Every tenant in the world has one thing in common: They already have a landlord. You may be considering the “lease project” because you have an actual need or desire to be elsewhere, or you may be dealing with this just because your lease is due to expire.The course of least resistance is easy ceratinly: just renew and hope for some good terms. Whether you are interested in moving or interested in remaining, do not use the term “renew” in your new vocabulary when speaking of your present lease.Yes, you have provisions in your current lease which speak about what terms might develop if the lease is renewed, but if you do go through this objective lease project, hiring your team, developing your criteria, needs assessment, real estate market analysis, building technical data information, discussing economic development opportunities, negotiating new rents and lease terms, how can you consider that you might remain at your present location as a simple renewal.
This site advocates that your present building and office area are just another of the several possibilities that you may end up in.
Let’s look at this from the landlord’s point of view.If you leave their building, the landlord will be required 1) to immediately forgo rental income from your space during its re-leasing and re-construction period, 2) to lay out large construction dollars to modify the premises for another tenant, and 3) to make whatever concessions may be necessary to secure another tenant, such as free rent, moving allowances, etc.If you are a larger tenant, the landlord may be facing the expense of dividing your space to accommodate several tenants if there is no other tenant in the market exactly your size.
This is the “burden”.Think of this as a pot of money sitting right next to the landlord’s desk that he will likely have to shell out if you leave.That is his nut no matter what.So, why should you not benefit from these dollars?To turn this around, many a tenant has gone out in the market and received excellent opportunities from many different landlords, and because of inertia or simplicity, the tenant just stayed put.It will take the same effort and time to remain as is will have to lease elsewhere (except of the move itself).
Consider your renewal option terms as just the first of many lease alternatives or, better, the safety net in the event of a catastrophic breakdown in your leasing efforts.
If the landlord thinks you’re leaving, he very much knows how big the burden is to him. He is expecting the renewal options terms to be the framework.He is hoping they will be in play and does not have to recapitalize your premises for another tenant. Avoid having “renewal” discussion with the landlord.Don’t call it renewal. Call it “Building Option One” to compare it to all other buildings you will evaluate.In essence your building is providing you with two opportunities: the one your renewal option declares, and the one you successfully negotiate using the open market as your backdrop of comparables.
The building owner will rarely get it.But the fact is you are considering leasing space in his building, AGAIN, not simply renewing.In this manner, all elements should be on the table for discussion, including tenant improvement allowance, concessions, etc.This takes a strong will on your part, but simply treat your current building as if it were one of the several others you are considering.And, if it is really in your heart to remain at your present location and negotiate the best possible terms, then having the objective information from the other buildings provides the justification to remain.
THE REAL ESTATE FEE
The real estate brokerage fee must also be included.Your current building always gets the last bite of the apple.You may have negotiated with several other buildings, but as soon as your current landlord understands this, his best financial proposal usually magically appears, and one you strongly will consider.Has the real estate agent performed his duty? You bet.Don’t let the landlord tell you that the man or woman on your team for the last year that brought you to the point where the current landlord makes his best offer is not worthy of the full fee.On any matter important enough to fight for, make sure you always have plenty of options and if one of the options fights back, tell them they are disqualified.Telling a building owner, developer or agent that they are disqualified, begets an apoplectic response.There are banks to answer to, there are investors to answer to, there are spouses to answer to.While their ego will suffer a little, advising what terms would reinstate their building in the “qualified” category will usually get it done.And unless there is an overwhelming measurable and damaging reason not to do so, tell the landlord to get lost.
Nothing contained herein is to be considered legal advice. Always seek legal advice when evaluating any legal document
