When you own a commercial property, you may occasionally encounter a situation in which a tenant asks if you can alter the lease agreement. This can happen for any number of reasons. But the decision to lower a tenant's rent — either temporarily or permanently — is one that requires careful consideration, and should not be taken lightly.
For many property owners, the immediate inclination when a tenant asks for a rent reduction would be to simply say no. That's understandable. However, there are other things you have to consider here besides the potential loss of rental income, according to Rent Prep. But regardless of whether you own a residential rental property or lease to some sort of business, the math is trickier than that.
Simply put, people will typically ask you for a rent reduction because they like living or working in your property and don't want to move on, but the terms have become in some way unfavourable to them. For instance, if they have hit a tough patch with their business, a temporary rent reduction may be all they need. But if they are reaching the end of their rental agreement, you'll have to break out the calculator.
While you may want to deny a requested rent reduction of a few hundred dollars a month, you have to consider: What happens if they move out because of that denial? Do you think you can find a new tenant quickly? If not, the months of lost rental revenue might be greater than the amount you would lose by cutting the current tenant's price.
Of course, it's also important for landlords to be more understanding of issues individuals and businesses alike may be experiencing due to the novel coronavirus pandemic, according to legal expert Anthony Gold. There are plenty of assistance programs for which people may be able to qualify, and you should be prepared to help connect them with those options, in addition to being flexible about rental payments.
If you are looking to sell your current commercial property, or expand your portfolio with a new purchase, you need to have the pros on your side. At Ray White Surfers Paradise, we can guide you through the sales process from either side, leveraging our years of experience to get you the best possible deal and help you avoid any pitfalls that might otherwise come up. Get in touch with us today to learn more about how we can help you.
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