When the time comes to renew an office lease, some commercial landlords try to boost their profits at the expense of the tenant. Some of the ways landlords attempt to accomplish this is by offering perceived savings that in the long run, do not actually save the tenant much, if anything. Skilled tenant representatives are attuned to these tactics and know how to spot them immediately. Avoiding lease renewal loopholes is one of the many valuable reasons why a company should always work with experienced tenant reps, even when renewing a lease. These real estate professionals can expertly negotiate on a client's behalf for the best renewal deal.
Skipping the Real Estate Brokers or Tenant Reps
Although landlords may try to convince a tenant to not use broker or tenant representatives to assist them, tenants should always work with tenant reps who will negotiate on their behalf. Working with a tenant rep costs the tenant nothing. The main reason why most landlords try to convince a tenant to skip broker representation is because they will generally save more money when a tenant does not have a professional representative negotiating for them.
Another main tactic that is used by commercial landlords to save money is by offering an amended lease rather than writing an entirely new lease. Once again, landlords claim this saves both parties money; however, accepting an amended lease often keeps a tenant from knowing that they can actually negotiate new terms for their renewal. Even if it costs some money in contracting fees, tenants should insist on a new contract after negotiating terms with the help of skilled tenant reps.
Base Rent and Tax Base Concerns
There are a number of tactics that commercial landlords will use to get more rent money with renewals and making it seem as though the tenant is paying less. One such method is by offering the same base rent. On the surface it seems like the tenant is avoiding a rent increase, except for the fact that there are a number of fees added to the base rent the first year, which do not usually get charged with renewals.
Another method is by asking for annually compounding rent increases rather than a flat percentage. After a few years, this compounding increase will add up more quickly than simply paying a standard percentage increase, based on the going local rates each renewal period. Landlords may also offer a lease amendment, then try to retain the tax base from the original lease throughout renewal years. In all of these situations, the tenant ends up paying more than they should for their monthly rent, despite claims of savings.
Security Deposits and Personal Guarantees
Many landlords will also attempt to increase the security deposit on a lease renewal, or even ask for a personal guarantee. If the original lease has been fulfilled in good standing and there is no actual reason for these requests, most tenant representatives and commercial brokers find these requests to be without basis and suggest tenants argue such requests.
The most important thing for a business to remember about lease renewals is that they are entitled to negotiate everything, just as if it were a brand new lease. This is something that landlords commonly try to avoid, since it means having to negotiate and give more concessions to their existing tenants in order to keep them. The best way to avoid dealing with these kind of tactics is to work with experienced tenant representatives, even for a lease renewal. Tenant reps can get the most from tenant/lease negotiations when renewing commercial office space leases!