In negotiationswith building owners, there is a dual strategy: one for the open market and prospective new landlords where you utilize the full force of the competitive market and naturally occurring interests of landlords who are your suitor; and one for your present landlord which may be possessive and seemingly intractable. A present landlord's attitude is one prevalent to most landlords: expressing possessiveness and lack of sophistication, but not in diminishing their desire for your continued tenancy. It is a lesson we all earn in business, but landlords, except for the corporate/sophisticated ones, for some reason don't get the plot. In any event, just as in marriage, the prospect of a lost spouse just may bring about a loving response to which is the aim by disqualifying them on Friday afternoon, and managing their response early the next week. In cases where remaining at a current space or building is likely or possible, and the existing landlord becomes intractable to accommodating negotiations of agreeing to the brokerage fee, or additional TIA, or softening of rent, follow a strict process to achieve results. Entertaining as it is, sometimes landlords perform the same behaviors over and over again and you need to plan the strategy based on the landlord's repeated silly behaviors. Some landlords will contrive numerous methods to eliminate payment numerous items, usually boiling down to their ego, policy or past experience.
A strategy with existing landlords follows a traditional course: Landlords truly believe their current tenants are their possessions and several additional layers of negotiations are required to get to the bottom line. In the end, these landlords will typically improve their positions/offers when they get a clear view of your tail lights, whether real or perceived. These next layers of negotiations get the client’s tail lights very bright. With the exception of extremely bad faith or financially weak landlords (or astronomical arrogance), this process is required to get to "yes".
Negotiating with your own landlord in the vacuum and absence of market comparisons is a mistake - you can never fully know how the economics could have truly concluded - you can only assume you are successful. In office leasing, assuming can cost tens of thousands or more. Although you may not desire the burden of securing "best deal" alternatives from other buildings (usually out of inertia, burden, or a desire to achieve only a specific cost reduction figure), these other deals offers create ACTUAL leverage in your current landlord negotiations. One may surprise you and be a real alternative. Just placing the name of your company on the prospect report of a neighboring building will create a buzz in the commercial real estate community. Your existing landlord discovering this will see this a "tail lights" also, and add to their angst of losing you as a tenant.
You need to keep the existing building in the mix by your control not theirs because they will always come back just when you think they are gone forever...fear is a great motivator.
During tail-light negotiations is usually when the landlord will either call the tenant or visit them personally with the interest in getting to yes and crushing their real estate representative. This would be a very good sign and a time for the tenant to listen and simply re-state the goals we have outlined in the counter negotiations While landlords will moan and groan about how tough the tenantrep is or how difficult you are as a tenant, they usually come to their senses. If not, then the intractability is for the tenant to judge if they want this landlord as THEIR landlord.
Landlords will put in writing that they will not pay a fee, or provide a proposal to the tenant with a rent proposed specifically reflecting that payment of the fee requires an additional amount or rent, such as amortization. They will declare that they will never agree to additional tenant improvement allowance, etc. In these occasions, landlords are attempting to convey to “their” tenant that the real estate agent is expensive, unorthodox or an interference.Landlords will actually say these things in writing and emails as a way to drive a wedge between the representative and the client by attempting to force the client to be suspicious of the agent.
Convey to the landlord the receipt of information. Re-state to the landlord that the fee was not included and that failure to pay the fee may result in the disqualification of the building; or that the additional tenant improvement dollars required failed to secure your agreemenmt to proceed.
Should the landlord further disagree, re-frame the argument by asking the question, “Are you telling us that you are unwilling to accept (you name it, e.g. $800,000 in rent) because you are unwilling to pay $7,000 in fees (or an additional $2.00 psf in tenant improvements, or the building signage you really need)?” The landlord will argue and say, “it’s not us its you, if the tenant wants to pay they can do it.” To which you can say, “Fine, we are happy to understand that you are unwilling to accept (you name it, e.g. $800,000 in rent) because you are unwilling to pay $7,000 in fees.”
Then, you might include, “Let me understand this, if we leave your building, which at this moment looks pretty much like the case, you will be required to pay real estate fees to lease the space, and $20.00 per sq. ft for TIA, and many months missed rent during lease up and rent concessions, and all this can be avoided by paying the fee of (you name it, e.g. $7,000)? Is that how you want to leave it?”
You can add, “I mean that’s fine, we’ll do that. I’m not sure how confident and excited we will be about how cheap you are being to retain what you have already stated is a good tenant.”
The purpose is to force the landlord into understanding the risk of being perceived so financially weak or stupid.
If another layer is needed, then say, “Okay, I understand this, that you feel so firmly that you’re unwilling to pay $7,000 to get $800,000 and avoid paying new TIA and missing rent, etc, but do ALL the owners of the building feel that way, or does your bank feel that way? And perhaps I need to ask them. This may anger you, but I am bound to represent our interests to the fullest which means getting past you if necessary and ask ALL the building ownership for their input on this.”
If they still persist, then contact all knowable owners and lenders of the building immediately summarizing this. In this letter/email include the provision that the building would need to be disqualified and the space would be returned to them at the termination of the lease.
Over the course of this multiple-layer negotiation, over time the landlord usually comes to see the fee or any other item as a small price to pay to retain the tenant (and avoid paying all the larger fees, TIA, etc. in the event the space is vacant).
This style of Tail-Light negotiations opens the door to the landlord coming back to earth to deal with what it will take to retain your tenancy, sometimes even very late in the schedule, sometimes even after the tenant has decided on another building. Prepare yourself that this likely may happen and devise a strategy of either accepting their final deal and remaining or not.
Adding to this effort the informaton derived from alternative buildings (and their best deal), you can then, and only then, be assured that the full effort was deployed.
Nothing contained herein is to be considered legal advice. Always seek legal advice when evaluating any legal document
