Renegotiating a Commercial Lease in Today's Market

Today's recession means that tenants ?r? struggling t? survive. To th?t end, m?ny tenants are seeking t? renegotiate th??r leases a? a means t? further cut costs. However, landlords are und?r increasing pressure to protect the?r rents and maintain occupancy ?n properties due to impending mortgage payments, property taxes, insurance and other carrying costs. Each party should t?ke steps t? protect th?mselv?s now and ?n th? future. The landlord and tenant ?h?uld be prepared w?th information on current market conditions ?nd th? state of the tenant's business b?fore entering int? renegotiations. Both parties ?h?uld b? interested ?n th? current financial state ?f th? tenant's business, what cutbacks and cost savings h?v? alre?dy b?en implemented, and how mu?h m?re n?ed? to b? cut t? survive the current economy. A review ?f the?? factors w?ll lead t? an effective negotiation b?twe?n th? parties.

Landlords c?n offer ??v?r?l devices t? relieve current economic pressures ?n Tenants:

a. Rent abatement up to six months, which is added t? th? end ?f th? lease as a lump sum or amortized over l?st year ?f the lease.
b. A reduction in monthly rent amounts.
c. Permitting ? temporary change in the base year f?r operating expenses / utilities or a landlord credit t?wards utilities f?r the current year.
d. A Temporary abatement in common area charges.
e. Additional signage ?r extra parking free of charge to assist in attracting n?w or m?re customers/clients.
f. Performing repairs or improvements t? the premises t? make them more inviting to customer/clients, including landscaping.
g. Constructing additional tenant improvements t? update th? current business location.
h. Permitting th? tenant t? sublet ? portion ?r th? entire unit w?th approval.

As an ov?rall device, Landlords ?hould ??nsid?r investing ?n g??ng "green" t? retain current tenants ?nd attract future ones. Going green i? ? current trend ?f protecting th? environment, but ?t ?ls? involves making a building efficient in use ?f utilities. A highly efficient building ??n make th? difference for tenants in determining what the? can afford to pay in rent.

In return f?r rent abatement or ? permanent reduction ?f rent, landlords would be wise to ?sk f?r a f?w things ?f th? tenant:

a. Longer/extended rent term tied to CPI Index, or step-up ev?r? year in rent
b. Waivers of f?rst rights ?f refusal, options to expand or purchase, and exclusive u?? provisions
c. Relocation clause (especially ?f permanent reduction in rent).
d. Unilateral renegotiation rights f?r landlord ?n fiv? years.
e. Waiver of co-tenancy requirements.
f. Personal guarantees ?n part ?f tenant and/or tenant's parent company.
g. Estoppel certificate waiving any landlord defaults.
h. Forfeiture ?f an? early termination right.

Alternatively, f?r struggling tenants, th?s ?s th? time to seek renegotiation w?th th? Landlord. Before approaching thi? process, tenants sh?uld ensure the?r financial house ?s in order - needed cuts ?nd staff reductions h?v? been made, and the business ?? "lean ?nd mean." Tenants will n?ed t? demonstrate thi? to the Landlord. In addition t? the devices listed ?bov? f?r Landlords, Tenants should attempt t? seek:

a. Short term, low rent lease.
b. Contraction option to reduce space ?f needed.
c. Expanding use clauses.
d. Increase flexibility in assignment and subletting clauses.
e. Cancellation right with minimum penalty.

Many landlords and tenants do n?t h?ve th? in-house staff or lease administration resources in th?? environment t? undertake a wholesale lease renegotiation strategy. Landlords may be reluctant t? expend precious resources ?n a previously negotiated lease. Tenants m?y b? reluctant t? have th?rd parties contacting the?r landlords. However, u?ing the correct professionals ?r?v?d?? ? key benefit to both parties. Professionals ??n protect th? landlord's revenue stream and prepare ?t for future growth for ?n? stage of economy. For tenants, professionals can operate ?s ?n extension of th? tenant's resources wh?le insulating the company fr?m ? pushback from the landlord.

Both landlord ?nd tenant should retain seasoned professionals wh? understand th? business of th? client, it? position ?n the marketplace, it? real estate strategy, and have th? ability t? renegotiate n?t ?nl? the economic provisions of th? lease, but undertake th? proper documentation ?f th? amendments.

vontaze burfict jimmy kimmel amzn white house correspondents dinner phoenix coyotes bruce irvin charlie st cloud