How To Renegotiate Your Business Lease

Many tenants of both residential and commercial properties forget that they have the ability to negotiate their leases. While a landlord might set a specific amount for rent, you have the ability to counter with a different number that is more favorable to your business. 

However, you need to be strategic about when you do this. If there are dramatic changes to the market or unfavorable conditions for the landlord, they may be more willing to renegotiate in order to keep you as a tenant.

If you are struggling to pay your rent each month—or just think you can get a better deal—follow these tips to effectively negotiate your rent.  

Have A Plan Before The Negotiations

Before you even reach out to your landlord to renegotiate your commercial lease, do your research, and come up with a plan. The main question you need to answer is this: what do you want to get out of the negotiation? 

If you let your landlord set the terms going in, then they can easily make a small offer and you won’t know whether or not you really benefit. A few things to consider as you consider your terms include:

• What is the average rental rate for similar commercial properties in your area? Are you paying more?
• What other rentals does your landlord own? Are they occupied? What do those tenants pay? 
• What percentage of rent deduction do you want? How could this benefit your business financially?
• Are there other perks you could include to increase savings, like paying the water or electric bills?
• What other benefits would you like to include? This list includes things like repairing an older HVAC system or updating the plumbing. 

Answering these questions can help you make a reasonable proposal. They will determine how aggressive you are. Plus, they give you multiple cards to play. Even if your landlord doesn’t agree to change your rent, you can still request upgrades to your space, fee reductions, or extensions. 

Be Mindful Of Your Lease’s End Date

Negotiations are all about timing.

If your lease is about to expire in a few months, you can renegotiate because your landlord knows you might decide to move somewhere else. 

However, remember that negotiations are a two-way street. If your landlord agrees to a lower rate, they might ask you to renew your lease or sign a longer lease agreement. In this case, they prefer financial stability in the long run and are willing to lose a percentage of their income because of it.

Make A Case For Why Your Landlord Should Renegotiate

The negotiation process takes time. You can’t expect to ask for a new rental agreement and sign the papers within the same meeting. You need to prepare your landlord to renegotiate and will likely have multiple meetings and phone calls about the new agreement. Remember, they are doing their research too. They want to find reasons to either reject your negotiation or offer you a smaller discount.

Use the data and information you found to create a case for negotiations. You can point out how other companies aren’t paying rent at all or provide insight into how the real estate market has changed over the past few months or years. You need to show that this adjustment is in their best interest.  

Additionally, look into what your landlord prioritizes. Some people invest in real estate to help their pension funds, which means they would prefer any form of income over months without a tenant. However, other landlords keep real estate as part of an investment portfolio and they won’t want to see their assets devalued because of lower rent. Knowing their financial situation can give you an idea of how flexible they will likely be. 

Rent is typically one of the most significant expenses for a brick-and-mortar business. Even a small drop in your rental fees can have a significant impact on your business. If you do your homework and are reasonable in your negotiations, you may be able to get a better deal from your landlord.

Ready to move on from your lease and buy your own commercial real estate? Learn more about commercial mortgages.

_{Information provided on this blog is for educational purposes only , and is not intended to be business, legal, tax, or accounting advice. The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of Lendio. While Lendio strivers to keep its content up to-date, it is only accurate as of the date posted. Offers or trends may expire, or may no longer be relevant.}