The three biggest mistakes tenants make when renewing or renegotiating a lease

Commercial landlords love lease renewals. Just as you use an attorney and accountant for legal and financial matters, always use an expert commercial real estate negotiator that represents your best interests, not your landlord’s, and renegotiate your lease several months before it expires to guarantee the best results.

A proactive approach to a lease renewal is essential for success because time is a powerful negotiating tool. As your lease expiration draws closer, your negotiating leverage diminishes fast.

The three biggest, mistakes when renewing or renegotiating a lease are:

• Not developing alternatives to the lease they are negotiating.
• Waiting until it is too late to negotiate and/or move if necessary.
• Trusting the landlord’s broker to negotiate a “good deal” for them.

Once a landlord believes the tenant is planning to stay, does not have time to move or is prepared to let the landlord’s broker represent them, all negotiating leverage is lost and the landlord is in control. So, even if you plan on renewing your lease, you must find alternatives to your existing lease to show the landlord you have other options and that he could lose you to a competitor. The easiest and most effective way to do this and regain control is to engage a tenant representation broker to represent you on your lease renewal, research other options and create the negotiating leverage and freedom for you to move if you choose to. Besides, your broker will do all the work and they simply share the landlord broker’s fee, which is paid in full whether you are represented or not!

We can renew or renegotiate your commercial real estate lease at almost any time and create opportunities for you to benefit from substantially reduced occupancy costs, greater operational efficiency and flexibility to grow or downsize, as well and realigning your real estate with your business plan.

Examples of deal points we can negotiate in commercial lease renewals:

• Expand or downsize your premises
• Reduce base rent and operating expenses
• Lock in fixed rents and operating expenses long term
• Reduce or remove security deposits, personal guarantees or letters of credit
• Eliminate operating expense pass through charges
• Secure landlord dollars to expand or improve your facilities or buy new equipment
• Revise obsolete or onerous leases and lease terms
• Secure favorable rights and options to expand, contract, purchase the building, extend or terminate your lease
• Resolve disputes between you and your landlord

Landlords often discourage tenants from seeking tenant representation so they can negotiate higher rents and lease terms that are onerous to the tenant. The landlord’s broker may also discourage you from hiring your own broker so they don’t have to share their fee. Furthermore, lease renewal terms offered to existing tenants are often less attractive as lease terms offered to new tenants. This is because landlords know that a tenant that doesn’t have a tenant representation broker to advise them on the most attractive lease terms achievable is more likely to accept the landlord’s terms and assume they are getting a & fair deal and less likely to take advantage of more beneficial lease opportunities elsewhere. So while you may have a good relationship with your landlord and believe you are getting a great deal on your lease renewal, beware!

No matter how good you think your relationship is with your landlord, they are in the business of maximizing their profits by getting the most rent possible, period. Until you create competition for your tenancy and hire an experienced tenant representation broker, your landlord will consider you a captive tenant, willing to pay asking or above-market rents on your lease renewal or renegotiation.

Lease renewals and negotiations can be complicated and time consuming. There is much more to negotiate than just the rent. And how do you know you’re getting the most attractive lease terms anyway? Parking charges, operating expense pass throughs and add-ons, security deposits, tenant improvement allowances and endless complicated and misleading lease terms and conditions, with far reaching financial and operational implications, are all up for negotiation. Only with the benefit of a tenant representation broker can you be guaranteed exposure to every opportunity and the negotiating power to secure the best terms available on your lease renewal or renegotiation.

At First and Main RE, we manage the entire process from start to finish so you don’t have to, saving you valuable time and money and exposure to risk while you focus on running your business. Our lease renewal process provides you with the strategy, market knowledge and negotiating expertise to guarantee you access to every alternative option available in the marketplace and advise you on the most attractive lease terms achievable on a lease renewal or renegotiation. We audit your lease to determine the options available for reducing your occupancy costs and building flexibility into your lease to achieve your business goals. We then create significant negotiating leverage with your landlord by identifying competitive alternative opportunities to secure the most cost-effective, risk-free lease terms possible on a lease renewal or renegotiation. We do all this in a professional manner that won’t damage your relationship with the landlord.