Lease Renewal

[Crusher]

My lease is up for renewal in about 5 months and was wondering if I should be trying to renegotiate it because of the current economy. I have had the same rent for the last 3 years. When I renew it will be for another 3 years, with rent increasing 3% each year. It is a NNN lease. I also really need a new floor installed.

I am thinking about agreeing to resign for 3 more years if the owner agrees to having a new floor installed and locking in my current rate for the next 3 year term instead of increasing annually. I really no intentions of moving or not resigning my lease, but I think he wouldn’t want to deal with an empty retail space right now and agree to my request.

This is my first time dealing with a commercial lease, should I write a proposal and send it out now. Is there a format or specific type of letter to do this.

-Crusher

 

[pizzapirate]

There is nothing wrong with asking but have all your ducks in a row and know your center and others. i.e. think about the landlord’s strengths and weaknesses before determining what to ask for. I’ve received compensation for improvements along the way. Its a negotiation, so ask for more knowing you will get less than what you ask for. If there are a number of improvements that need to be done, concentrate on the ones that will appeal to the landlord long term beyond you.

There’s an article in this months Pizza Today about this very subject as well.

 

[bodegahwy]

It has been a while since I posted about leases, but I am a licensed broker in Colorado specializing in tenant representation, commercial property and business sales. I also was a national site selection and leasing specialist for a national retailer.

The farther in advance that you open the discussion, the better for you. Once the LL knows it is too close to the end for you to move the leverage moves in his favor.

In my opinion, you are already late in opening the discussion. The best time would be between a year and 18 months in advance of the end of the lease. As it stands now, you really would be hard pressed to find a location to move to and the LL knows that… which greatly reduces your leverage.

In the end, I have had the most success with open and frank conversations, but not knowing your landlord it is hard to say what the best approach is.

If you are a good tenant (takes care of the property and meets financial responsibilities ON TIME ALWAYS the LL will want you to stay. You need to know what recent leases have been signed at for comparable properties in your area. It is fair to open the discussion and ask for things. Your fall back is to sign it the way it is already written.

The way to start is with a phone call if your relationship is good or with a letter if your relationship is more formal. If I were doing it myself, I would write a letter and try to get to the deal before handing it over to an attorney to make sure it is written up properly.

 

[Thin2win]

I don’t post much, just lurk and listen mostly!
Commercial real Estate is part of my professional background and I still maintain my License in MN for personal and business reasons.

There are many things you can do, yes there is a format, the letter or proposal you want to write up is a “Letter of Intent”

It should spell out the term, the rate, and any of the concessions your asking for. This is generally a very broad stroke basic letter to see if it is in either of your interest to continue to talk or move to spending money on lease drafts "ABSOLUTELY, YOU MUST HAVE A GOOD!!! REAL ESTATE ATTY:.!!! review and draft your couter-proposals.

You indicated you were not excited about relocating! I get that, the hassle and all. I believe it would be in your interest to contact a experienced Commercial Real Estate Broker the expense of their services are generally born by the Broker represnting the leasing or lessors. it is just a cost they factor the include in their building proforma if you lease somewhere or release @ your current location. they have access to information you do not. Vacancy rates absorbtion rates how much space will landlords have sitting empty in the next 6 months or 2 years what current market rates are! Probably less than the base plus 3% a year you have been paying. that is pretty boiler plate language but markets may not be baring that rate currently. HVAC language is another place your broker and ATTY. should be reducing you liability.

You find a list of Commercial Brokers (agents) to contact through your chamber or local Board of Realtors but you want a experienced Commercila Realtor (not your cousin betsy who Sells houses) it is an entirely different skill set and profession even though it Licensed the same.