When it comes to renegotiating a commercial or retail lease, the general rule is to start the process as soon as possible, well within the time frame specified in the lease signing process and documentation.
Early negotiations allow for a productive tenant and landlord dialogue.
Leasing and the Property Market Rental
Typically the levels of market rental will always be a discussion point for debate in any new lease or renegotiation process. It is wise to investigate the levels of market rental in the local property market so that accuracy is maintained in the negotiation process. Similar properties of comparable location and tenancy mix will provide a reasonable source of market rental comparison.
Any protracted debate between the tenant and the landlord regarding market rental will usually finish up in some form of determination; existing lease documentation will likely have timeframes and terms and conditions to work within if a determination is to be activated and achieved.
The All-Important Lease Negotiation
When it comes to renegotiating a commercial or retail lease, here are some tips for the lease renegotiation process that landlords and property managers can use productively:
- Understand the history of the tenancy and the stability of the rental paid by the tenant leading up to the renegotiation. Any defaults or difficulties with the tenant may influence the consideration of any further occupancy.
- Review the levels of market rental in existing nearby comparable properties. Each comparable rental situation should be inspected so that differences between the tenancies are identified before the negotiation starts.
- Seek details from the landlord regards the intended holding patterns for the property as an investment. If the landlord wants to initiate a sale the property in the near future, it may be that the rental discussed in the renegotiation should be selectively structured to improve the value of the property.
- Interview the tenant to understand any needs of tenancy expansion or contraction, particularly given the current levels of their business and established business plans. These pressures on occupancy can be incorporated into the leasing strategy across a number of tenancies to create a coordinated vacancy for a future larger tenant.
- Essential terms and conditions and points of a verbal agreement between the parties should be evidenced in writing so that the lease documentation can be accurately prepared by the landlord solicitor.
Renegotiating a lease in this market is a wise move to improve the stability of the income and the cash flow for the landlord. Productive property management processes will incorporate lease strategies of this type to enhance property performance.