Negotiate with my commercial landlord for temporary rent abatement how?
April 21, 2020 7:27 PM Subscribe
I'm the owner of a small retail specialty food shop (Portland, ME, USA) that's been closed to the public since March 15. We're selling online, but... overall sales are down :) so I'm considering asking my landlord for a temporary rent reduction. Just not sure how best to position it, what tone to use, what terms to propose, etc...
I have a great landlord, and I'm sympathetic to him as a fellow business owner. But I also see it as being partners in a sense. These are exceptional circumstances.
My goal is to secure an actual temporary reduction — not something I'll have to pay back later bc I'm somewhat pessimistic about retail returning to previous levels anytime soon.
Ideas or stories from everyone are appreciated, especially other business owners. Cheers!
I have a great landlord, and I'm sympathetic to him as a fellow business owner. But I also see it as being partners in a sense. These are exceptional circumstances.
My goal is to secure an actual temporary reduction — not something I'll have to pay back later bc I'm somewhat pessimistic about retail returning to previous levels anytime soon.
Ideas or stories from everyone are appreciated, especially other business owners. Cheers!
You might also tell the landlord what percentage of your normal business you’re seeing so they can ballpark what kind of reduction you might need.
posted by hungrytiger at 8:05 PM on April 21, 2020 [3 favorites]
posted by hungrytiger at 8:05 PM on April 21, 2020 [3 favorites]
This is a draft I wrote for another small business owner, mutatis mutandis:
"Dear [landlord's agent],
I am writing to discuss how to proceed going forward during this national public health emergency. As you may be aware, our shop has been closed by state order, and government small business support—when it becomes available—will not fully replace my revenues. [This situation, in which the government has temporarily prevented the operation of my business, appears to qualify under [article] of my lease as one of force majeure or as frustration of purpose.] Therefore, I anticipate that I will need some form of at least partial forbearance on rent [in the amount of $—] starting in May and until business resumes. As it has long been established that my revenues are, under normal circumstances, sufficient to pay my rent, the landlord’s forbearance will help to avoid an unnecessary potential costly disruption to our contractual relationship. Please give me a call to discuss arrangements. Thank you, and I hope you and your family are well in this difficult time."
The part in brackets may or may not apply to you; they are contractual defenses invoked when extraordinary circumstances prevent performance of a contract. Often there is a provision in a lease dealing with force majeure/act of God.
Use "forbearance" if you want a delay in payment, "remittal" or "forgiveness" if you're hoping not to pay part of it at all.
This is the kind of letter you send if you don't have a personal relationship with some kind of old-timey small landlord, but you have been a tenant in good standing for some time. The idea is to remind them that they can't get blood from a stone and that they can either forgo some rent or end up trying to find a new tenant in the middle of a recession when you go out of business. And that you're aware that they have something to lose here, too. You're not partners, but you will both likely suffer if your business fails.
(IANYL!)
posted by praemunire at 8:50 PM on April 21, 2020 [2 favorites]
"Dear [landlord's agent],
I am writing to discuss how to proceed going forward during this national public health emergency. As you may be aware, our shop has been closed by state order, and government small business support—when it becomes available—will not fully replace my revenues. [This situation, in which the government has temporarily prevented the operation of my business, appears to qualify under [article] of my lease as one of force majeure or as frustration of purpose.] Therefore, I anticipate that I will need some form of at least partial forbearance on rent [in the amount of $—] starting in May and until business resumes. As it has long been established that my revenues are, under normal circumstances, sufficient to pay my rent, the landlord’s forbearance will help to avoid an unnecessary potential costly disruption to our contractual relationship. Please give me a call to discuss arrangements. Thank you, and I hope you and your family are well in this difficult time."
The part in brackets may or may not apply to you; they are contractual defenses invoked when extraordinary circumstances prevent performance of a contract. Often there is a provision in a lease dealing with force majeure/act of God.
Use "forbearance" if you want a delay in payment, "remittal" or "forgiveness" if you're hoping not to pay part of it at all.
This is the kind of letter you send if you don't have a personal relationship with some kind of old-timey small landlord, but you have been a tenant in good standing for some time. The idea is to remind them that they can't get blood from a stone and that they can either forgo some rent or end up trying to find a new tenant in the middle of a recession when you go out of business. And that you're aware that they have something to lose here, too. You're not partners, but you will both likely suffer if your business fails.
(IANYL!)
posted by praemunire at 8:50 PM on April 21, 2020 [2 favorites]
Definitely you should suggest a number, based on your cash flow or in general your ability to pay, and do not mention the number that you already know, which is the regular rent amount. Naming a number has a remarkable effect on the human psyche, when talking money; it's a concept known as Anchoring. Once you have set that number into the conversation, all other subsequent numbers will be considered, in your mind and your landlords, in relation to that one. Suppose you name a lowball number that's at 20% of your rent; every increase your landlord gains out of you in subsequent conversation, 25%, 35%, 50%, will be thought of as a gain on the 20%, rather than thought of as a loss from the 100% rent which you can't pay.
I've used percentages in this example, but you should name a specific amount, rather than a percentage. You are also, in general, doing them a favor by starting with the number-- the Landlord has their own problems, and likely sees this coming, but doesn't know where to start the bidding.
posted by Sunburnt at 9:29 PM on April 21, 2020 [2 favorites]
I've used percentages in this example, but you should name a specific amount, rather than a percentage. You are also, in general, doing them a favor by starting with the number-- the Landlord has their own problems, and likely sees this coming, but doesn't know where to start the bidding.
posted by Sunburnt at 9:29 PM on April 21, 2020 [2 favorites]
I disagree with Sunburnt. Make your landlord say a number first. That will let you know how much they value your continued tenancy, so you can make plans for the future accordingly. They may be more understanding than you imagined, or they may not cut you any slack at all. Better to know now what they think and at least clear up some of the uncertainty that we're all dealing with.
posted by bradbane at 9:48 PM on April 21, 2020 [1 favorite]
posted by bradbane at 9:48 PM on April 21, 2020 [1 favorite]
Make your landlord say a number first. That will let you know how much they value your continued tenancy, so you can make plans for the future accordingly.
It is not clear how being vague would achieve that. A landlord can be sympathetic and willing to help but it would be poor business sense to offer the maximum amount they could go to based on a vague request. That’s not a sign of not valuing the relationship but of being in business. Even reasonable, sympathetic people have their own bills to pay and businesses to keep afloat.
posted by koahiatamadl at 3:43 AM on April 22, 2020 [1 favorite]
It is not clear how being vague would achieve that. A landlord can be sympathetic and willing to help but it would be poor business sense to offer the maximum amount they could go to based on a vague request. That’s not a sign of not valuing the relationship but of being in business. Even reasonable, sympathetic people have their own bills to pay and businesses to keep afloat.
posted by koahiatamadl at 3:43 AM on April 22, 2020 [1 favorite]
A really good book on negotiating is Never Split the Difference. I'd read that and then have a conversation with them.
posted by slidell at 5:43 AM on April 22, 2020 [1 favorite]
posted by slidell at 5:43 AM on April 22, 2020 [1 favorite]
Also I hope you've applied for government assistance (or I'd do it before you talk). I know the PPP and EIDL are disasters, but as a landlord, I'd want to hear that you had sought out all available resources to make your payments.
posted by slidell at 5:45 AM on April 22, 2020 [1 favorite]
posted by slidell at 5:45 AM on April 22, 2020 [1 favorite]
Apply for the small business government assistance programs, so you can at least say asking for rent relief is your last resort.
Share your sales numbers, if you don’t have to do that already. Make sure your landlord understands that you genuinely need this, you’re not just an opportunist (I know you’re not, but people can be suspicious when money is on the line).
Ask for a specific reduction and a specific timeframe. For example, half rent for three months, with plans to revisit at the end of the three months.
Ask if there are any other funds related to your tenancy that you could tap to make up the difference (at some point) — tenant allowance, even security deposit money.
Be responsive! A lot of people get nervous about asking for help or fear the situation is hopeless, so they go radio silent and just don’t pay. Be communicative! You’re asking for their help so that your business can survive, but you do want and think it will survive if they’ll help you now.
posted by rue72 at 6:59 AM on April 22, 2020 [2 favorites]
Share your sales numbers, if you don’t have to do that already. Make sure your landlord understands that you genuinely need this, you’re not just an opportunist (I know you’re not, but people can be suspicious when money is on the line).
Ask for a specific reduction and a specific timeframe. For example, half rent for three months, with plans to revisit at the end of the three months.
Ask if there are any other funds related to your tenancy that you could tap to make up the difference (at some point) — tenant allowance, even security deposit money.
Be responsive! A lot of people get nervous about asking for help or fear the situation is hopeless, so they go radio silent and just don’t pay. Be communicative! You’re asking for their help so that your business can survive, but you do want and think it will survive if they’ll help you now.
posted by rue72 at 6:59 AM on April 22, 2020 [2 favorites]
Response by poster: Just wanted to thank everyone and report back what happened.
Since I have a fairly personal relationship with my landlord, I mostly opted for @hungrytiger's approach. I asked for a 3-month 50% rent reduction. My landlord's counter suggestion effectively achieved the same result: He'll be applying my security and other deposit money toward 50% of my rent for 3 months. A much needed victory!
*****
In case it's helpful for other business owners, here's my letter:
Hi ______
How are you doing? I hope your family and all your loved ones are well. Everyone I know is safe and sound so I'm thankful.
I wanted to write and ask about the possibility of a temporary rent reduction for my space at ________.
I had hoped not to have to ask you this. I know you have other residential tenants that may have lost their jobs and may be struggling to pay rent on their homes, and I certainly don't want to impact them. I also appreciate that, like me, you’re a small-business person and have your own bottom line. All of which is why, despite closing the physical storefront on _______, I paid last month's rent in full. I had hoped I could do the same this month and next month, too, but reality has caught up to me.
Sales are way down for the obvious reasons -- and that's way down from first-quarter norms, which is the lean, just-getting-by time of the year anyway. I was not able to take advantage of the government's stimulus because I no longer have employees, and I'm not eligible to collect unemployment insurance myself. I know some people are talking about temporary rent loan situations or extensions, but I don’t see how I could pay that back in the future, with all this missed revenue and the expectation that, whenever things do come back, economic spending will likely not return to healthy anytime soon, but let's leave that assumption aside for now.
Is there a way we could do a temporary rent reduction to $_____ (that's 50%) for the next 3 months and then check in to see where things stand in terms of overarching economic factors and each of our experiences and needs? I'm doing everything I can to trim expenses in other areas and with other vendors -- and I'm working hard to keep boosting online sales so that we can get through to the other side.
Thank you for your consideration.
posted by Text TK at 5:08 PM on April 28, 2020 [1 favorite]
Since I have a fairly personal relationship with my landlord, I mostly opted for @hungrytiger's approach. I asked for a 3-month 50% rent reduction. My landlord's counter suggestion effectively achieved the same result: He'll be applying my security and other deposit money toward 50% of my rent for 3 months. A much needed victory!
*****
In case it's helpful for other business owners, here's my letter:
Hi ______
How are you doing? I hope your family and all your loved ones are well. Everyone I know is safe and sound so I'm thankful.
I wanted to write and ask about the possibility of a temporary rent reduction for my space at ________.
I had hoped not to have to ask you this. I know you have other residential tenants that may have lost their jobs and may be struggling to pay rent on their homes, and I certainly don't want to impact them. I also appreciate that, like me, you’re a small-business person and have your own bottom line. All of which is why, despite closing the physical storefront on _______, I paid last month's rent in full. I had hoped I could do the same this month and next month, too, but reality has caught up to me.
Sales are way down for the obvious reasons -- and that's way down from first-quarter norms, which is the lean, just-getting-by time of the year anyway. I was not able to take advantage of the government's stimulus because I no longer have employees, and I'm not eligible to collect unemployment insurance myself. I know some people are talking about temporary rent loan situations or extensions, but I don’t see how I could pay that back in the future, with all this missed revenue and the expectation that, whenever things do come back, economic spending will likely not return to healthy anytime soon, but let's leave that assumption aside for now.
Is there a way we could do a temporary rent reduction to $_____ (that's 50%) for the next 3 months and then check in to see where things stand in terms of overarching economic factors and each of our experiences and needs? I'm doing everything I can to trim expenses in other areas and with other vendors -- and I'm working hard to keep boosting online sales so that we can get through to the other side.
Thank you for your consideration.
posted by Text TK at 5:08 PM on April 28, 2020 [1 favorite]
That's cool you found a compromise that helps you out. By the way, the EIDL program is / was reportedly giving $1k/employee in forgivable advance, including to sole proprietors. It's closed now while they catch up, and might already be oversubscribed, but if they reopen, you may be able to receive a little help that way (i.e., $1000 for yourself as one employee).
posted by slidell at 5:35 PM on April 28, 2020
posted by slidell at 5:35 PM on April 28, 2020
« Older Download epub on Android from archive.org books... | How to email a reminder after several months have... Newer »
This thread is closed to new comments.
“Hey landlord, I wanted to write and ask about he possibility of a temporary rent reduction. I know you’re a [small?] business person too and have your own bottom line, I just am seeing sales being way down foe obvious reasons and am not sure how long I can pay full rent under these circumstances while keeping the business afloat. (I know some people are taking about temporary rent loan situations, but I don’t see how I could pay that back either, considering the circumstances.). Is there a way we could do a temporary rent reduction, for the next 2-3 months until the city opens up again? Thanks so much for your consideration, Text TK”
posted by hungrytiger at 8:00 PM on April 21, 2020 [5 favorites]