Tips on Negotiating Lease Renewals
Lease renewal time is not just about increasing the rent. A landlord must look at several factors if they want to keep their property fully leased at the rental rate they desire.
At the end of a lease term, many landlords and also tenants think that they will automatically renew in the same location for another term.
As a landlord – when you enter into lease RENEWAL negotiations you should consider at least the following items:
- What is the market rent for equivalent properties in the area where your building is located and what is your existing rent compared to the market?
- Factor in the cost for the tenant to move to another location.
- Factor in the cost of vacancy if the tenant does move to another location. At a minimum, this should include leasing commissions, tenant inducements such as free rent and improvements, and the cost of vacancy if you cannot lease the space immediately.
- Are there any terms and conditions under the existing lease which have proven difficult for you as a landlord? Remember that the tenant will be compiling their own list.
- What has your relationship been with the tenant? Do they pay their rent on time? Are they reasonable to deal with?
- What is the future health of this location? Is it up and coming or declining? Tenants will also be looking at this. The time to be sprucing up your property is before you have a vacancy and no cash flow.
- What are the tenant’s current and future needs? Sometimes a tenant will simply outgrow your space. If this is the case – it is good to know in advance. Regular communication with your tenant is important.
- Are there other vacancies in equivalent buildings in the neighbourhood? If there are, as a landlord you should consider how this might affect the renewal process.
In summary, when it comes to lease renewals, it is not as simple as just increasing the rent. A landlord must look at several factors if they want to keep a property fully leased and also attain the desired rent they are looking for.
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