script type="application/ld+json"> { "@context": "", "@type": "Product", "name": "Delancey Street", "aggregateRating": { "@type": "AggregateRating", "ratingValue": "5", "reviewCount": "10" } } Negotiating with Landlords for Business Debt Relief | Delancey Street

How to Negotiate with Landlords for Business Debt Relief

The Hard Truth: COVID Crippled Many Businesses

Let’s be blunt: the COVID-19 pandemic wreaked havoc on businesses across industries. According to a Federal Reserve study, business bankruptcy filings skyrocketed in 2020, but many firms avoided it by negotiating with creditors – including landlords.

If you’re struggling with Chapter 11 bankruptcy due to rent or lease obligations, you need to understand negotiating strategies for landlord debt.

Why Landlords May Negotiate, Even if They Don’t Have To

Commercial landlords have legal rights – you can’t simply stop paying rent. So, why would they negotiate? There are a few key reasons:

  1. Avoiding Vacancies: An occupied space getting some rent is better than none. Even a temporarily discounted rate keeps money flowing.
  2. Retaining Anchor Tenants: Major tenants, like an office building’s namesake company, are harder to replace if evicted. Landlords may bend to keep them.
  3. Bankruptcy Concerns: If you claim bankruptcy tenant rights, a landlord could get stuffed with past rent debt and zero future income.

With the right approach and positioning, you can often renegotiate lease terms, but you need a firm gameplan. So, how do you make it happen?

The Art of Landlord Negotiation: 3 Core Strategies

1. Appeal to Their Interests, NOT Your Hardship

While your business struggles matter, landlords ultimately care about their own bottom line. Don’t waste time citing COVID impacts – explain precisely why restructuring helps them:

  • You can keep operating, paying some rent
  • Re-tenanting the space could cost more and bring vacancy
  • Downsizing by ending your lease would harm the landlord
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Focus on the landlord’s financial incentives, not pleading for mercy.

2. Back Up Your Claims with Concrete Data

To seriously renegotiate, you need receipts. Come armed with:

  • Tax returns proving declining business revenues
  • Rent roll showing you’re a major, hard-to-replace tenant
  • Market analysis of re-tenanting costs and vacant space competition

The more evidence you provide, the less “needy” you seem. Landlords respond best to tenants who do their homework.

3. Lay Out a Specific, Reasonable Proposal

Don’t just say: “We need help!” Propose a planned solution, like:

  • Temporary partial rent reduction for X months
  • A percentage rent deal based on revenues
  • Early termination for a reduced termination penalty

Having a thoughtful pitch with real numbers shows you took negotiating seriously. You can get landlords to “yes” if you do the legwork.

Get Experienced Legal Counsel – It Makes All the Difference

While some landlords may negotiate reasonably, many will fight tooth and nail. Having an experienced real estate attorney advocate for your business interests is invaluable:

  • They understand landlord-tenant laws inside and out.
  • Legal involvement shows you mean business.
  • Having counsel makes you less exploitable.

Would you perform surgery on yourself? Probably not – and negotiating commercial leases can be just as complex and impactful. Do it right by lawyering up.

Summary: Negotiate Intelligently, Strategically, Forcefully

Renegotiating business leases with landlords may seem daunting, but you can prevail – if you take the right calculated approach:

  1. Frame the “what’s in it for them?” perspective clearly.
  2. Bring objective evidence backing your reasoning.
  3. Offer a transparent proposal addressing landlord concerns.
  4. Hire seasoned real estate attorneys to maximize leverage.
See also  Debt Relief Options for Businesses with Merchant Services Agreements

Done right, you can compel many landlords to negotiate favorably – protecting your business in uncertain times. Stay savvy, diligent, and keep pushing.

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