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How to Renegotiate Your Commercial Lease

1. Get an early start in negotiating your lease.

It’s important to start negotiations early to avoid losing leverage and flexibility in your lease renewal negotiations. The closer your lease gets is to expiration the less believable a threat to relocate is. Starting early allows you to evaluate the market and look for better rates in other areas. It also allows you to turn down your landlord’s first proposal.

2. Do not accept the first proposal.

By holding off on furthering negotiations and looking other places you communicate to your landlord that you’re considering alternatives. Never accept the first offer. With enough time and leverage, you can always negotiate more than the landlord will initially propose.

3. Push for more, even if you’re happy.

When it’s finally time to respond to your landlord’s proposal, it’s important to be aggressive. Always ask for more than you’re actually looking to get. It is in your landlord’s best interest to keep your business and they will continue to negotiate even if your counter is low or unreasonable. An aggressive approach will also set the stage for what the landlord needs to do to please you.

4. Negotiate more than just rate.

When negotiating your lease, rate isn’t the only thing on the table. Lease renewal time is your chance to fix any problems or complications that may have come up during your lease term. Office improvements like carpet and paint are a few common subjects but you can also ask for renovations, upgrades, parking spaces and more. It’s important to ask for perks and improvements while your landlord is competing to keep your business.

5. Consider other spaces to introduce competition and increase leverage.

Whether or not you’re interested in relocation or not, it’s important to consider other spaces. This gives added leverage to your negotiations with your landlord. You must convince your landlord to compete for your business and the added leverage of relocating is important.

6. Get a tenant representative to do the talking.

Being that it’s in the best interest of the landlord, they will try to negotiate directly with you and get you to agree to terms and sign a lease. Before agreeing to any terms, it’s important to develop your approach with your tenant representative beforehand. Speaking directly to a leasing agent or landlord can undermine your negotiations thus far.

7. Good tenancy is worth less than you think.

In terms of leverage, being a good tenant and always paying on time aren’t worth much. These things are expected as a part of your lease agreement and may actually decrease the amount of leverage you have. As a renewal it’s likely that you will get a less competitive rate than a newcomer. Landlords will often give better terms to newcomers to remain competitive while only offering relatively good deals to renewals.

8. Work with your rep to control information regarding the negotiations.
To avoid losing important leverage in your negotiations, be sure to control information within your company. It’s not uncommon for landlords to know people within your company and some will work to uncover your motivations. This can lead to a loss of leverage and ultimately gettings a worse deal on your lease renewal.

9. Get yourself a tenant broker at no cost.

While landlords negotiate with leaseholders daily, tenants are only in the market every once in a while. This puts the landlord at a great advantage when it comes to negotiating a lease for a commercial space. It’s important to find a commercial real estate broker that specializes in tenant representation. A real estate representative can negotiate deals based on the current market climate as well as compare your current lease terms to those of competitors. The presence of a broker adds credibility to your negotiations and provides some leverage. This can cause a landlord to offer more competitive terms to avoid the loss of your business.

Leases
A legal document outlining the terms under which one party agrees to rent property from another party. A lease guarantees the lessee (the renter) use of an asset and guarantees the lessor (the property owner) regular payments from the lessee for a specified number of months or years.

Both the lessee and the lessor must uphold the terms of the contract for the lease to remain valid.
Lease Amendments
Once a lease has been signed, you can usually change its terms only if the landlord and tenant agree and sign a written amendment. The amendment, together with the lease, then constitutes the final, complete and exclusive statement of the agreement between the parties regarding the subject matter and supersedes any and all prior and contemporaneous understandings or agreements of the parties.

The amendment usually provides that it may be supplemented, amended or modified only by the mutual agreement of the parties by stating that no supplement, modification or amendment of the amendment shall be binding unless it is in writing and signed by both parties. A common amendment to a lease is a change in rent.
Lease Renewals
Tenant may only renew the lease with the consent of the landlord. If a lease contains an automatic renewal clause, the landlord must typically give the tenant advance notice of the existence of this clause tenant is required to notify the landlord of an intention not to renew the lease. A lease renewal may be negotiated with different terms from the current lease.

Local laws vary, so it’s advisable to consult an attorney for applicable law in your area.
Request for Proposal (RFP)
Publication of detailed requirements by a prospective buyer or Lessee in order to receive vendor offerings.
Letters of Intent (LOI)
A letter of intent describes the details of a real estate transaction before it is finalized. A letter of intent is a non-binding agreement stating two or more parties' desire to enter into a real estate transaction, such as a sale or lease. The letter provides an outline of the proposed transaction so the parties can negotiate before committing to a contract.

If any party is not satisfied with the terms, he can propose a counteroffer. If the counteroffer is accepted, the letter of intent is revised and reviewed again by all interested parties. Any party can decide against the deal at any time before the final sale contract or lease is signed.

Let a professional tenant representative negotiate your lease or lease renewal and save you money.
Contact us today to schedule your free consultation 1-800-986-9201