Post a new topic
    4 Replies Latest reply on Feb 26, 2008 4:28 PM by puzzleman

    Negotiating with your landlord

    clnshirtz Wayfarer
      So, our crazy landlord is trying to push a 30% rent increase on us this year, in part I think because he knows our business is doing well. Obviously, it would be tough to move, but I also can't imagine stomaching that level of rent.

      Any good suggestions on how to negotiate with him. I am so mad that I can't even think about this too clearly
        • Re: Negotiating with your landlord
          teacup Wayfarer

          How long have you been a tenant? Are you located in a "hot" area in which it would be easy for your land lord to find a new tenant?
          • Re: Negotiating with your landlord
            Bluesuit Adventurer

            Before you negotiate, it's important to always think about your best alternative if you can't agree to the terms. Even if you don't have a realistic alternative, you may want your land lord to think that you do! In fact, it might be a good idea to simply start asking around and find out what other rents are next door, across the street, etc. So, your landlord can be more grounded vs. imposing a hefty percentage increase. Good luck!
            • Re: Negotiating with your landlord
              Lighthouse24 Ranger

              Are you a good tenant (always pay your rent on time, maintain the value of the property, attract a clientele that is desirable to other businesses in the area)? If so, you have some power. No landlord wants to lose a good tenant. The only reasons a landlord would pitch a 30 percent increase are (a) you're NOT such a good tenant, (b) it's a hot piece of commercial property that is certain to rent quickly for that much or more if you leave, or (c) he is the kind of person who believes in "pitching high" to start the negotiating process.

              Assuming it is (c), this was just his way of saying "I have to increase your rent." 30 percent was probably the highest amount he thought he could put out there without getting laughed at, and he expects you to negotiate from there.

              Begin by reinforcing your power -- have him confirm that you are, in fact, a good tenant. Then let him know you really want to stay, but you don't see how you can with a 30 percent increase (notice you didn't say you can't or won't, so you haven't backed yourself into a corner). Ask him what cost increases or other factors have caused him to need to raise the rent.

              As he explains, put yourself in his shoes, listen carefully, and empathize -- after all, his taxes, assessments, insurance, and similar costs have likely risen, and gas and food is costing him more just like it is the rest of us. Try to calculate a reasonable counter-offer based on his responses -- for instance, if his cost of ownership has increased by 4 percent, maybe add in another 3.5 for cost-of-living and pitch the idea of a 7.5 percent ("How about a 7.5 percent increase? Would that get you what you need?").

              He might accept, but he'll probably counter with something higher. Don't go up on your offer without getting something in return (for example, if he responds that he might be able to scrape by with just a 20 percent rent increase, you could counter by saying, "I could possibly handle 12 percent, but I'd want that front door replaced" (or a new sink, or new paint, or a longer lease term, or anything else reasonable that you'd like to have that he'd have to provide in order for you to agree to pay more). You'll probably go back and forth a few times like this until you have an agreement.

              Before you start any of this, calculate your absolute bottom line and be willing to walk away and find another space rather than exceed that amount. For example, if you calculate the cost of moving and decide your absolute bottom line is a 17 percent increase (i.e., it would be better to move than to pay more than that), and he insists on at least 20 percent, tell him: "I'm sorry, I just can't pay more than $X (17 percent)" and keep repeating it -- and stick to it (even if you end up having to move)!

              A final tip: When you reach an agreement, make him feel good about it -- tell him he negotiated more from you than you expected to give (say that even if you would have been willing to pay more), but also tell him you appreciate the fact that he was willing to come down from the 30 percent and work with you so you could keep doing business in the same location. You want him to feel like the "winner" in the deal, and to feel like a good person, too. It will make all your future interactions with him easier.

              Hope this helps. Best wishes. (Let us know how it turns out!)
              • Re: Negotiating with your landlord
                puzzleman Tracker
                I agree with the above.

                My story of my landlord.

                He wanted to sell the property to me for a price of $210K. I had it appraised by a commercial appraiser recommended by my bank. He came in with $105K. Tried to negotiate with him on the price but he wouldn't go below $200K. If I wanted to rent he wanted a 20% increase but I couldn't handle that much. I started looking around and found a building that would work much better for my operation, cost only $85K to buy, and had a more favorable zoning. I would never looked for and found this great building except for my landlord wanting more money.

                Moral of the story: Your landlord might be doing you a favor by making you look around at other options that might work out better.