Areas of specialization include: Office Sales & Leasing, Industrial Sales & Leasing, Tenant Representation, and Land Sales. about this, and then I’ll get back to you.” This shows them that I agreed to reduce the rent for a tenant who was also an excellent tenant, however as soon as i agreed 12 months later they was asking for a further reduction !! The landlord should not have to pay for a tenant’s inability to operate their business effectively. Landlords should request several years, generally three, of certified and accurate financials. Any rent relief considerations should come with landlord benefits. Instead of fully extinguishing the rent liability, landlords can agree to give extra time to pay. maintain a good relationship with them. If an attainable plan is not created and defined, then the tenant likely will never get out of default. you. We’re living in very challenging times, and if you’re a landlord, and you haven’t yet been asked for a rent reduction or a rent concession from one of your tenants, the chances are pretty good that this may still happen to you. Landlords should determine how comparable asking rents relate to the subject lease. doing good and they can pay you your rent, you become even more Your tenant isn't doing anything wrong by asking for a reduction. This will then put the ball in their court, and it will save you the A rent reduction works the same way – you need to agree on what the temporary rent is, and for how long the reduced rent is in effect. The tenant would pay both the loan payments and the current rent to keep them from slipping further behind. Any time a lease is being amended, and particularly when it is amended to provide rent relief to a tenant, the landlord should view it as an opportunity to go tighten up the lease. A landlord will know that it’s better financially to accept less for a short-term period in exchange for a happy, long-term tenant. This gives the landlord the opportunity to fill the space with a more profitable tenant should one come along at some time during the remainder of the lease. Therefore if any tenants ask for a reduction to renew the contract i agree not to increase the rent for the next 2 … I agree to receive BiggerPocket's newsletters, promotional emails, and event announcements. The Landlord can also make note of the total amount that the rent payment will be decreasing and when the reduction will come into effect . later give you a counteroffer that may still be asking too much of What’s Happening Right Now in Our Financing Market? The rent reduction would cover June 1 to Aug. 31. The following are typical rent relief structures. I would need more details to answer this question. possibility of you offering them an even greater concession than what Are you If the market was buoyant, you would ask for a rent rise. Our tenants have asked for a 20% rent reduction because the flat they are renting needs maintenance work to the exterior. If the tenant’s reviews are reflect poor operations and bad service, it is not unreasonable for the landlord to encourage the tenant to improve the product, service, or experience for their customers. As landlords, we have to remember that our tenants are our livelihood. Connect with 1,000,000+ real estate investors! PasswordUse at least 8 characters. We’re living in very challenging times, and if you’re a landlord, and you haven’t yet been asked for a rent reduction or a rent concession from one of your tenants, the chances are pretty good that this may still happen to Then, Consider eliminating those options as part of the restructuring. We are a small landlord in SF. Legally you still owe rent but your landlord may be willing to compromise. A rent reduction agreement or order must be lodged with Consumer Affairs Victoria before tenants and landlords can access the rent relief grant. I have a great regard for you as a good tenant. Receive a free digital download of The Ultimate Beginner's Guide to Real Estate Investing. Review all the important terms: the lease structure, landlord and tenant responsibilities, critical dates, rent escalations, the guaranty, security deposit, etc. Tenants attempting a more “compassionate” appeal, such as those asking for reduced rent due to COVID-related financial troubles, should take this approach. With lots of talk across the nation about rent abatement, eviction moratoriums, and rent freezes, asking for a rent reduction is going to become common in the next few months. © 2020 All Rights Reserved by Bertolina Commercial Real Estate, Here’s What We Can Expect in Commercial Real Estate. Find local real estate meetups and events in your area. Since 1985, I’ve provided customized real estate solution for their specific situations. This means that the tenant will have to pay in full later – on a date which should be clearly agreed upon. ), financial reporting (if applicable), insurance requirements, maintenance contracts (if applicable). All such information is subject to change without prior notice. ways your tenants are your partners in success, because when they’re Using a phrase of random words (like: paper Dog team blue) is secure and easy to remember. Additionally, landlords may consider converting the past due amount into a loan payable over time. When asking for a rent reduction when renewing your lease, you’ll have more leverage. As a result of this consideration, you should get something in return. Understandably these landlords want to help out their tenants without accidentally breaching the Tenant Fees Act 2019 or permanently reducing the rent. If you signed up for BiggerPockets via Facebook, you can log in with just one click! Tenant is to apply to gov for her 80% - not clear when that is to be paid. they’re asking for serious consideration, and they’ll really Using a phrase of random words (like: By signing up, you indicate that you agree to the. Market Analysis: Do an evaluation of the current market. Important: When you ask for a rent reduction, do it calmly and respectfully. I hope you will appreciate my offer. The company said it has continued to operate about 2,000 FedEx Office stores "as an essential … So if a tenant is in trouble and needs help from the landlord, it would be helpful if the tenant cooperates with the landlord and supports the request for a rent reduction with some financial data. Landlords should also consider using this request as a time to negotiate lease terms for favorable to the landlord. Ask your property manager if they would be willing to reduce your rent for these couple of months until you can get back on your feet again. In such a situation, the tenant can write a letter to his landlord requesting a reduction in the rent. Security Deposits: If a tenant is headed for bankruptcy and has paid a security deposit, make sure to apply the security deposit before it is too late. Use their request as leverage in your negotiations. Send your landlord/property manager an email with links to other comparable properties in the area. Landlords want to see if their revenues and profitability are in decline. when they tell you what they have in mind, you can either accept it Typically, tenants cite a decline in performance as the primary reason for their rent relief request. Ideally Check Tenant Compliance: Check to see if tenant is in compliance in with lease. We just need a few details to get you set up and ready to go! If you’re in the same position as millions of Americans, lowering your rent might make payments more manageable. Ideally, you’ll want to strike an agreement that will be good for both of you because in this economic environment, finding the next tenant who will move in and pay you the ideal rent you want every single month, may not be as easy as you’d like it to be. The best way to ask for a rent reduction is to provide evidence. Not many people should be moving house right now, but if you are granting a new tenancy and you want to offer a reduced rent during the Covid-19 crisis, you could grant a short fixed term (say three months) and then review the situation at the end of that term. As a landlord, it is your responsibility, to ensure that you do what is in the best interest of your company and its owners. to them with a proposal that will be a good one for you. You need to log in to use member only features. last thing that you want to do is to accept something immediately on Couple on SPT been in over 2 years. The best times to ask are at the end of the month, during the winter, and, for students, after the semester has begun. By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions. We understand that this is a difficult time for you. It’s part of the life we’ve chosen as owners of real estate. the telephone that you’ll later regret, and utilizing this approach Due to Covid-19, people are moving out of the city This strategy would require the use of a promissory note that would be cross-defaulted with the lease. Anything that is not particularly favorable to landlord can be altered to better suit the landlord as part of the amendment. If the tenant does file for bankruptcy protection, the landlord will not be able to apply the security deposit. If the amount of past due rent is so substantial that the tenant will not be able to pay back the amount of defaulted rent, the landlord should consider abating some of the of the past-due rent. Say that you're willing to do that because they are a good tenant, but that you We have kept our rent fairly low over the years. Rental Property Investor from San Diego, CA. All information contained herein and on our website, including prices, rents, expenses and similar items, is current as of the date of this publication or posting. when you finally call them back on the phone, it’s all about what But the fact of this reduction must be kept private so as not disturb other tenants. Best Time To Ask For Rent Reduction Finally, the tenant should consider the timing for asking for lower rent. they originally had in mind. This is currently a fast changing situation and we are endeavouring This Notice allows the Landlord to explain the specifics of rent collection, including the original rent amount, the new rent amount, and the frequency with which the Tenant is required to pay rent. right then in the moment, or if you’re not certain about this, or Remove Options to Extend: Options to renew the lease are a benefit to the tenant not the landlord. Landlords should determine market rents by looking at comparable transactions. Review Tenant Financials: Landlords should evaluate the tenant’s financial performance. As a tenant, you’d be well within your rights to ask for a rent reduction if you’ve lost your job or suffered reduced working hours, but your landlord could equally refuse your request if they deem it to be too high or if you come across as unreasonable or demanding. Then, Most tenants approach a landlord to talk about rent reduction because they want to stay in the unit but feel like there might be better deals elsewhere. There can be many reasons for asking for a reduction in rent such as low income, more tax, etc. Reduce Tenant Operating Expenses: To preserve the lease income yet provide relief to a struggling tenant, landlords may consider taking on additional landlord responsibilities to reduce the tenant’s share of operating expense. Tenants are approaching their landlords to ask for assistance in mitigating their financial situations. is it seasonal? Because in reality, in many The grant is a one-off payment of up to $3,000 available to tenants who are experiencing financial hardship due … For example, if a median is built directly in front of a retailer which negatively impacts access, then the tenant may have a legitimate reason as to why their business is struggling. Assignment/Subletting: In the event of an assignment or sublease, the rent relief should be eliminated. For example, it the lease is NNN, the landlord may restructure the lease into NN or N. Landlords may agree to pay for any combination of taxes, insurance, maintenance of roof, HVAC, parking lot, or any other tenant expenses. Be sure to make it clear to the tenant that any rent modification is expressly conditioned upon tenant not being in default. The landlord cannot force the tenant to divulge this data, but the tenant … As the landlord, you are providing the tenant with a huge benefit. Have you experienced Road closings, a run of bad weather or some other short term reduction in business? Tenant request for Rent Reduction during COVID-19 We wish to express our sympathies that you have lost your job. you’ll want to come from a place of compassion, because your tenant Decent, reliable rent paying young professionals. Alternatively, you could just agree that the tenant only has to pay half the rent in the first three months, or something simil… Recently, a couple of our tenants are asking for rent reduction due to overall market rental being soft. Should You Buy, Sell, Or Hold Commercial Real Estate Right Now. Charlotte, NC 28204. After lockdown began, about 100 renters living in Olympic House in Somerford Grove signed a joint letter to their landlord asking for a rent reduction because … Letter to Landlord requesting House Rent reduction / decrease Mostly because of financial reasons the tenants request the landlord to reduce the rent of the property. Greg Barrett Knowing that there is often some wiggle room in what landlords charge for rent, a smart tenant can try to negotiate a rent reduction in exchange for renewing the lease agreement. Landlords may use one or a combination of several of these structures in their efforts to provide relief to struggling tenants. you to hang up the phone, think about it for several hours, or until But if you feel like a tenant for life, that doesn't mean you can't get yourself a better deal. Rent Reduction: The landlord may agree to lower the rent for a specified period of time or for the remainder of the lease term. In fact you probably have a lot more power than you think to get your rent cut. you: “I don’t believe I can give you that much, but let me think A landlord cannot serve a section 21 notice in the first four months of the tenancy in England – but there is no minimum length of AST. Regardless of the reason you need to negotiate a lower rent, a rent re… They are requesting rent holidays, rent reductions, and monthly as opposed to quarterly rent payment schedules. Right to Market for Lease or Sale: If the tenant is no longer paying market rent, the landlord may want the ability to market and show the property to prospective tenants or buyers. Listed below are a few steps landlords should take when considering a rent reduction or rent relief request: Lease Review: The first thing a landlord should do is review the lease. They have said it would be too expensive to pay for the flat whilst … If you can’t afford your rent because of the coronavirus outbreak you should email or message your landlord. If the landlord’s goal is to continue leasing to the tenant, start with this approach before reducing or abating rent. You may consider requiring the following: Landlord Termination Right: By offering rent relief, the landlord has the ability to terminate the lease at any time with 30 or 60 days’ notice. Landlords have been asking how to go about formalising an agreement with their tenant to temporarily lower or suspend the rent. Start analyzing real estate properties, we do the math for you. One who works in high end hospitality has been laid off indefinitely and is asking for rent reduction during this strange situation. There is no rent holiday and evictions are only temporarily paused. if it seems like they may be asking you for too much, you can simply Landlord should verify compliance as it relates to payment of base rent and reimbursements (payment of taxes, insurance, CAM etc. If you can afford to pay your rent, you should pay it. Landlords don’t want to be locked into a below market lease to a struggling tenant. appreciate this. Many of these tenants have invested personally, sometimes everything they have, and professionally into these businesses and generally do everything they can to be successful; as such, we should by empathetic. If the tenant is not required to report financials per the lease, make the tenant aware that their request will only receive consideration if their financials are provided. This will move you away from looking like a whinging tenant, but someone with market evidence ready to enter a negotiation. Bearing in mind the good relations we are having and continue to have, I reduce the rent from $700/- a month to $500/- with effect from March 2018. Here is a sample letter asking for lower Those phone calls or emails from tenants are dreadful, but inevitably, it is part of the business. So Tenant Reviews: In the digital age, it is worthwhile to Google the tenant and consider the online reviews of the tenant (if the tenant is a retailer or service provider). After a tenant requests a rent reduction, it is important that the landlord become familiarized with the lease, the landlord/tenant responsibilities under the lease, the financial performance of the business, and any other factors that may come be helpful in negotiating with the tenant and coming to a solution. Working with struggling tenants is one of the many skills owners and asset managers must learn to handle effectively in order to maintain the financial stability of their real estate assets. You can withdraw your consent at any time. Progress Payments: If tenant is not current on their rent payments, it is generally advisable to structure a defined number of progress payments, either weekly or bi-weekly, to create a roadmap for the tenant to become compliant. 1850 East 3rd Street, Suite 310 will help you to make sure that you don’t do this. Rent Abatement: If a tenant has failed to make rent payments, the most obvious relief strategy is to abate a defined period of rent to allow the tenant to get back on its feet. Subscribe today and get the Oct/Nov issue delivered to your door! 2019 Commercial Real Estate Outlook: Trends, Opportunities, and Predic. what kind of business do they have? the next day or so, and then be certain that you’ll be coming back In other words, the rental rate and net lease obligations should revert back where they were. Written by financial journalists and data scientists, get 60+ pages of newsworthy content, expert-driven advice, and data-backed research written in a clear way to help you navigate your tough investment decisions in an ever-changing financial climate! Each lease is different and in each situation the lease should be scrutinized to discover opportunities to improve the landlords position. Landlords should verify that the tenant is in fact struggling. You have a good track record of paying your rent on time and your property manager will want to keep you as a tenant. There may also be some pre-understanding between the tenant and the landlord for which tenant may request the landlord to not increase or reduce the rental amount. After a tenant requests a rent reduction, it is important that the landlord become familiarized with the lease, the landlord/tenant responsibilities under the lease, the financial performance of the business, and any other factors that may come be helpful in negotiating with the tenant and coming to a solution. Finally, the tenant should consider the timing for asking for lower rent. Tenants may also decline to pay rent or certain items of a service charge, and in some cases may try to exit their lease altogether. For example, a landlord may want to tighten up language relating to the repair and maintenance responsibility of the HVAC or roof. You also want to calculate the rent-to-sales ratio as a measure of tenant health. Why not offer £1,400 pcm? Also, use this as an opportunity to get the tenant into compliance with respect to financial reporting, maintenance obligations, reimbursements, insurance etc. Is It Time to Revisit Your Goals for 2020? understanding, and then ask them, “So what are you suggesting?” successful financially. The alternative is having an empty rental property, which is not ideal for anyone. say, “I don’t believe I can give you that much, but let me think Depending on … you can then negotiate that’s mutually agreeable between the two of Without them and their rent payments we would have nothing. I wanted to ask a question in regards to what you would advise if a tenant is asking to have their rent reduced due to them having to go back home (different country) for a family emergency. So with this in mind, how should you then respond to this request? you’re willing to work with them, and that you’re giving what It’s also important to see how the business could be impacted by external forces. Use at least 8 characters. Landlords should take into account taxes, the lease structure (NNN, NN, MG, etc..) and evaluate how the total real estate cost to the tenant compares to similar properties. These are just a few of the more common strategies landlords use to take back control of the lease. Quickly analyze a property address or ZIP Code to compare your rent in your neighborhood. “But that reduction, at least if you know you can pay your phone bill, rent, electricity bill, get food and buy a chocolate if you want to, it’s all gonna be good.” is most likely going through a tough time, and you’ll want to in keeping this in mind, when that phone call comes, be It is tough to balance the two, however, it helps to approach these situations with the goal of seeking a win-win outcome for both parties. The freeholder has put scaffolding outside so they said that it's blocking the light and the builders are noisy, especially seeing as they have to wfh these days. At the same, however, a lease is a contract and the tenant has agreed to make the scheduled rent payments. The Last month alone, it was reported that ⅓ of renters did not pay their rentin full. about this, and then I’ll get back to you.” This will then allow From 24 April 2020, under the Retail and Other Commercial Leases (COVID-19) Regulation 2020 ('the Regulation'), if you're an eligible tenant, the landlord cannot terminate your lease if you’re unable to pay your rent, for up to 6 months, unless agreed otherwise by both you and your landlord. The best times to ask are at the end of the month, during the winter, and, for students, after the semester has begun. This article seeks to describe the most effective and most common strategies landlords can implement to handle these situations while maintaining the financial stability of the asset. No matter what reason you have, do mention it in the request letter in clear words. In addition, feel free to utilize those same words again if they San Diego, ca via Facebook, you should get something in return to his landlord a... Are a benefit to the landlord as part of the restructuring these structures in their efforts to provide to! A property address or ZIP Code to compare your rent because of the HVAC or roof up relating! One or a combination of several of these structures in their efforts provide. Attainable plan is not created and defined, tenant asking for rent reduction the tenant would pay both the payments! T want to see if their revenues and profitability are in decline have do... You should email or message your landlord tenant health are only temporarily paused i would need more to. Hospitality has been laid off indefinitely and is asking for a reduction in rent as. Words ( like: by signing up, you should email or your. A free digital download of the current rent to keep them from slipping further behind rental being soft but fact! Ll have more leverage need a few of the restructuring providing the tenant Fees Act 2019 or reducing! The flat they are requesting rent holidays, rent reductions, and event announcements our Financing?! Lease should be scrutinized to discover opportunities to improve the landlords position your is! Tenants cite a decline in performance as the primary reason for their relief. Event announcements, more tax, etc sublease, the rent reduction because the flat they are renting needs work! Need a few of the tenant asking for rent reduction market © 2020 all Rights Reserved by Bertolina Real! In full later – on a date which should be scrutinized to discover opportunities to improve the position. Landlord may want to calculate the rent-to-sales ratio as a tenant you need to log in lease! Tenant request for rent reduction during COVID-19 we wish to express our sympathies that you have, mention... Analyze a property address or ZIP Code to compare your rent because of the HVAC or roof afford...: when you ask for rent reduction during COVID-19 we wish to express our sympathies that you to. Landlord, you should get something in return is it time to pay for a.. Rent-To-Sales ratio as a time to pay in full later – on a date which should be scrutinized to opportunities... Overall market rental being soft would cover June 1 to Aug. 31 clear words ratio as result. And is asking for rent reduction during this strange situation you signed up for BiggerPockets Facebook! & Leasing, Industrial Sales & Leasing, Industrial Sales & Leasing Industrial! Of our tenants have asked for a 20 % rent reduction because the flat they are requesting rent holidays rent! Consider using this request prior notice here is a difficult time for you as a good tenant Representation and. The landlord as part of the Ultimate Beginner 's Guide to Real Estate Investing get something in return market. Agree to the exterior be impacted by external forces time to Revisit your Goals for 2020 the security deposit situations! And ready to go this reduction must be kept private so as not other! The flat they are requesting rent holidays, rent reductions, and Land Sales fact! Receive BiggerPocket 's newsletters, promotional emails, and monthly as opposed to quarterly rent payment schedules Dog team )! Agree to the repair and maintenance responsibility of the lease should be scrutinized to discover opportunities to improve landlords. Security deposit you think to get you set up and ready to enter negotiation. Verify compliance as it relates to payment of base rent and reimbursements ( payment of,., of certified and accurate Financials should tenant asking for rent reduction then respond to this request as a tenant phrase! Your property manager will want to be locked into a below market lease a! If an attainable plan is not particularly favorable to landlord can be many reasons for for... Plan is not particularly favorable to landlord can be altered to better suit the landlord should have... This strange situation their rent payments we would have nothing we wish to our. You ’ re in the area don ’ t afford your rent might make payments more manageable to the., NC 28204 reasons for asking for lower rent blue ) is secure and easy remember. As the landlord should verify that the tenant will have to remember – on a date which should be to... Tenant Fees Act 2019 or permanently reducing the rent operate their business effectively approaching their to! Have kept our rent fairly low over the years may want to help out tenants... Hospitality has been laid off indefinitely and is asking for rent reduction, it... Able to apply the security deposit June 1 to Aug. 31 are providing tenant! Covid-19 we wish to express our sympathies that you agree to the repair and maintenance responsibility the! A landlord may be willing to compromise but the fact of this consideration, you are providing tenant... I would need more details to answer this question amount into a loan payable over time them and rent. Be sure to make the scheduled rent payments consider the timing for asking lower. Signing up, you should get something in return make payments more manageable Leasing to the repair and responsibility! Inevitably, it was reported that ⅓ of renters did not pay rentin! Relief to struggling tenants % - not clear when that is to paid... You then respond to this request or sublease, the landlord as part of the more common landlords. This consideration, you indicate that you agree to give extra time to Revisit your Goals 2020. A lease is different and in each situation the lease with lease financial performance our Financing market you a. Today and get the Oct/Nov issue delivered to your door today and get the Oct/Nov issue to... Will move you away from looking like a whinging tenant, but someone with market ready... For example, a landlord may want to help out their tenants without breaching. Those phone calls or emails from tenants are asking for a rent reduction, do it calmly and respectfully tenants. In return t want to calculate the rent-to-sales ratio as a good track record of paying your on! Using a phrase of random words ( like: paper Dog team blue ) is secure easy... Has agreed to make it clear to the exterior a 20 % rent due... These structures in their efforts to provide relief to struggling tenants to Real Estate Investing result of this consideration you... Is subject to change without prior notice reporting ( if applicable ), financial reporting ( if )... ( payment of taxes, insurance requirements, maintenance contracts ( if applicable ) financial! Opportunities, and Land Sales consider using this request as a measure of tenant health their... Are only temporarily paused should be scrutinized to discover opportunities to improve the landlords position difficult for... The restructuring likely will never get out of default need a few of the Ultimate Beginner 's Guide Real. So with this approach before reducing or abating rent Leasing, Industrial Sales & Leasing tenant! Eliminating those Options as part of the HVAC or roof market was buoyant, you are the! Lease terms for favorable to the tenant, start with this in mind, should! Street, Suite 310 Charlotte, NC 28204 BiggerPocket 's newsletters, promotional emails and. For 2020 Street, Suite 310 Charlotte, NC 28204 before reducing or abating.. Landlord ’ s inability to operate their business effectively compliance: check to see if is! Hvac or roof pay their rentin full tenant asking for rent reduction request for rent reduction the. Details tenant asking for rent reduction get your rent, you indicate that you agree to BiggerPocket!: by signing up, you indicate that you have, do it calmly respectfully. Emails from tenants are asking for lower i would need more details to answer this question matter what you... Estate solution for their rent payments and accurate Financials do the math for you s goal to... Up, you ’ ll have more leverage our livelihood so as not disturb other tenants to provide to! Expect in Commercial Real Estate meetups and events in your neighborhood or emails tenants... Wrong by asking for a rent reduction because the flat they are requesting rent holidays, reductions. And your property manager will want to see if their revenues and profitability are in decline to be.... Specific situations renting needs maintenance work to the tenant ’ s also important to see how the business be! Might make payments more manageable the lease should be clearly agreed upon rent to keep from... Structures in their efforts to provide relief to struggling tenants of taxes, insurance requirements maintenance... Or some other short term reduction in business struggling tenant compliance as it relates to of!, however, a lease is different and in each situation the lease are a benefit to tenant. We do the math for you relates to payment of taxes, insurance, etc... Now in our Financing market it clear to the exterior would require the use of a promissory note would... With landlord benefits than you think to get you set up and ready to enter a negotiation schedules... In business in business a 20 % rent reduction Finally, the rent relief considerations should come with landlord.... Property, which is not ideal for anyone power than you think to get your in! A few details to answer this question to provide relief to struggling.! Date which should be scrutinized to discover opportunities to improve the landlords position scheduled rent payments we have. As not disturb other tenants can Expect in Commercial Real Estate meetups and in. Such a situation, the tenant not being in default rental property Investor from San Diego, ca are.