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Eight Costly Lease Administration Mistakes

1. Avoid emotional attachment to a location. Remain objective. Landlords can sense a tenant's anxiety and often manipulate a tenant to bid against themselves leading to unnecessary concessions.

2. Integrate landlord and tenant needs. Tenants and landlord fail to take the time to listen to each other’s needs, leading to concessions being made for assumed but false reasons. Take time to get to know the landlord. Form a list of what lease elements are important to both of you, arranged in order of priority.

3. Understand what is negotiable in a lease. If you don't ask, you won't get. Almost every element of a commercial lease is negotiable - NOT just base rent.

4. Avoid personally guaranteeing the lease. The probability of financial failure in your practice is remote, correct? Then why does the landlord require you to personally guarantee the lease? In most cases, the landlord wants a personal guarantee to provide leverage during negotiations.

5. Negotiate flexibility. The future is uncertain. What requirements will you have in 10 or 15 years? Remember that the lease you sign today describes terms and conditions which will affect your operation for many years! You need to be thinking of potential concerns many years down the road to build opportunities and flexibility into your lease that will enable you to respond to changes in circumstance. The ability to assign the lease, rent payments in term renewals, potential use, expansion opportunities are a few examples of terms and conditions that need to be thought through.

6. Do not antagonize the landlord. Imagine if you had a patient that visited personally with you 18 times before actually scheduling treatment. Then took double the amount of treatment time for each procedure by asking many questions. And then contested every payment. Is this someone you want to do business with? Don’t expect a landlord to make significant concessions during renewal negotiations if you have antagonized them every month for the past 10 years.

7. Approach the landlord with confidence. If you are perceived as a tenant lacking in negotiating confidence, market intelligence and consumer savvy, the landlord will take advantage of the relationship.

8. Give yourself enough lead time. The most powerful negotiating tool is time. Approaching the landlord after the renewal option has expired, or with the view that you want to negotiate a new lease for space in less than 2 weeks tells the landlord that you have no idea what you are doing.

Hiring an objective and qualified professional commercial real estate advisor to negotiate on your behalf will save you time, stress and money.

 

Written by
Ian D. Toms and Jennifer J. Miles

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