Professional Comment

Re-Negotiating Your Commercial Lease

By Amanda Hamilton, Chief Executive of the National Association of Licensed Paralegals (NALP) –

For most hospitality businesses the biggest expenditure is paying for commercial premises. Having, no doubt, suffered a very tough year, is there anything you can do to mitigate the financial burden of your lease?

The answer is, yes! But of course there are no guarantees, as your landlord would have been going through similar circumstances, but a reasonable approach to any negotiation should prove fruitful for both parties.

The first thing to do is to check your lease to see if there is any adverse clause in there that may prevent you negotiating. For example, a clause stating that ‘there shall be no rent negotiation after one year’ or ‘negotiation on rent will only be acceptable after three years’ etc.

You should also check the length of any ‘notice’ period, e.g. the notice you need to give if you wish to leave.The last thing you want is to start negotiating and threaten to leave in a month and then realise that you are legally bound to give three or six months’ notice, or that there is a clause stating:‘there will be no break clause in your lease for two years from the date the lease commences, or from the date your lease is renewed’.

By understanding exactly what is in your lease you will find it easier to work with your landlord to find a mutually agreeable solution.

If your landlord is approachable, then building a rapport with him/her helps you to understand the kind of person s/he is.Trust and honesty is key, and given the unprecedented circumstances, you may be able to

come to some agreement in spite of the clauses(s) in the lease.

In any negotiation it’s important to understand the other party’s point of view and say so, or say something complimentary. For example, you could start off the negotiations by saying something along the lines of:

‘I know the last year has been difficult for us as I am sure it has been for you too…’ or

‘I really like these premises and I think you do a good job on every level. It ticks all the right boxes for the business…’

Then you could go on by saying…

‘… but I hope you can understand that in order for both our businesses to get back on our feet and up to full strength, we need to have a reasonable stepped approach to the payment of rent so that we can build up our business again. I would like to retain my lease with you, but I would appreciate a bit of leeway…’

This is the diplomatic approach, rather than demanding a reduction: ‘It’s unfair to expect me to pay the full rental after what’s happened.You should reduce the rent…’

It’s always best to start thinking in terms of what you want to achieve. If your goal is to stay in the premises then you can aim your negotiations in that direction rather than say to yourself,‘I will only accept this amount of reduction’ or ‘I won’t accept that…’.

Being too acerbic can have a really adverse effect. If you are too forth- right, the other party will close ranks and not be willing to give an inch, as this could give the impression of a lack of integrity and being disingenuous. However, being too sweet and accommodating can also have the same effect, but not if it is perceived to be genuine.The right balance must be found.

Both parties need to participate in the communications as it cannot be a one-sided conversation and listening is the most important skill you can have. Everyone knows from social interactions, that bulldozing through a conversation, being opinionated, demanding and manipulative,

will induce a reaction of: …’wow, I don’t like this person. I need to get away as quickly as possible – I’ll just go and get another drink…’ We have all been there!

On the other hand, being in the company of someone that is listening to what you have to say, and nodding occasionally, validates what we are saying and is perceived well.

At the end of the day, everyone has a different negotiating style. However, there are a few tips to hopefully get you to your win-win scenario:

1.Understand who you’re dealing with.The more you know your Landlord and the kind of person she/he is, the more you will know how to pitch what you want.

2.Know what you want to achieve.

3.Put yourself in the shoes of the other party and/or say something complimentary.

4.Don’t come on too strong or too sugary sweet. Integrity is the key.

5.Listening is the best skill.

Once you have reached your goal, then ask a professional paralegal to assist you in drafting an agreement to reflect the negotiation you have reached. Paralegals charge a lot less than solicitors and can perform many of the same tasks, including drafting agreements or changes to your lease.

If negotiations fail or things unfortunately turn unpleasant, then a paralegal may be able to help here too. Sometimes taking the emotion out of the negotiation and letting independent third parties continue the talks, can help bring things back to the real issue of the lease negotiation.

Finally, if all negotiation fails and your landlord will not budge, then legally there is probably very little you can do. If there is a fixed rental period, then you could try again when this ends, or if the lease allows, you can give the required notice and look to relocate to premises with a lease that better suits you.