- Security Deposit “Burnoff”: In a situation where the landlord requires a large security deposit, some brokers are successful in negotiating the partial refund (or “burnoff”) of the security deposit provided that the tenant is not in default after a specified period of time. This is a great way to put cash back in the tenant’s pocket.
- Amortization of Termination Fee: Some tenants are successful in negotiating an early termination, but at what cost? As the tenant pays rent, the landlord recoups some of its initial costs such as landlord’s work, broker commissions and attorneys fees. Therefore, some landlords are willing to agree to amortize the termination fee over the term of the lease.
- Good Guy Guaranty. One of the landlord’s biggest concerns is recourse if the tenant defaults. If the tenant is a business entity that holds no assets except the lease, landlord’s recourse is essentially limited to the personal guaranty which is typically provided by tenant’s principals. By limiting the personal guaranty to a “good guy” guaranty, the landlord preserves recourse if the tenant defaults and retains possession. Additionally, the tenant’s principal limits their personal liability if they vacate, hand the keys back and otherwise comply with the terms of the Good Guy Guaranty.
- Option for Lease Renewal. Tenants can plan, budget and save considerable resources by renewing their lease. Without an option to renew, the landlord can increase the rent to a point where it becomes cost prohibitive for a tenant to remain or ask the tenant to leave so that the landlord can expand another tenant’s space in the building or repurpose the space. Negotiating the term and rent during the renewal term are examples of how the broker can add value.
- Landlord’s Work Upon Lease Renewal. Another trick of the trade is negotiating for landlord’s work upon a lease renewal in advance. For example, paint, carpet, ceiling tiles and lighting can get tired over time. A landlord benefits by retaining a good tenant, avoiding vacancy, broker commissions, and maintaining the value of the building. A tenant benefits by avoiding moving costs. While this may require some forward thinking by both parties, it can be a creative way to add value to the lease.
Based on the foregoing, there are some relatively simple items the tenant can ask for that can potentially save the tenant a great deal of money while helping them budget and plan for the future.
For questions pertaining to commercial real estate or general information about our firm, please contact us at (914) 338-8050 or send an e-mail to keith@betenskylaw.com. We look forward to hearing from you.
Betensky Law PLLC
118 N. Bedford Road, Suite 302
Mount Kisco, New York 10549
(914) 338-8050
keith@betenskylaw.com
www.betenskylaw.com
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