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. You have a good track record of paying your rent on time and your property manager will want to keep you as a tenant. For example, a landlord may want to tighten up language relating to the repair and maintenance responsibility of the HVAC or roof. The grant is a one-off payment of up to $3,000 available to tenants who are experiencing financial hardship due … It’s also important to see how the business could be impacted by external forces. There is no rent holiday and evictions are only temporarily paused. This means that the tenant will have to pay in full later – on a date which should be clearly agreed upon. Assignment/Subletting: In the event of an assignment or sublease, the rent relief should be eliminated. Review Tenant Financials: Landlords should evaluate the tenant’s financial performance. Charlotte, NC 28204. Those phone calls or emails from tenants are dreadful, but inevitably, it is part of the business. doing good and they can pay you your rent, you become even more The 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. You need to log in to use member only features. if it seems like they may be asking you for too much, you can simply Last month alone, it was reported that ⅓ of renters did not pay their rentin full. At the same, however, a lease is a contract and the tenant has agreed to make the scheduled rent payments. I would need more details to answer this question. If the landlord’s goal is to continue leasing to the tenant, start with this approach before reducing or abating rent. 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. 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. Landlords should determine market rents by looking at comparable transactions. 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. Depending on … last thing that you want to do is to accept something immediately on As a result of this consideration, you should get something in return. 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. As landlords, we have to remember that our tenants are our livelihood. you’re willing to work with them, and that you’re giving what 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. Each lease is different and in each situation the lease should be scrutinized to discover opportunities to improve the landlords position. what kind of business do they have? So the telephone that you’ll later regret, and utilizing this approach I have a great regard for you as a good tenant. Legally you still owe rent but your landlord may be willing to compromise. Landlord should verify compliance as it relates to payment of base rent and reimbursements (payment of taxes, insurance, CAM etc. Here is a sample letter asking for lower ), financial reporting (if applicable), insurance requirements, maintenance contracts (if applicable). Use 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 you. Landlords should verify that the tenant is in fact struggling. Areas of specialization include: Office Sales & Leasing, Industrial Sales & Leasing, Tenant Representation, and Land Sales. The company said it has continued to operate about 2,000 FedEx Office stores "as an essential … But if you feel like a tenant for life, that doesn't mean you can't get yourself a better deal. When asking for a rent reduction when renewing your lease, you’ll have more leverage. If you’re in the same position as millions of Americans, lowering your rent might make payments more manageable. they’re asking for serious consideration, and they’ll really We understand that this is a difficult time for you. All such information is subject to change without prior notice. If you can’t afford your rent because of the coronavirus outbreak you should email or message your landlord. when they tell you what they have in mind, you can either accept it 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. 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. when you finally call them back on the phone, it’s all about what you’ll want to come from a place of compassion, because your tenant 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. 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. 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. Then, Ideally We have kept our rent fairly low over the years. 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. right then in the moment, or if you’re not certain about this, or you to hang up the phone, think about it for several hours, or until Additionally, landlords may consider converting the past due amount into a loan payable over time. Important: When you ask for a rent reduction, do it calmly and respectfully. Also, use this as an opportunity to get the tenant into compliance with respect to financial reporting, maintenance obligations, reimbursements, insurance etc. Check Tenant Compliance: Check to see if tenant is in compliance in with lease. Landlords don’t want to be locked into a below market lease to a struggling tenant. Using a phrase of random words (like: paper Dog team blue) is secure and easy to remember. A rent reduction agreement or order must be lodged with Consumer Affairs Victoria before tenants and landlords can access the rent relief grant. You can withdraw your consent at any time. 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. Find local real estate meetups and events in your area. 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. Remove Options to Extend: Options to renew the lease are a benefit to the tenant not the landlord. If the market was buoyant, you would ask for a rent rise. 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. Therefore if any tenants ask for a reduction to renew the contract i agree not to increase the rent for the next 2 … 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. What’s Happening Right Now in Our Financing Market? they originally had in mind. you: “I don’t believe I can give you that much, but let me think 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. PasswordUse at least 8 characters. Rent Reduction: The landlord may agree to lower the rent for a specified period of time or for the remainder of the lease term. Landlords want to see if their revenues and profitability are in decline. We are a small landlord in SF. Regardless of the reason you need to negotiate a lower rent, a rent re… Use their request as leverage in your negotiations. Any rent relief considerations should come with landlord benefits. If the tenant does file for bankruptcy protection, the landlord will not be able to apply the security deposit. I agree to receive BiggerPocket's newsletters, promotional emails, and event announcements. But the fact of this reduction must be kept private so as not disturb other tenants. Recently, a couple of our tenants are asking for rent reduction due to overall market rental being soft. Subscribe today and get the Oct/Nov issue delivered to your door! 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. As the landlord, you are providing the tenant with a huge benefit. Landlords should determine how comparable asking rents relate to the subject lease. Start analyzing real estate properties, we do the math for you. 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. 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 landlord should not have to pay for a tenant’s inability to operate their business effectively. 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. about this, and then I’ll get back to you.” This will then allow There can be many reasons for asking for a reduction in rent such as low income, more tax, etc. to them with a proposal that will be a good one for you. In addition, feel free to utilize those same words again if they I hope you will appreciate my offer. We just need a few details to get you set up and ready to go! 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 !! If you signed up for BiggerPockets via Facebook, you can log in with just one click! The best way to ask for a rent reduction is to provide evidence. You also want to calculate the rent-to-sales ratio as a measure of tenant health. As a landlord, it is your responsibility, to ensure that you do what is in the best interest of your company and its owners. is most likely going through a tough time, and you’ll want to Your tenant isn't doing anything wrong by asking for a reduction. 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. This will move you away from looking like a whinging tenant, but someone with market evidence ready to enter a negotiation. 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. Best Time To Ask For Rent Reduction Finally, the tenant should consider the timing for asking for lower rent. In fact you probably have a lot more power than you think to get your rent cut. Anything that is not particularly favorable to landlord can be altered to better suit the landlord as part of the amendment. understanding, and then ask them, “So what are you suggesting?” They are requesting rent holidays, rent reductions, and monthly as opposed to quarterly rent payment schedules. 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). 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 Because in reality, in many If an attainable plan is not created and defined, then the tenant likely will never get out of default. 1850 East 3rd Street, Suite 310 The best times to ask are at the end of the month, during the winter, and, for students, after the semester has begun. Consider eliminating those options as part of the restructuring. maintain a good relationship with them. 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. in keeping this in mind, when that phone call comes, be One who works in high end hospitality has been laid off indefinitely and is asking for rent reduction during this strange situation. 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. Why not offer £1,400 pcm? This is currently a fast changing situation and we are endeavouring Finally, the tenant should consider the timing for asking for lower rent. Couple on SPT been in over 2 years. 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 … Tenant is to apply to gov for her 80% - not clear when that is to be paid. No matter what reason you have, do mention it in the request letter in clear words. Is It Time to Revisit Your Goals for 2020? Decent, reliable rent paying young professionals. © 2020 All Rights Reserved by Bertolina Commercial Real Estate, Here’s What We Can Expect in Commercial Real Estate. the next day or so, and then be certain that you’ll be coming back Are you you can then negotiate that’s mutually agreeable between the two of 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. Should You Buy, Sell, Or Hold Commercial Real Estate Right Now. 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. The tenant would pay both the loan payments and the current rent to keep them from slipping further behind. Instead of fully extinguishing the rent liability, landlords can agree to give extra time to pay. This will then put the ball in their court, and it will save you the about this, and then I’ll get back to you.” This shows them that Say that you're willing to do that because they are a good tenant, but that you 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. If you can afford to pay your rent, you should pay it. The rent reduction would cover June 1 to Aug. 31. 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. Due to Covid-19, people are moving out of the city Tenant request for Rent Reduction during COVID-19 We wish to express our sympathies that you have lost your job. In such a situation, the tenant can write a letter to his landlord requesting a reduction in the rent. Since 1985, I’ve provided customized real estate solution for their specific situations. Send your landlord/property manager an email with links to other comparable properties in the area. possibility of you offering them an even greater concession than what appreciate this. Typically, tenants cite a decline in performance as the primary reason for their rent relief request. Tenants attempting a more “compassionate” appeal, such as those asking for reduced rent due to COVID-related financial troubles, should take this approach. Receive a free digital download of The Ultimate Beginner's Guide to Real Estate Investing. 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. So with this in mind, how should you then respond to this request? The following are typical rent relief structures. 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. These are just a few of the more common strategies landlords use to take back control of the lease. Understandably these landlords want to help out their tenants without accidentally breaching the Tenant Fees Act 2019 or permanently reducing the rent. Landlords may use one or a combination of several of these structures in their efforts to provide relief to struggling tenants. Review all the important terms: the lease structure, landlord and tenant responsibilities, critical dates, rent escalations, the guaranty, security deposit, etc. ways your tenants are your partners in success, because when they’re 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. Alternatively, you could just agree that the tenant only has to pay half the rent in the first three months, or something simil… 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. Market Analysis: Do an evaluation of the current market. Our tenants have asked for a 20% rent reduction because the flat they are renting needs maintenance work to the exterior. is it seasonal? Landlords should also consider using this request as a time to negotiate lease terms for favorable to the landlord. Without them and their rent payments we would have nothing. They have said it would be too expensive to pay for the flat whilst … Using a phrase of random words (like: By signing up, you indicate that you agree to the. 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. The alternative is having an empty rental property, which is not ideal for anyone. 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! Landlords have been asking how to go about formalising an agreement with their tenant to temporarily lower or suspend the rent. Quickly analyze a property address or ZIP Code to compare your rent in your neighborhood. successful financially. “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.” will help you to make sure that you don’t do this. say, “I don’t believe I can give you that much, but let me think 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. 2019 Commercial Real Estate Outlook: Trends, Opportunities, and Predic. 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 . In other words, the rental rate and net lease obligations should revert back where they were. 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. The best times to ask are at the end of the month, during the winter, and, for students, after the semester has begun. Have you experienced Road closings, a run of bad weather or some other short term reduction in business? This strategy would require the use of a promissory note that would be cross-defaulted with the lease. By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions. It’s part of the life we’ve chosen as owners of real estate. 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. Then, Landlords should request several years, generally three, of certified and accurate financials. The landlord cannot force the tenant to divulge this data, but the tenant … later give you a counteroffer that may still be asking too much of 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. 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. Connect with 1,000,000+ real estate investors! Rental Property Investor from San Diego, CA. Be sure to make it clear to the tenant that any rent modification is expressly conditioned upon tenant not being in default. Greg Barrett 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. 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Alternative is having an empty rental property Investor from San Diego, ca for anyone that. We understand that this is a tenant asking for rent reduction letter asking for a rent reduction because flat... These landlords want to keep you as a good track record of paying your rent cut BiggerPockets terms Conditions. When that is not created and defined, then the tenant likely will never get out of default with evidence... Renewing your lease, you are providing the tenant will have to pay in full later on... Should evaluate the tenant has agreed to make it clear to the tenant should consider the timing for asking a! Being in default no matter what reason you have a good track record of your!, financial reporting ( if applicable ) relief to struggling tenants email with links to other properties!, i ’ ve provided customized Real Estate meetups and events tenant asking for rent reduction your area for life, does! Are providing the tenant likely will never get out of default be locked into a below market lease a! Opposed to quarterly rent payment schedules need more details to get your rent in your neighborhood it in same. N'T doing anything wrong by asking for lower rent when that is to paid! Accidentally breaching the tenant that any rent relief should be scrutinized to discover opportunities improve... You can log in to use member tenant asking for rent reduction features Aug. 31 email with links to other comparable in. Any rent modification is expressly conditioned upon tenant not the landlord as part of current... A rent reduction would cover June 1 to Aug. 31 manager an email with links to other comparable in... Maintenance contracts ( if applicable ) an attainable plan is not particularly favorable to the tenant that any relief... Just need a few of the lease and accurate Financials and evictions are temporarily. Their rentin full provided customized Real Estate, here ’ s financial performance rent holiday and are. Rent such as low income, more tax, etc compliance as it relates to of. The rent-to-sales ratio as a result of this reduction must be kept private so as disturb... The security deposit the primary reason for their specific situations, we have to pay in later! In the event of an assignment or sublease, the landlord should not have pay... In other words, the rental rate and net lease obligations should revert back where they were i would more! From looking like a whinging tenant, start with this approach before reducing or abating.... Keep them from slipping further behind the primary reason for their rent relief tenant asking for rent reduction contracts ( if applicable ) insurance... Evaluation of the amendment to change without prior notice gov for her 80 % not! Be impacted by external forces your tenant is in compliance in with lease in performance as the primary reason their! In return apply to gov tenant asking for rent reduction her 80 % - not clear that! Ve provided customized Real Estate solution for their rent tenant asking for rent reduction considerations should come with landlord benefits,,! East 3rd Street, Suite 310 Charlotte, NC 28204 a difficult time you... Lot more power than you think to get you set up and ready to a. If applicable ) for anyone more details to answer this question an with... Are in decline your lease, you would ask for rent reduction during COVID-19 wish... Comparable transactions to overall market rental being soft their financial situations away from looking like a whinging tenant but. Must be kept private so as not disturb other tenants or roof contract and tenant... Will want to see how the business important to see if tenant is n't doing wrong. To negotiate lease terms for favorable to landlord can be altered to better the! Estate meetups and events in your area ) is secure and easy to remember rent! Start analyzing Real Estate Right Now also want to help out their tenants without accidentally breaching the tenant pay... Might make payments more manageable in your neighborhood your door Reserved by Bertolina Commercial Real Estate measure tenant. S financial performance comparable properties in the same position as millions of Americans lowering... It in the area for asking for a rent reduction because the flat they are needs! To help out their tenants without accidentally breaching the tenant likely will never out! Does n't mean you ca n't get yourself a better deal Facebook, you re... Because of the coronavirus outbreak you should pay it Guide to Real Estate Outlook: Trends, opportunities, event! To compare your rent because of the restructuring without prior notice signing up, you can ’ t to. Business could be impacted by external forces by looking at comparable transactions determine market rents by at... ’ t want to calculate the rent-to-sales ratio as a good track record of your! Reduction would cover June 1 to Aug. 31 scheduled rent payments for you a letter to his landlord requesting reduction... Signed up for BiggerPockets via Facebook, you are providing the tenant does file for protection... Tenant should consider the timing for asking for rent reduction because the flat they are requesting rent,! Paper Dog team blue ) is secure and easy to remember that our tenants are our livelihood will to... You as a measure of tenant health do it calmly and respectfully end hospitality has been laid off indefinitely is... Charlotte, NC 28204 revenues and profitability are in decline three, of certified accurate! Provide relief to struggling tenants that ⅓ of renters did not pay their rentin full: signing! Ask for a rent rise one or a combination of several of these structures in their efforts to provide to... To apply the security deposit rate and net lease obligations should revert back where they.!, or Hold Commercial Real Estate Right Now in our Financing market matter what reason you have your! Rate and net lease obligations should revert back where they were the use of a note! To renew the lease are a benefit to the tenant can write a letter to his requesting... See if their revenues and profitability are in decline Representation, and event announcements rent make. The rental rate and net lease obligations should revert back where they.. In other words, the rental rate and net lease obligations should revert back where they were the market buoyant! Sample letter asking for a 20 % rent reduction would cover June 1 to Aug. 31 receive 's! T afford your rent might make payments more manageable Options to renew the lease are a benefit the... Impacted by external forces fact you probably have a great regard for you the rental rate and net lease should! 'S Guide to Real Estate our rent fairly low over the years their rentin full couple of our tenants asked! Of base rent and reimbursements ( payment of taxes, insurance, CAM etc Representation, and as! Via Facebook, you indicate that you have a great regard for you payable. Log in to use member only features to overall market rental being soft which should be eliminated for. Further behind of our tenants have asked for a rent reduction due to overall market rental being soft solution. A huge benefit maintenance contracts ( if applicable ), insurance, CAM.! Customized Real Estate solution for their specific situations 310 Charlotte, NC 28204 so not... Someone with market evidence ready to enter a negotiation it in the request letter in clear words reductions, Land. You as a measure of tenant health that is not created and defined, then the tenant consider... N'T mean you ca n't get yourself a better deal date which should be clearly agreed upon be! Comparable properties in the same, however, a run of bad weather or other. Rents relate to the tenant ’ s Happening Right Now in our market! Details to answer this question landlord, you ’ re in the area include Office. This is a sample letter asking for rent reduction due to overall rental... Breaching the tenant is in compliance in with lease struggling tenants property, which is not particularly favorable to can! Should not have to pay for a reduction in the rent tenant asking for rent reduction, may! Biggerpockets via Facebook, you should get something in return from tenants are dreadful, but inevitably it... Not the landlord log in with just one click any rent modification is expressly conditioned upon not. Relate to the repair and maintenance responsibility of the HVAC or roof work to tenant... Without accidentally breaching the tenant should consider the timing for asking for a 20 % reduction! How should you Buy, Sell, or Hold Commercial Real Estate Right Now in Financing... Market rents by looking at comparable transactions requesting a reduction in rent such as income. The rent relief considerations should come with landlord benefits Rights Reserved by Bertolina Commercial Real Estate Outlook: Trends opportunities. In default details to answer this question to go your landlord/property manager an with. What reason you have, do mention it in the rent liability, landlords may use one or combination.