Negotiating Reduced or Deferred Rent
Do you find yourself unable to make your rent payments? In a recent All In One Accounting interview, CEO Heide Olson spoke with Tim Olson of Carlson Partners about ways tenants can work with landlords when they need rent concessions. Carlson Properties specializes in working with tenants on lease negotiations. Tim gives this insight and advice to help tenants during this pandemic crisis.
The first step is understanding your options. What is your current situation? How has the pandemic affected you financially? Options may include skipping one or more payments or making partial payments. The best choice for you depends on your business strategy. Align your business strategy with your real estate strategy in a way that benefits you most.
Know your numbers
Look at your landlord as a business partner. Before starting a conversation, understand your current situation and how you’ve been impacted. Then decide on the best way to approach your landlord. If you haven’t truly been financially impacted, it’s best not to ask for concessions. Commercial landlords are sophisticated. They will ask for records to prove your financial situation. So, know your numbers before asking and make sure you can back them up.
On the other hand, maybe you can pay your rent now, but you’re worried that the financial impact will be felt later. You’re concerned that you might not be able to pay rent in a future month. Let your landlord know your concerns now. This will be appreciated and give you credibility if you have to ask for help later.
Options for payback
If you’ve negotiated a month or more of free rent, or a reduction of rent, there are options on how to catch up those payments.
One possibility is to tack the rent onto the end of the lease. In many cases, this is not the best strategy due to rent escalation clauses in future periods, when your rent is at its highest.
If your lease is expiring soon, this is a good time to negotiate an extension, or lock in a long-term lease. It may be a good time to ask for a shorter option to renew. Ask for an option to renew at a date that aligns with your business strategy.
It’s a good time to act
Until recently, landlords enjoyed a very low 5% vacancy rate. That means landlords have had the advantage in tenant-landlord lease negotiations. Things have changed. Now, landlords are concerned about keeping tenants. They will be more willing to accept a compromise that ensures you remain in the property. Now is the time for tenants to take a proactive approach before the market rebounds.
PPP loans and rent payments
If you received a PPP loan, the loan specifically allows for payments of rent. So, while your landlord may allow you to defer rent while you wait for PPP proceeds to arrive, he or she will expect to be paid when your funds are received.
About Carlson Partners LLC: Carlson Partners LLC is a strategic real estate firm focused on tenant representation only. Tim Olson can be reached at tolson@carlsonpartnersllc.com or 651-558-1400.
About All in One Accounting: All In One Accounting takes businesses from financial chaos to business clarity and beyond. Our elite team of Accountants, Controllers, and CFOs are ready to help you in these uncertain times. Visit our website here for a free consultation with one of our accounting professionals.
View the full video interview below!
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