management division serves commercial buildings, apartments, condominium associations and houses in the Portland / Vancouver metro area, while the brokerage division facilitates both leasing and sales of investment properties throughout Oregon and Washington.
Cliff earned a degree in Political Science from Claremont McKenna College and holds an MBA from Willamette University. He is a Certified Property Manager and has achieved his Certified Commercial Investment Member designation (CCIM). Bluestone & Hockley Real Estate Services is an Accredited Management Organization (AMO) by the Institute of Real Estate Management (IREM). Cliff is a member of the Institute of Real Estate Management and was named Certified Property Manager of the year in 2001 and 2003. Cliff is a frequent contributor to industry newsletters.
Bluestone & Hockley offers customized brokerage, property and asset management, as well as maintenance services to property owners and investors throughout the Portland/Vancouver metro area. The company’s full-service approach benefits busy property owners and investors, who know they can count on Bluestone & Hockley for high quality real estate services start to finish.