Tips Offered for Commercial Tenants
Those Losing Their Leases Have Options
By Timothy King
A frequent story in the media is the tale of the merchant who loses his lease.
Typically, this fate befalls a retailer who has been at the same location for 20 to 30 years. The villain in every case is the “heartless landlord,” who is now looking to double or triple the poor tenant’s rent.
Of course, no landlord no matter how heartless they may seem, can charge a rent higher than the current market value of the space. What this means oftentimes is that the tenant has been benefitting from a rent that could be 50 percent or more below market.
So while the tenant and the folks who read the story think the landlord is being greedy, it’s simply a case of the landlord trying to get a rent that is in line with current market conditions.
This conundrum can also provide a solution for a tenant who doesn’t want to lose his or her lease. Assuming that the tenant has a viable business and wants to continue at the same location, it is recommended that they reach out to their landlord long before their lease is up.
If they contact their landlord three to five years before the end of the lease term and offer to pay a higher rent immediately in exchange for an extension of the lease, everyone wins.
If the landlord won’t consider an extension of the lease, however, the tenant now has more time to prepare to find new space and arrange for the continuity of his or her business.
Timothy King is a principal with CPEX Real Estate.
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