Is your lease not quite what you thought you were getting yourself into? Don’t worry, there may still be a chance to renegotiate commercial lease agreements.
There are many reasons to look into how to renegotiate a commercial lease. From saving money to getting additional benefits added to your lease, this is a doable process, although it can be a bit tricky. To avoid ending up in a worse situation or missing out on opportunities available to you during the renegotiation process, our specialists at 620 N LaSalle are covering all the tips for commercial lease renegotiation to help you better achieve a lease that suits your needs. Let’s get right into it.
What Does It Mean to Renegotiate a Commercial Lease?
So, can you renegotiate a lease? Yes, and we are here to share just what that means.
While a commercial lease does serve as a binding contract between the tenant or business and the landlord, renegotiations are possible. This means changing the terms of your lease, whether it refers to the total rent, added perks, or the lease term. But when is this appropriate? Let’s break it down.
There are quite a few reasons you may choose to renegotiate a lease. These situations include:
- If the market has changed in a way that has the potential to impact your business’s profits, a renegotiation can take place to better fit your needs and ability to work in coworking space.
- If your business must close unexpectedly, due to situations like pandemics or natural disasters, you may also renegotiate.
- And lastly, if your landlord is unable to meet particular terms of your lease agreement, commercial lease renegotiation is permitted.
Not every small inconvenience and frustration warrants a renegotiation of a lease. Still, in some scenarios like the ones above, there is potential to renegotiate a commercial lease to better suit the needs of a tenant, as well as a landlord.
Why Would You Want to Renegotiate Your Lease?
In light of Covid-19, many companies have looked into how to renegotiate a commercial lease, but even if the pandemic isn’t the reason behind your research, learning how to handle commercial lease renegotiation is good for everyone to know.
Especially if your lease is up for renewal soon, due to market changes, as well as any personal changes, re-evaluating your lease agreement and what will best suit you is a good way to ensure you’re paying for what you need. From tenant improvement allowances to adjusting rent costs, there are some adjustments you can make to suit your needs.
Okay, but really - why should a landlord allow you to renegotiate commercial lease agreements? Let’s face it - we’ve all been affected by these changing times, and keeping tenants in a property is beneficial to landlords, too. For this reason, you have a bit of leverage to renegotiate, ensuring the landlord still has a tenant in their property to ensure their finances remain in good condition, too.
Types of Lease Renegotiations
So, what exact negotiations can you work out with a landlord? From rent reductions to subleasing options, here are a few of the types of lease renegotiations you can pursue to help adjust your lease to your new preferences.
In some cases, due to pandemic changes, a rent reduction can be pursued. This can be a good route if there have been changes in the market, or if the property itself has seen some negative impacts, maybe from environmental factors. Rent reductions are best pursued in these scenarios, but if you make a good case, you may be able to reduce your rent in other situations as your landlord seeks to maintain a positive relationship.
If your landlord has been dragging their feet about making repairs and improvements that you need to feel comfortable and productive enough to remain in the property, you can seek to pursue rent abatement when in renegotiations. With rent abatement, you can be entitled to suspend your payments for rent, or pay a smaller cost until the landlord makes the necessary changes.
Partial Rent Abatement
Partial rent abatement, similar to a full rent abatement, authorizes that you pay a lesser amount of your rent while your landlord pursues making the repairs you’ve requested. This is a good compromise, ensuring you are still paying a portion of your rent in good faith that the landlord will follow through on their end of the deal.
Another option to pursue during commercial lease renegotiation proceedings is to request a sublease. This method will be useful if renting office space, whether large offices or small offices, becomes difficult or it no longer meets your needs. This is a great route for those whose businesses may have been negatively affected by the pandemic, as well as those who saw great success and are growing more rapidly than anticipated. Additionally, if your location must change for operational reasons, finding a sublease, which means someone takes over your current lease for the rest of the term, will solve your issues.
How to Renegotiate a Commercial Lease
Figuring out how to renegotiate commercial lease agreements is a tricky task, especially considering it typically isn’t in the landlord's best interests. However, that doesn’t mean you’re not entitled to do so. To help you better navigate how to negotiate a commercial lease, here are some helpful tips to assist in the process.
1. Begin Early
Since a commercial lease renegotiation isn’t exactly a breeze, beginning the process early will help ensure you and the landlord can reach an agreement. In an ever-changing market, keeping up-to-date on the changes and fluctuations will be key to getting what you want. Additionally, keeping good communication with your landlord will help ensure you make the process as seamless as possible.
2. Opt for the Phone Over Email
Emails are somewhat impersonal and can allow people to fester on a topic for too long. So, instead of emailing your landlord, plan to call them and talk out the renegotiations clearly. This way, everyone’s tones can be clear and you can avoid any miscommunications that come with written exchanges.
3. Keep a Good Attitude
Ultimately, commercial lease renegotiation proceedings are a bit complicated, so approaching a landlord in an organized, confident, and professional manner is essential. This way, you can maintain a good relationship with your landlord, forging a strong long-term partnership that is based on both parties looking out for each other.
4. Do Your Research
We can’t stress it enough - research, research, research! Going into renegotiation commercial lease conversations without the proper knowledge can make your goals unclear. You must go into the process knowing what you want or can even pursue, and asking a landlord “what can you do?” won’t get you anywhere. Instead, decide on what you need - whether it’s a rental reduction, permission to sublease, or abatement, and have the paperwork ready to go.
5. Research Other Options
It’s in the best interest of the landlord to keep their tenants long-term, especially if you are a good and respectful one. For this reason, looking into alternative options on the market and sharing with your landlord what the competition may offer you instead will help push them to meet your needs and remain a competitive option.
This is not only important for your conversations with the landlord but your knowledge as well. This can help reveal if renegotiations are even worth your time, or if you are better off pursuing a new location that will better suit your preferences.
6. Consider Hiring a Professional
We’ve said it once and we will say it again - commercial lease renegotiation proceedings are not easy! With this in mind, it may be in your best interests to hire a broker to help navigate this endeavor effectively. If you’re not familiar with this process or need some guidance, hiring a professional team will help you get the best deal possible. This will allow you to take control of the situation early on and handle proceedings with a landlord in a super professional way that will keep relationships smooth.
7. What to Include
Not sure what to include in your proposal? To start, you’re going to need clear reasoning for why you are pushing to renegotiate commercial lease agreements. This should include market research on similar properties offering better deals. Additionally, this can include any reasons and proof of why your business can’t currently meet the demands in your lease agreement. To show this, you can share financial statements, as well as a business plan for what’s to come to show how in the future you will be able to meet your lease agreement.
8. What to Do if the Answer Is “No”
So, you already received a big “no” when approaching the topic of commercial lease renegotiation with your landlord. Now what? It’s time to (quickly) propose a backup offer. Negotiations can be ongoing, and a landlord may not agree to your first request, so have a second idea in mind that will still help alleviate the burden or issues with your current lease. This may require some additional help from a tenant broker, but it will be well worth the effort to have a plan A and a plan B, just in case.
So, can you renegotiate a lease? If you have the right reasons and research to back you up, the answer is a resounding “yes.” It’s in the best interests of both tenants and landlords to come to an agreement that both feel good about, especially considering commercial leases can last for many years. For this reason, properly pursuing commercial lease renegotiation proceedings can ensure the success of both parties.
From negotiating for a subleaser to proposing rent abatement, learning to renegotiate commercial lease agreements is in every tenant's best interests. However, if the property your company currently resides in simply isn’t cutting it, upgrading to a modern, new building in the heart of Chicago is sure to boost your business. For more information on the spaces available for your business, our team at 620 N LaSalle is just the place for you. To learn more about our commercial spaces, contact us today at 312-800-1997.
Table of Contents