As we've worked with our clients who are preparing their business plans, or as they get ready to 'pitch' for funding or buy-in to their proposals, we recognize that building solid, mutually beneficial relationships are important for the survival of your business.
In this post, our friends at The Lease Coach share some valuable suggestions that touch on and support what we've just said. Thank you once again Dale Willerton and Jeff Grandfield for these helpful tips for our "Business Success" audience!
Negotiating Commercial Leases & Renewals For Dummies
Commercial
Leasing Tips for Commercial Tenants
By:
Jeff Grandfield – The Lease Coach
 |
| Dale Willerton and Jeff Grandfield |
For many business-owners, negotiating a good lease or lease renewal against an experienced agent or landlord can be a challenge. While an entrepreneur focuses on marketing and managing, savvy real estate agents and brokers are specialized sales people. Their job is to sell tenants on leasing their location at the highest possible rental rate.
As explained in our new book, Negotiating Commercial Leases & Renewals
For Dummies (co-written with my colleague, Dale Willerton), tenants may go
through the leasing process only two or three times in their entire lifetime –
yet they have to negotiate against seasoned professionals who negotiate leases
every day for a living. Negotiating appropriate leasing terms is vital for an
entrepreneur as the amount of rent he pays will directly affect the business’
financial bottom line.
Whether you are leasing a new location for the
first time or negotiating a lease renewal for your business, these are some
money-saving tips for tenants:
Avoiding Personal Guarantees: It may sound over-simplified, but plainly saying “no” to personal guarantees will often be all it takes to avoid them. Too many tenants passively accept a guarantee because it was left to the end of the negotiations for discussion. If you are strongly opposed to guarantees, bring it right out in the open to begin with before you invest several weeks on the deal. In most cases, a limited personal guarantee (which declines over the course of time) can be agreed upon – but should be equivalent to the tenant allowance or other up front risks or expenses to the landlord and not be unlimited.
Avoiding Letters of Credit: Some landlords request Letters of Credit or Security Notes rather than personal guarantees. This is where the tenant’s bank guarantees to pay the landlord a pre-negotiated amount of money in the event that the tenant defaults on a lease. This type of security is worse that a regular personal guarantee since the money is too convenient for the landlord to access without going through due process.
Befriend the Landlord and/or Manager: It can be very important for a tenant to develop a professional relationship with the owners and administrators. In the event that you ever need a favour, you will find it much easier to make a withdrawal from the relationship if you have made some deposits along the way (e.g. an annual bottle of the landlord’s favourite wine for the holidays). Since most tenants have only one landlord, but the average landlord has hundreds of tenants, take the initiative and cultivate a relationship.
For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail your request to JeffGrandfield@TheLeaseCoach.com.
Jeff Grandfield and Dale Willerton - The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Jeff and Dale are professional speakers and co-authors of Negotiating Commercial Leases & Renewals FOR DUMMIES (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com or JeffGrandfield@TheLeaseCoach.com or visit www.TheLeaseCoach.com.
Avoiding Personal Guarantees: It may sound over-simplified, but plainly saying “no” to personal guarantees will often be all it takes to avoid them. Too many tenants passively accept a guarantee because it was left to the end of the negotiations for discussion. If you are strongly opposed to guarantees, bring it right out in the open to begin with before you invest several weeks on the deal. In most cases, a limited personal guarantee (which declines over the course of time) can be agreed upon – but should be equivalent to the tenant allowance or other up front risks or expenses to the landlord and not be unlimited.
Avoiding Letters of Credit: Some landlords request Letters of Credit or Security Notes rather than personal guarantees. This is where the tenant’s bank guarantees to pay the landlord a pre-negotiated amount of money in the event that the tenant defaults on a lease. This type of security is worse that a regular personal guarantee since the money is too convenient for the landlord to access without going through due process.
Befriend the Landlord and/or Manager: It can be very important for a tenant to develop a professional relationship with the owners and administrators. In the event that you ever need a favour, you will find it much easier to make a withdrawal from the relationship if you have made some deposits along the way (e.g. an annual bottle of the landlord’s favourite wine for the holidays). Since most tenants have only one landlord, but the average landlord has hundreds of tenants, take the initiative and cultivate a relationship.
For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail your request to JeffGrandfield@TheLeaseCoach.com.
Jeff Grandfield and Dale Willerton - The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Jeff and Dale are professional speakers and co-authors of Negotiating Commercial Leases & Renewals FOR DUMMIES (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com or JeffGrandfield@TheLeaseCoach.com or visit www.TheLeaseCoach.com.
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