How To Say No To Your Landlord During A Lease Renewal
If you have ever dealt directly with your Landlord in a lease renewal negotiation, you know that the situation can be challenging, awkward, emotional, time-consuming, and stressful. There are several factors that come into play on a lease renewal which present an opportunity to either lose a significant amount of money or to make you feel like you’re not getting the best deal on a substantial financial investment.
There are many factors that affect the viability of a healthcare practice during a lease negotiation, including:
- The majority of healthcare providers remain in one location for at least 10-15 years, and many even longer, as relocating can be costly and inconvenient.
- Build-out costs for healthcare spaces are a substantial investment and considerably higher than general office space.
- Negotiating lease terms can result in a 6-to-7-figure financial swing in favor of the landlord or tenant, depending on who has the better posture, the most knowledge, experience, and options.
- Any added expense, as the result of the renewal negotiation, comes straight from the bottom line of the practice.
- Tenants may enter into only a few leases in their career while landlords will likely transact on hundreds of leases.
Landlords are keenly aware of these facts and are not timid about getting aggressive and applying pressure in order to maximize their profits, especially when negotiating with an inexperienced tenant that doesn’t have representation.
Why Hiring Representation For Your Lease Renewal Is Critical
The majority of healthcare providers understand the benefits of hiring an experienced healthcare real estate agent to represent them in securing a new location for their practice. As most doctors understand, the do-it-yourself approach is time consuming and a path riddled with expensive pitfalls. The same doctors that would hire an agent for securing a new lease often aren’t aware that they can (and should) hire an agent to represent them in a lease renewal negotiation.
When a healthcare lease is up for renewal, there are several scenarios that a tenant may find themselves in:
- The lease does not contain a renewal option, forcing a renewal negotiation
- A renewal option is pre-defined in the lease and there’s time to exercise it
- A renewal option exists in the lease but the notification deadline has passed and the landlord is not obligated to honor it
The existence of a renewal option in a lease does not prohibit the tenant and landlord from negotiating new terms, especially since the option rarely benefits the tenant without renegotiating it. Regardless of which scenario a tenant is up against when their lease is expiring, it is undeniably best for the tenant to hire a commercial real estate agent experienced in lease renewal negotiations to procure the best possible renewal terms and other market options on their behalf.
Handling a lease renewal in a way that produces winning outcomes requires a proven, strategic approach and a strong posture that’s created by competitively procuring options in the market. All of this must happen before negotiating a renewal with the current Landlord. This is not something that can be handled effectively by an inexperienced agent or tenant without oftentimes resulting in considerable losses.
How To Say No To Your Landlord
Once a tenant comes to the realization that it’s in their best interests to hire an expert agent to negotiate their lease renewal, this news has to be shared with the landlord. Whether through email or phone, this conversation is vitally important. The tenant’s posture is either strengthened or severely weakened by how this conversation is handled, ultimately affecting the outcome of the negotiation.
Having secured an agent, the best thing the tenant can do is to have the agent engage the landlord on their behalf. A respectful landlord will fully understand the tenant’s position and their desire to have representation, as it’s a clearly understood fact that the most successful companies in the world either hire representation or employ experts in-house. Unfortunately, though, some property owner’s refuse to respect a tenant’s decision and instead try to circumvent the agent as they understand a tenant who has a solid game plan with a buyer / tenant-only agent could cost them in the transaction.
One might ask: “If a tenant has requested that a Landlord deal directly with their agent, why then would a Landlord not respect this decision?” A few key reasons include:
- They believe the tenant is their client or their friend, entitling them to direct communication. The tenant however is their tenant, not their client.
- They know that if an agent is involved, they will be dealing with someone of equal or greater experience in commercial real estate. This levels the playing field and strips the landlord of any “home field advantage”.
- They don’t want to pay brokerage fees, even though they happily will pay fees for new tenants who have never paid them a dollar to occupy their space.
Any of these reasons will many times prompt a landlord to ignore the tenant’s position, contact the tenant directly, and entice them to try to cut their agent out of the equation.
When this happens, a tenant must be empowered to say “No” to their landlord in a confident manner. A professional way to establish the boundaries of the negotiation and say no to a landlord should sound something like this:
“As a healthcare provider, I understand that real estate is one of the highest expenses in my practice which I am not comfortable handling without proper representation. I’m not an expert in real estate, therefore I have hired a professional that will be happy to speak with you and work towards a solution that’s mutually agreeable. Please direct all negotiations through my agent.”
If the landlord won’t take the first “no” for an answer, the tenant may follow up with:
“In the same way that you come to me for your healthcare instead of handling your medical needs and procedures yourself, I have hired an agent to work with you in taking care of my real estate needs. I’m confident you can understand that I’m not trained in real estate, just as you are not trained in healthcare. I sincerely appreciate your respect in my decision to handle this transaction in this manner.”
Any additional form of pressure from a property owner is an indication that the person is trying to take advantage of you and is solely concerned with his or her own interests. Any response from a Landlord other than a respectful one that honors a tenant’s request should only affirm to the tenant that they made the right decision in hiring representation.
In summary, as a healthcare tenant pursuing a lease renewal you can move forward in confidence knowing that a lease renewal is always negotiable, you can hire an experienced healthcare real estate agent to exclusively represent you in the renewal negotiation, and you can confidently hold to your position even when a landlord wants to pressure you into dealing with them directly.