Tuesday, June 30, 2009

Get a Good Deal on a Lease -- Act Now

A Chief Executive Boards International member asked his fellow members for some cost-reduction ideas to save his business from a severe cash crunch. In the next breath, he mentioned his lease was up for renewal within the next year. It happens that this member is in a specialized business in a specialized building in a severely depressed local economy.

The members unanimously advised him to run, not walk, to the landlord, requesting several things:
  1. An immediate rent abatement, or rollback -- perhaps to or below the original base rent (before escalators) of the current lease.

  2. A renegotiated renewal at an even lower lease rate -- asking also for an option to terminate in the case of sale, liquidation, or bankruptcy

  3. At least 2 months' rent at $0, commencing with the start of the new lease

The members' rationale was straightforward. First, you don't get what you really need without asking. And, secondly, the lessee (CEBI member) is holding all the cards in this deal. It's highly unlikely the landlord could find a replacement tenant any time soon, and he probably knows that. The peace of mind that the lease is even renewed at all should be worth something in rent reduction. And, finally, the lessee knows that the landlord owns the building free and clear -- he's not in his own cash crunch trying to meet debt service demands of a mortgage holder.

Tough times call for tough actions. Have a look at your own lease, and if you see a renewal in the future perhaps now is the time to renegotiate that. You'll never have more bargaining power. Here's a recent article from Inc. Magazine with a multi-part strategy for getting your rent reduced: http://www.inc.com/magazine/20090501/how-to-get-a-good-deal-on-a-lease.html This article makes the important point that you probably don't want to go this one on your own, and further that a good real estate Attorney might be more help than a Commercial Broker.

If you've had some success in reducing your lease expenses, please click "Comments" below and share that experience with others.

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Terry Weaver

Chief Executive Boards International

Chief Executive Boards International: Freedom for business owners & CEOs -- Less Work, More Money, More Freedom to enjoy it

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