Your responsibility as a tenant is to manage your tenancy. Your landlord will not call you and offer to reduce your rent. Here are five key rent-saving opportunities every tenant should know.
1. Existing Lease Review
Have your lease reviewed. What you do not know can and will hurt you.
Alease is a complex document written at one time designed to manage a long term relationship between the tenant and the landlord. There are a large number of variables in each lease which are affected by changing conditions over time. It’s not possible to foresee each change when the lease is being written, so each clause attempts to set up the structure to deal with probable eventualities. However, it takes a very experienced eye to review and understand all of the lease clauses and interpret then in the context of a current situation.
Your rent should not exceed 7% of total sales. To calculate, divide your monthly rent by your monthly sales. If the number is greater than 7% you probably have a problem and you need to callus right now.
2. Offer to Lease Negotiation
The offer to lease negotiation is the first and most important step in a tenancy, but most tenants think that the lease is the most important document! Know that more than 90% of the tenancy terms and conditions are negotiated during the offer to lease negotiation – waiting to negotiate until the lease negotiation is too late. The offer to lease is the time to negotiate what rent is payable, immediately and in future lease years. Tenants have the best leverage position they will ever have for the entire tenancy during the offer stage.
For example, we recently completed an offer to lease negotiation for a new location during which we saved our client – net of our fees – over $110,000 which works out to over $8.50 psf or $900 per month! We also reviewed all the terms and conditions to protect the tenant and his operation throughout the coming years.
3. Lease Term Renewal
Look forward to renewing the term of your lease! Handled properly by a very skilled and experienced lease negotiation expert, the lease term renewal negotiation can be a very powerful time to reduce rental payments and amend other lease terms and conditions. Handled improperly, they can spell disaster. Most tenants underestimate the opportunity lease term renewal brings.
Recently, we completed a lease term renewal on behalf of one of our tenant clients which resulted in a rent reduction of $1,035.83 per month. We also extended the time he had control of the premises to 15 years (enabling a sale) and added a death and disability provision. All of these terms added significant value to his practice.
4. Additional Rent Review
Check your additional rent statements! Every year, landlords forward annual rent statements to tenants that must be checked to determine if the calculations are correct and that the items charged for are permitted under the lease. At least 40% of the statements that we review are incorrect. Most tenants simply look at the bottom line of the statement to see what they owe or are owed. Why not look at the rest of the statement to understand whether you are overpaying?
In one situation, we reviewed an additional rent statement compared to the lease for one tenant client and noticed that the lease did not permit a significant cost the tenant had been paying for years. One phone call to the landlord saved our client over $4,000.00 in rental overpayment for the lease year we were looking at. With the newly found savings, our client had a great week in Cuba!
Cost saving and revenue generating “cookies” can be embedded in a lease when the lease is first being negotiated. These tasty morsels remain latent until activated. An experienced and capable lease negotiator can embed opportunities which can enhance the financial success of the tenancy over time. Examples include including a broad use clause which will provide the tenant the opportunity to use and sell the clinic to a wide number of users. Adding an option to purchase the property or lease the adjacent premises will add resale value to the practice and can greatly improve the ongoing operating success.
Hiring an experienced and capable professional can and will save you rent dollars. Inmost cases our services save our clients more than our fees. We encourage you to call us now to schedule a complimentary consult to discuss how our services will protect your interests.