Tips for communicating with your landlord to prevent a big rent increase
By Dale Willerton – The Lease Coach
Catering companies are beginning to see the summer light at the end of the pandemic tunnel. The industry took the full brunt of the pandemic, with catering clients of The Lease Coach reporting no or low revenues over the past 15 months. Yet landlords still wanted their full rent.
In fact, many landlords are now trying to raise the rent business owners pay for leasing their space. Why? Because economists are predicting a record 2022 recovery year.
I’ve been negotiating leases for tenants since 1993. Before that I worked for landlords. If there was ever a time that catering companies needed a rent break, it’s now. So how does a tenant go about negotiating the lease renewal process? By following these tips:
1. Plan ahead. Get an early start on the renewal process; a year in advance is not too soon to contact the landlord. And do a bit of research on the landlord. Pandemics hit many landlords hard, too, and their situation may have changed. The property may be for sale or in poor condition from neglect, indicating the landlord is suffering.
2. Ask, don’t tell. When I negotiate a lease for a client, I don’t tell the landlord the tenant wants (or needs) to renew their lease. I start by asking the landlord if they want the tenant to renew for another term. You can tell a lot about how the negotiating process will go from there by the landlord’s response. We want the landlord to pursue you to stay.
3. Deal in writing. Don’t text with your landlord or property manager. Email is the proper etiquette. Of course, you need to speak with them, too, but casual email proposals are hard to work with. If a landlord says they want my catering client to renew their lease, I say, “OK, please send me the actual agreement you want the tenant to sign”—not a proposal, not an email, but the actual agreement in a Word document (ready for me to make a redline counteroffer).
4. Do your homework. Find out if other tenants are renewing or moving out. Talk to your neighbors to see if the landlord helped them through the pandemic. Hundreds of thousands of businesses permanently closed in the past 15 months. This may create an opportunity for you to negotiate a better deal.
5. Explore relocation properties. I did not say to relocate, but if you don’t look at other properties for lease, how will you know how your space and deal size up in the marketplace? At The Lease Coach, we often use decoy locations to keep the current landlord honest. The thought of losing your tenancy to another property is the motivation many landlords need to give you a reasonable lease deal.
6. Review your current lease. Every lease contains clauses you tried to change five years ago but couldn’t. Revisit those, especially if you still have a deposit or personal guaranty on the lease. We renegotiate those clauses all the time, and many others.
7. Consider renewal options. Normally we don’t exercise renewal options because you can’t touch anything but the rent, and often the rent can only go up. I like to get my clients a tenant allowance, free rent and even a rent reduction on their lease renewals. Yes, these are achievable goals in many circumstances.
8. Deal with rent arrears. Many catering companies have rent arrears from the pandemic. We negotiate to have those arrears abated upon renewal—a fresh start. Why would the landlord forgive rent arrears? Because no one else is out there trying to rent your space. If the property has other vacancies that the landlord can’t fill, he surely won’t be able to find a tenant for your space if you move out.
The reality is you may be a great caterer, but if you don’t like battling with landlords and working on lease deals, you’re probably going to come up short on your next lease negotiation. Remember: Tenants don’t get what they deserve; they get what they negotiate.
ABOUT THE AUTHOR
Dale Willerton is The Lease Coach—a professional lease consultant, speaker and author, who has successfully negotiated leases for tenants for the past 28 years. Send an email to DaleWillerton@TheLeaseCoach.com to request a complimentary autographed copy of his book, Negotiating Commercial Leases & Renewals FOR DUMMIES, and book a free 30-minute phone consultation. For more information, visit TheLeaseCoach.com.