How to Get Commercial Lease Relief

2 Minute Read
June 19, 2020

The following was edited by Dylan Lowe from a presentation by the author

In this blog we will discuss how to obtain commercial lease assistance (rent relief) from your landlord and also provide some useful tools that might help get you over the uncomfortable situation of starting off the negotiation with your landlord. The first thing to recognize is that your landlord has also been heavily affected by COVID-19 and is afraid of losing you as a tenant and not being able to lease the space out in the near term if you default. So making the approach to negotiate your rent from a  place of empathy, rather than aggressiveness, is key. 

Before we get into exactly how to negotiate, let's start with some vocabulary so you can talk to your landlord from a place of mutual understanding:

Definitions:

  • Relief: Help or assistance
  • Abatement: Rent is forgiven and not required to be repaid
  • Deferment: Rent is not required to be paid during that time frame but must be paid back later
  • % Rent in Lieu of all Charges: Calculated as a percentage of sales and replaces all rent and additional rent (NNN’s, etc.)
  • % Rent in Lieu of Base Rent: Same as above but only replaces Base Rent and all additional rents must be paid in full

Some things to keep in mind about your landlord: Their revenue stream may also be drying up, so if you have another source to cover your rent, i.e. PPP or EIDL loans, use those first. Below is a recap of some of those options:

Screen Shot 2020-06-18 at 4.54.32 PM

Understand that your landlord needs the space leased and they are never going to volunteer you to stop paying rent. So only begin this negotiation if you have no other avenue to cover the lease. After all, you are both business owners. They also want to minimize the conflict and the last thing they ever want to do is to start evicting and/or suing their tenants.

Once you are ready to start negotiating with your landlord start by being transparent with how much you can or cannot afford. In order to calculate this, and show your landlord this information in an accurate and transparent way, we have included a calculator below to estimate these numbers. This Excel tool will allow you to calculate and show your landlord how much your lease has increased as a percentage of your overall business costs vs. your revenue as you have lost revenue due to COVID-19. 

Link to Calculator Here

After you have factored those numbers and percentages, use them to create an objective letter to your landlord showing exactly why you need deferment or forgiveness on your lease costs. To make it easy, we have created a form letter for you below. Just download and fill it out with the data you calculated. 

Link to Form Letter Here

If your landlord is reasonable, and is objectively trying to save the future of their business, this method is one of your best chances at receiving help from them.  

 

Karie Armstrong

Written by Karie Armstrong

Karie is an advisor for the Small Business Development Center and has been helping commercial tenants for over 25 years.