Commercial Lease: 7 Ways to Negotiate a Rent Reduction- Tenant's Perspective

Published: 28th September 2011
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Economic times are tough. Businesses that were once strong and viable are quickly shuttering their doors, putting the ĎOut of Businessí signs up, and walking away from their commercial lease agreements.

Not all of these businesses needed to reach this point. Some business owners simply either didnít make the effort to gain concessions from their vendors and suppliers or even their landlord to help them pay their mandatory bills, such as wages and utilities.

When it comes to a commercial lease, there are things that every tenant can do that has the potential to bring down their rent.

The most important thing to consider is that if your landlord has no idea that your business is struggling to make ends meet every month, he or she will never willingly offer to reduce your rent. Just because you signed an agreement doesnít mean that your landlord is not willing to negotiate a rent reduction.

Itís basic economics, really. If they understand that by offering to reduce your rent that youíll be able to stay open and stay in business, that means they will still have that space occupied, rent coming in, and wonít have to worry about the stigma of empty commercial space.

So here are 7 ways to negotiate a rent reduction.

1. Inform your landlord of tough times. Open your financial books to your landlord. Show him that your business is struggling. Everyone knows the economy is soft right now and we all have to pull together to get through it.

2. Offer to make up the difference when business picks up. By making concessions to your landlord that you will pay more in rent once business is back to normal, youíll give him more incentive to work with you.

3. Offer to take care of the premises. If your landlord has other spaces available on the lot, you could offer to be his point man for showing the property to other customers.

4. Hire a commercial lease expert to represent you. Commercial lease experts have the knowledge and tact to be able to successfully negotiate a reduced rent on your behalf. Plus, your landlord will likely be more flexible if he knows you have professional counsel on your side.

5. Offer to extend the lease. If you know that this setback is not going to bury your business, you can make an arrangement with your landlord to extend the length of the lease in exchange for reducing your rent.

6. Look at comparable rents in the area. You may find that you are paying a lot more for the space than other businesses are. Mention this to your landlord. If youíre a good tenant, then heíll likely prefer to keep you rather than lose you to a competitorÖeven if your actual lease is not finished!

7. Donít be shy. Your landlord is most likely a person just like you. They donít want to lose business and if it means lowering your rent, then they will likely be willing to work with you.

If it comes time to negotiate a rent reduction, some of these tips should help. If you want to maximize your chances for success, then definitely hire a commercial lease expert.

Jean Louis Racine, lawyer, real estate broker since 34 years.

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