Create Efficiencies in Commercial Property Lease Negotiation

In commercial real estate, renegotiation of a lease provides efficiencies in income stability and market rental. An experienced commercial real estate agent can offer specialist experience and market knowledge to the clients they serve.

Lease renegotiation is, therefore, a special service that agents can provide on an ongoing basis. Given that the tenant and the landlord are already in a lease relationship, the fee for the renegotiation service should be somewhat less than the normal full lease fee that is paid for introducing a new tenant to the property. It is not unusual to have a fee calculated at 75% of the normal lease fee.

Special leasing Services

Some specialist leasing services can be incorporated into the lease renegotiation concepts.

1: Lease term and extensions

It is sometimes desirable to get a longer lease term for the tenant and/or the landlord. This provides stability to the landlord’s property income stream. Renegotiating these leases when the tenant is nearing lease expiry is not unusual. Extending the new lease term helps with refinancing the property.

2: Making Good the Premises

When a tenant reaches the end of the lease term, the lease’s make-good provisions need to be managed. This means that the tenant is required to undertake certain works in accordance with the terms of their lease. These remedial make-good works should be undertaken by the end of the lease and suitably inspected prior to lease expiry.

3: Guarantees and Bonds

Any new lease should involve fresh lease guarantees or bonds. These are sureties for the landlord to draw on if the tenant defaults. In most cases, the value of any lease guarantee or bond should be equivalent to at least three months of rental and outgoing charges. It is not unusual for this amount to extend up to six months where necessary with tenants of dubious or unsubstantiated history. The landlord’s cash flow should be protected in this way.

4: the entire Leasing package

A good commercial or retail property lease will balance market rental, rental types, outgoings, lease terms and conditions, options, and make-good. In most cases, it pays to have a solid awareness of the local property market when negotiating these facts and conditions.

5: Consider Renovation and Relocation issues

Relocation and renovation requirements arise from time to time with older properties and with certain tenancies.  They can be managed through as part of a lease service.

6: Management services and fees

The terms and conditions of any lease will feature critical dates, obligations on the tenant to undertake specific works, permitted use provisions, insurance, and renovation activity.  All of these things can be managed for a fee.

7: Lease renegotiations and changes

Any new lease renegotiation requires skill on the part of the agent.  Good leasing agents are well-placed to provide specialist leasing and renegotiation services between many tenants and landlords. Diversify your fee base so the services can be readily available to all landlords and tenants where situations permit.