Most Common Lease Negotiation Mistakes
The single biggest issue on most tenants’ minds when negotiating their office lease is how to achieve the lowest rental rates. Yet, most tenants feel disadvantaged and ill-equipped to achieve this goal.
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The single biggest issue on most tenants’ minds when negotiating their office lease is how to achieve the lowest rental rates. Yet, most tenants feel disadvantaged and ill-equipped to achieve this goal. According to our expert, you must position your tenancy as something that is not only desirable but also elusive in order to get the landlord nervous enough to give you the best rates. However, negotiating effectively and positioning your tenancy doesn’t have to be as difficult or intimidating as you might expect. Like anything else, if you have a proven system to follow—and know the signals and the language—you can successfully turn the tables in your favor.
- Starting too late
Many tenants start lease-renewal negotiations too late. Tenants need enough time to implement lease-negotiation strategy and techniques without pressure and to negotiate a new lease elsewhere and relocate if negotiations fail. Allow 9 to 12 months before the lease expires. Get time leverage on your side and take it away from your landlord.
- Bidding blind
What price should you offer when you bid on a location? Is the landlord’s asking price too high or does it represent a great deal? If you fail to research the market in order to understand what comparable spaces are renting for, making your offer would be like bidding blind. Without this knowledge of market value, you could easily bid too much or fail to make a competitive offer at all on an excellent value.
- Failing to create competition for your tenancy
It is important to create the perception that relocation of your business is an option even if this is the last thing you want to do. If a landlord thinks you have no other real alternatives, you will pay a higher rent than new tenants pay. Engaging a professional to negotiate your lease renewal automatically activates competition especially when the professional lets your current landlord know that you are actively evaluating alternative premises. Get your landlord worried that he will lose a good tenant and possibly face vacant space and the uncertainties of leasing to someone else.
- Failing to negotiate terms of the lease
Industry estimates show that about 90 percent of small tenants make no changes at all to a lease! Don’t make this mistake. A “standard” real-estate lease contains hidden cost clauses that can cost you a lot of money and problems in the future. It can even affect the viability of your business to survive in some cases. Clauses inserted in leases by the landlord’s lawyers can end up costing tenants tens of thousands of dollars over the term of the lease. They can also cost many thousands in penalties upon the expiration of the lease. Simple changes to your lease during lease-renewal negotiations can provide the protection you need. Look not only for clauses to delete and change in your lease but also for clauses that are missing and should be added. Down the road, this can even be more important than getting the best rental rates.
- Leaving money on the table
Many tenants fail to negotiate enough. They leave too much on the table because they simply do not position themselves to get more. Besides getting better rental rates and business protection, it may be possible to get free rent; this is one of the easiest concessions a landlord can give. About 75 percent of renewal tenants can get free rental periods. Be aware of general market conditions and always ask for more than you think you will get. By being aware of these and other issues and by seeking the advice of an experienced real-estate consultant, your negotiating skills can be more effective in your lease-renewal process. Most renewal tenants can save at least $10,000 in rental costs, free rental periods, and hidden costs of leasing without lifting a finger by hiring a competent real-estate lease consultant. Some lease consultants will guarantee their results.
Source: Anthony Dyson has 30 years of experience in finding office space, renewing leases, and defending tenants from unfair rental costs and risky leases. He is also a co-lecturer for the Annual Commercial Real Estate Leases conference and conducts workshops and a course titled “Drafting and Negotiating Leases to Get the Best Deal”. He can be reached at 416-410-1080; Email: firstname.lastname@example.org.