Lease Renewals: Five Tips for Successful Negotiation

Lease renewals and the art of negotiation is one of the most important skills to master in business. Some people seem born to it, others take a little time to develop their abilities.

But ultimately being able to sit down and thrash out an agreement which is mutually beneficial to multiple parties is something everyone in business has to do.

Stockport based Fairhurst Estates offer their top 5 tips for getting started on the path to successful negotiations.

Negotiating the lease on your property is one of the more crucial instances where your skills are put to the test. Property overheads are often one of the biggest costs a business faces, so bargaining hard is in the best interests of your bottom line. But equally, your landlord is in the game to make money. They know they are sitting on a valuable asset, and they want to make the most they can from it.

1. Know Your Rights

Barring a few exceptions, all tenants have the right to seek a renewal to their lease on renegotiated terms. Your landlord can only refuse if you have fallen behind on rent payments, or if they decide to use the property themselves. Once discussions start, there are a number of conditions the tenant is entitled to negotiate, including:

• Concessions: Incentives on things like moving allowances and tenant improvements.
• Operating expense cap: You can try to negotiate a cap on your liability to any increases in utility costs.
• First refusal on expansion space: Ask for the right of first refusal on adjacent property, should it become available and you wish to expand.
• Termination clauses: These provide the option to move out of a property before the end of the lease, should the need arise.

2. Seek Advice

There really is no substitute for asking for expert assistance; it will strengthen your position in negotiations for two good reasons. Firstly, you will start from a much stronger negotiating position if you know what comparable market rates and arrangements are in the area. This is the default position which the law states a landlord is entitled to charge. Secondly, in the event that an agreement cannot be reached and it ends up in court (which is often where lease renewal proceedings are issued if not finalised), you will want a property lawyer on your side.

3. Do Not Accept a First Offer

Renewal negotiations start with a landlord making an offer. Unless the terms are just too good to be true, do not be tempted to accept this outright. You have negotiating powers in your favour (see above) and you should use these.

4. Put Everything in Writing

Even if your last face-to-face meeting went swimmingly and you are sure you have just sealed the deal you wanted, never assume until things are ratified in a contract. Put all counteroffers in writing, signed and with an expiry date for acceptance. What people shake on in a meeting is not always what they are prepared to commit pen to.

5. Keep Dialogue Open

Finally, keep talking. Once negotiations descend into a back-and-forth game of written offers and counteroffers with little dialogue in between, the likelihood of reaching a compromise dwindles. Be open and upfront about what you are looking for from the very start, and you are more likely to find common ground. Holding back demands or grievances to hit your landlord with late in the process will usually only cause upset.

If you would like further advice on lease renewals or rent reviews, Fairhurst’s lease renewals team would be delighted to hear from you.