Renegotiating your commercial lease is an excellent option for saving money, especially when times are tough. As the coronavirus pandemic continues to affect how many of us do business, company owners are reconsidering their needs, their space, and their best options moving forward.
Whether COVID-19 is influencing you to renegotiate your lease, you need a new arrangement for another reason, or you want to stay informed, you should understand what’s involved in the process.
In this blog, we’ll discuss the renegotiation process, highlight what to consider if you are thinking about renegotiating, and explain how an experienced business attorney can help.
What Is the Process of Renegotiating a Commercial Lease?
If you want to renegotiate your commercial lease, you should understand the general process it takes to reach an agreeable arrangement for both you and your landlord.
Understand Your Needs
Renegotiating your commercial business lease is not a one-size-fits-all process. A successful renegotiation can include:
- Rent reduction: If you’re hoping to pay less in rent, check the market for pricing on similar spaces. If you’re paying above-market rates for comparable space, you may be able to get your landlord to agree to a reduction.
- Temporary rent reduction: If you’re using your space less because of COVID-19 or some other reason, you may be able to negotiate a temporary rent reduction where you pay less for a certain amount of time. Usually, your rent will go back to the original rate after that period.
- Rent abatement: If you are struggling to make ends meet but expect business to pick up in the future, rent abatement might be a good option for you. Rent abatement is a bit like a loan, as it allows you to suspend rent payments for a set amount of time. Once that time is up, you will pay back the missed rent, sometimes with interest.
- Partial rent abatement: Partial rent abatement allows you to pay reduced rent — for example, 50% of your rent payments — for a certain amount of time and then pay the missed rent back later.
- Sublease: Subleasing your space to other entrepreneurs, vendors, teams, or workers is a great way to make use of your excess space, especially if you’re not able to use all your space consistently. It’s important to talk with your landlord about subleasing to make sure it doesn’t conflict with your lease agreement or any other rental agreements they have.
Create a List of What You Need
Once you know how you want to renegotiate your lease, create an outline of your requests along with supporting data, arguments, and conditions. Working with an attorney can help you create a legally sound plan and protect your business interests.
Present Your List to Your Landlord Before Your Lease Is Up
It’s best to speak with your landlord, whether you do it via phone call, videoconference, or in-person meeting. If you can, begin the conversation early — at least a few months before you need to renew your lease. When you and your landlord have plenty of time to consider options and communicate, you’ll have a better chance of reaching a solution everyone can agree on.
Have a Backup Plan
Ultimately, the only leverage you have in a typical lease negotiation is your ability to explore alternatives. If your landlord doesn’t agree to your terms, you should have a few ideas on hand about what to do next. Will you stay in your current location and continue paying rent as usual? Find another location? Try and answer these questions early in the process so you’re not left at a loss if your landlord refuses to negotiate.
An Attorney Can Help You Navigate the Renegotiation Process
The process of renegotiating your lease can be complex and delicate. The COVID-19 pandemic has put a strain on everyone; many landlords are feeling a financial squeeze and won’t be eager to reduce rent.
Working with an experienced business attorney, especially one familiar with the West Michigan community, can help make the negotiation process easier and more productive. A lawyer can help you understand your options in simple terms, work with you to create a plan, and give you expert advice as you pursue a rent renegotiation.
Need Help Renegotiating Your Lease? Call the Law Office of Kari Santana
The Law Office of Kari Santana has over a decade of experience supporting the West Michigan business community. We’re ready to work with you and help you confidently renegotiate your lease.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.