Your landlord will not call you and offer to reduce your rent. Here are five key “when and how” rent saving opportunities every tenant should be aware of.
Covid – 19
Most leases have three provisions and a collateral facility that come into play in a situation like this Covid 19 pandemic. The first provision is a “continuous operation” clause which says that your clinic must be open continuously and actively. Under this clause you cannot close without landlord consent, not even in a pandemic. The second provision is a “force majeure” clause which says that if you or the landlord are prohibited from doing something by circumstances beyond your control (such as a Covid 19 pandemic), then you or the landlord may be relieved of some responsibilities under the lease one of which may be rent payment. The third provision is a “notwithstanding” clause that says that the lease is valid and binding regardless of any governmental legislation to the contrary, such as whether the provincial government requires the tenancy to close. The collateral facility is that most leases require tenants to carry business interruption insurance which insurance may pay losses and/or ongoing expenses under certain circumstances, such as when your clinic is closed during a pandemic.
At a time like this, the first step is to see if your lease has one of these clauses, then if you need relief from lease provisions such as these, and/or rent relief, then you need to contact the landlord and make arrangements to defer rent until after the pandemic is under control.
This is nothing new for us; I negotiated many rent deferral and abatement arrangements in economic downturns in 1990 and 2008, including relief arrangements for my own tenancies which in part saved me from bankruptcy.
Offer to Lease
Offer to lease negotiation is the first and most important step in a tenancy, but most tenants think that the lease is the most important document! Know that more than 90% of the tenancy terms and conditions are negotiated during the offer to lease negotiation – waiting to negotiate until the lease negotiation is too late. The offer to lease is the time to negotiate what rent is payable, immediately and in future lease years. Tenants have the best leverage position they will ever have for the entire tenancy during the offer stage.
For example, we recently completed an offer to lease negotiation for a new location during which we saved our client – net of our fees – over $110,000 which works out to over $8.50 psf or $900 per month! We also all the terms and conditions to protect the tenant and his operation throughout the years.
Lease Term Renewal
Most lease terms renew every five or ten years. Handled properly by a very skilled and experienced lease negotiation expert, the lease term renewal negotiation can be a very powerful time to reduce rental payments and amend other lease terms and conditions. Handled improperly and they can spell disaster. Most tenants underestimate the opportunity lease term renewal brings.
For example, we just completed a lease term renewal on behalf of one of our tenant clients which resulted in a rent reduction of $1,035.83 per month. We also extended the time he had control of the premises for 15 years (enabling a sale) and added a death and disability provision, all adding significant value to his practice.
Every year, landlords forward annual rent statements to tenants that need to be checked to determine if the calculations are correct, and if the items charged for are permitted under the lease. At least 40% of the statements that we review are incorrect. Most tenants simply look at the bottom line of the statement and notice whether they are owed or owe. But wait a minute, why not look at the rest of the statement to understand whether you are overpaying?
For example, we reviewed an additional rent statement compared to the lease for one tenant client and noticed that the lease did not permit a significant cost the tenant had been paying for years. One phone call to the landlord saved our client over $4,000.00 in rental over-payment for the lease year we were looking at. Our client had a great week in Cuba!