Doing the rounds on LinkedIn of late reveals a plethora of information, tips and tricks for tenants and landlords alike to get through the current difficult climate. These include:
- recommendations for tenants in requesting rent abatement or reductions;
- advice for landlords on realising security upon a tenant’s default, making insurance claims and vacancy minimisation strategies; and
- information in relation to government assistance available for struggling tenants and landlords to help the business community weather the current storm.
Rather than add to this helpful yet voluminous guidance, we thought it might be worthwhile offering a word on the way to go about the current hardship discussion many tenants are having with their landlords in order to obtain the best outcome.
Acting for both tenants and landlords alike, we are in the privileged position of seeing both perspectives. Having already seen a flurry of correspondence from tenants of our landlord clients in recent weeks, it is clear that many businesses are truly struggling. However, it is also becoming apparent that there are unfortunately some out there (albeit a limited number) who are not in difficulty but are determined to extract concessions from their landlord given the current difficult climate. These approaches can create a climate of suspicion and distrust and often lead to deterioration of the relationship with the landlord in the long term.
In order to get the best outcome when undertaking hardship discussions with your landlord, it may be prudent to be transparent, genuine, compassionate and open to thinking outside the box in order to find a commercial solution which works for all parties. So, what does this mean in practice?
Be Genuine: Remain factual and resist the temptation to exaggerate your businesses’ current circumstance. Whilst there is an appreciation that the situation is constantly changing and may worsen, overcooking the dire portrayal of the businesses’ current difficulties may elicit a flat refusal from the landlord and may also compromise the credibility of subsequent approaches you might need to make.
Be Transparent: Within the bounds of ensuring you maintain appropriate confidentiality for your business, be prepared to show your landlord the current state of play for your business. Examples, data and attestation from your accountant or professional advisors can assist to convince the landlord of your plight and demonstrate that the peril is real.
Be Compassionate: Yes, I know, I’m being brave asking for compassion for landlords! But consider that not all landlords are akin to Scrooge McDuck sitting on a pile of cash lighting cigars with wads of hundreds. Indeed, landlords are often themselves business people with their own staff, rents and financial commitments to meet. Many hold their superannuation nest-egg in their rental property and/or owe substantial sums on the leased property. Sure, a great many landlords are in a position to sustain a little short term financial pain but there are also a large number who are stretched to the limit in the current environment.
It’s worth keeping in mind that we are all in this difficult situation together and that the pain you are feeling is also likely being felt by the landlord as well. Thus be patient, courteous and considerate in your approach and try to work with your landlord to find a solution.
Be open to unconventional solutions: Consider a variety of solutions which might assist your landlord in coming to ‘yes.’ This may include offering something in exchange for a rent reduction or abatement. There are a variety of possibilities in this regard including reducing your floor space, committing to an extended term, giving up a car park, increasing a security deposit or even taking over from the landlord on certain maintenance or outgoings responsibilities. Offering something in return for rent relief may be more likely to elicit a positive response from your landlord.
Of course, before negotiating anything with landlords, tenants should obtain legal advice and seek to document in writing anything agreed with the landlord.
If you need advice in relation to commercial tenancy negotiations and leasing, contact a member of our team for on-point, practical guidance.
Joseph Carneli, Senior Associate