Ask The Experts: Four tips for better rent negotiation
‘The King is dead, long live the King’, springs to mind on what is potentially the most concerning recession that I have experienced in five decades in the industry. The industry is in turmoil, and when the Government moratorium eventually is lifted, allowing landlords to collect rents, tenants won’t be able to find the money out of “thin air”. That said, here’s my overview and advice to hospitality tenants.
1. Cash is king
It goes without saying that cash is king. Tough talks with landlords are required and tenants should not accept deferred rent as an option – that’s just kicking the can down the road. They should seek rent free periods, and lease restructuring, at post Coronavirus rents to ensure survival, and remain competitive.
2. Pre-Coronavirus rents are history
Landlords should forget what used to be - accept what is - and more importantly, will be. It’s clear now that rents across most sectors are history. Landlords should accept that rents have collapsed by 30 – 40%. Landlords are bluffing. Most landlords will want to keep their tenants, for when the curtains reopen, and without that support, there will be liquidations in abundance. Landlords will then feel the pain, when they try to re-let empty properties, in an oversupplied market. Sensible ones will negotiate.
3. Consider the CVA route
This is a simple process, where a tenant can, however good their business has been, draw a line in the sand, negate back rent and agree a new lease with their landlord, which works for them. The process forces a level playing field and allows a tenant to propose a new business model that works for them.
4. Be transparent
Tenants need to be transparent about their position, and upfront with their landlords, revealing their financials when asking for help. A landlord busting a tenant, and not being able to find another one puts the banker under pressure. That will happen across the board where negotiations are not concluded. Landlords need to listen and work out whether they’re better to hold on to their tenant or not. Bankers should help landlords fund rent-free periods, to assist Tenant survival and keep the tripartite relationship together. The quicker we appreciate the adjusted market, the better. It is vital for Landlords, Tenants and Bankers to get together and find solutions, failing which, collapses are inevitable.
Anthony Lorenz is the founder of Lorenz Consultancy.
