How lease renegotiation can benefit you as a landlord

Some would say it is an open secret in the real estate industry that the sector is experiencing strong headwinds—maybe even a looming hurricane. Office vacancies are up, and nearly $2 trillion in loans nationwide are set to mature in the next three years. As a landlord, you are in for a wild ride, especially if you took out loans to finance an expansion or a project. Even with the Federal Reserve cutting interest rates, relief does not appear to come anytime soon.

Fortunately, you do not have to kill the goose that lays the golden egg. Banks have the motivation to keep you from defaulting, and the government is more than willing to backstop the banking industry to prevent a meltdown. If you can get some form of loan restructuring, you can pivot and do some forgiving of your own by giving your tenants relief on their leases.

Helping your tenants helps you

Many of your tenants are in trouble, too. Locked in a lease obligation they cannot meet, they struggle with few options. As liquidity dries and interest rates decrease moderately, they may face forced bankruptcy or breach their lease contracts. Offering them a lifeline by agreeing to a renegotiation of their leases might help keep them from bankruptcy and survive the crisis.

You can agree to lower rents or offer deals on maintenance and upgrades in exchange for a longer term and collateral. You can even include clauses such as late fees, security deposits and terms on property use. An updated lease does not have to be disadvantageous for you.

You need help, too

Fortunately, you do not have to complete these negotiations alone. Lease renegotiations can be complicated, with both sides haggling about what they want and are willing to concede in return. Consulting an experienced law firm that can negotiate and look out for your best interests may be advisable. They can give you a path to help both you and your tenants survive this crisis.