Don’t Break Your Lease – Renegotiate It

Do you have a lease and encountered any of these problems in your business recently?

Your sales have dropped off…making it a challenge to pay your lease.

You’ve taken a big hit from an unexpected expense…proving it difficult to make ends meet, including paying your lease.

You’ve lost your biggest client (or clients) and your cash flow is on life support…putting your lease in jeopardy.

You’re not alone.  These scenarios are happening to small businesses everywhere.  While you may seriously need to rethink your business strategy over the long haul, there are a few things you can do short-term to stop the flow of red on your books.

If you know you need to take a serious look at how you’re doing business, contact us for a review of your business plan, your books, and your agreements to see where we can make some changes to bring your business back to life.

In the meantime, one of the fastest ways to buy yourself some breathing room is to renegotiate your lease. Landlords are hurting, too, and they don’t want to lose a tenant. Here are a few things to think about if you want to approach your landlord about lowering your rent:

1. Have Your Books In Order

Never go into a negotiation unprepared.  And that means a negotiation on your lease or anything else.  Take a look around and see if other tenants have left. If other people have closed up shop in your building, the landlord may be more agreeable to negotiation on your rent just to keep you in the space.  Before you start talks, know exactly what your monthly costs are and how much you need to lower your rent in order to break even.  Knowing exactly what you need will make for a smoother negotiation process.

2. Ever Heard of Rent Forbearance?

If you’ve had a substantial unexpected expense, you may need to skip a couple of rent payments to catch up. If just getting a break on your rent won’t do the trick, ask for a 2 or 3 month rent forbearance where you pay no rent at all.  Make sure you have documentation of the unexpected expense to show your landlord so he or she will know you’re not just trying to get out of paying rent.  Establish a payment schedule at the end of the forbearance period to make up the difference and get back on track.

3. Early Lease Renewal

If you’re planning to stay where you are and are just going through a little business slump (or if you’re just being a smart business owner and want to reduce your expenses), approach your landlord about an early renewal on your lease in consideration for a lower monthly payment.  Even a little savings on what you pay per square foot can make a big difference in your bottom line.  Make sure you know what’s going on in the surrounding area as far as rents, vacancies, etc.  That will give you some leverage in getting a lower lease payment to stay put.

4. Bankruptcy As A Last Resort

If your business has really taken a hit and you see no short-term fix for the cash flow problem, you might want to consult a bankruptcy attorney.  They will be able to give you an idea of what a bankruptcy trustee will be able to do with a reduced lease payment and even let you know if reducing your rent is a possibility.

Any of these options will go a long way toward giving your business some breathing room to get through the economic downturn.  Knowing your legal rights beforehand will make a big difference in a successful negotiation.

And just as with any other process with serious potential for legal issues down the line, always consult an attorney to determine what’s best for you.  Have you had success re-negotiating your lease?

Integrated General Counsel
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