In our last blog, we discussed how the COVID-19 pandemic has impacted both landlords and tenants. While both parties have faced major setbacks this year, tenants have a surprising amount of power: many younger tenants are moving in with family members, and those who are looking to rent are more carefully considering their options than ever before. As such, property managers need to do what they can to keep the tenants they have happy, even if it means working out some type of deal.
This doesn’t mean just giving in to their every demand though. Remember: everyone is facing challenges right now, so if you approach the situation as such, you can figure out a way to help each other. So long as you come to the negotiation table with a pragmatic yet empathetic mindset, you can devise a mutually beneficial agreement that will result in the best outcome for everybody!
Understand the Tenant’s Perspective
There haven’t been many resources discussing how landlords have negotiated with their tenants, but there are a few from the opposite perspective. This can be useful, as this can allow you to formulate your response based on the needs and interests of tenants themselves. For instance, an article by Andy Hirschfeld titled “How I lowered my rent by 20% during Covid-19-and what experts say about negotiating with your landlord” offers some excellent advice that, while tailored to tenants, can be just as useful for landlords and other property managers.
His chief point is that whoever you are going to the negotiation table with, you should understand them as best as possible to gauge how successful your conversation will be.1
From there, take note of who are your best options to negotiate and communicate with, along with doing research on what comparable listings are going for. 2 By getting a point of reference, you understand both your competition and what your tenants are looking for. This allows you to figure out what you can reasonably ask for and what can be brought up during negotiations. It all comes to being realistic, yet empathetic.
Building a Strong Relationship
Landlords can and should use the pandemic as an opportunity to establish better relationships with their tenants. This should be the goal of any good property manager, regardless of outside circumstances, but it is especially important in order to mitigate the unpredictable and damaging effects of the pandemic. This can be difficult sometimes, especially now due to the anxiety of the pandemic, but when it comes down to it, you just have to be honest, upfront, and understanding. Have an honest conversation with your tenants regarding your current financial situation, encouraging transparency on both sides. You obviously can’t force anyone to return these shows of understanding or kindness, but being upfront and reasonable can go a long way towards making tenants more comfortable with working with you and navigate these tough times together.3
Stepping Up to the Negotiating Table
Once you plan on negotiating with a tenant, you need to do your homework, developing a well-thought-out plan, and consider whatever bargaining tactics would be viable in this situation.4 That said, come in with an open mind and willingness to compromise. Most of all, keep your tenant’s position in mind. Provide realistic relief strategies that are beneficial to both of you.
Before sitting at the negotiation table, besure that you fully understand the details of the lease, including rent amount, the regularity of rent increases, and if there are any “pass-through” expenses included. Keep in mind important details like the lease expiration date, how the contract defines a default of the lease, and who is liable if a default occurs. Additionally, make sure to go over tenant’s insurance options, as well as their security deposit if there is one.5
There are also negotiation requests that can come up, so be sure that you are familiar with them. Some of the agreements you can make with tenants include (but are not limited to): 6
- Better terms and rates
- Subletting agreements
- Potential subdividing
- Loan conversions
- Late-payment fee waivers
- Selling a contract to another tenant
- Lease buyout
There are also some potential sacrifices that tenants could make, including (but not limited to):
- Added interest to future rent payments.
- Commitment to an extended term.
- Provided guarantee or additional co-signer.
- Traded business shares.
A Mutually Beneficial Relationship
Landlords might be at a disadvantage right now in the evolving, post-pandemic real estate market, but that doesn’t mean that there aren’t ways to get around it. By working closely with tenants and understanding their unique perspectives, it is possible to work out a solution that can benefit both parties. By coming to the negotiation table with pragmatism, preparedness, and an open mind, you can walk away with an agreement that makes everyone happy.
Of course, if you are looking to negotiate with tenants and need further guidance, you can contact the legal professionals at CCSK Law. With our extensive background in real estate and business law, our team can offer the support you need during these tough times. Simply call us at (219)-230-3600 or send an email to firstname.lastname@example.org.
1. Hirschfeld, A. (2020, August 3). How I lowered my rent by 20% during Covid-19-and what experts say about negotiating with your landlord. CNBC. https://www.cnbc.com/2020/08/03/i-lowered-my-rent-by-200-what-experts-say-when-negotiating-with-landlord-during-covid-19.html.
2. Hirschfeld, A.
3. Henick, M. (2020, April 10). I told my landlord I couldn’t pay April rent – due to Covid-19. This is his incredibly emotional response. CNBC. https://www.cnbc.com/2020/04/10/told-my-landlord-i-cant-pay-rent-due-to-coronavirus-how-he-responded.html.
4. Novick, S. (2020, August 5). How to negotiate rent for your small business during COVID-19. MSN. https://www.msn.com/en-us/money/personalfinance/how-to-negotiate-rent-for-your-small-business-during-covid-19/ar-BB13Nj5Q.
5. Novick, S.
6. Novick, S.