Premise Lease Negotiations

What I Have Learned in 30 Years of Lease Negotiation


Ian D. Toms


June 20, 2016

June 20, 2016

Writing the 75th article for this publication gives me cause to pause and reflect. There have been 75 articles for The Professional Advisory alone and countless other articles and presentations. Plus 30 years of lease negotiation. Thousands and thousands of lease negotiations from Hawaii to Alaska, Newfoundland, Rhode Island, Florida, New Mexico to California and many places in between. All this as well as 10 years negotiating and living with leases for my own retail tenancies from Sudbury to Kingston. I have the scars to prove it. I’ve learned a few things over the years. That’s why I do what I do. My experience is available to you so you do not make the costly mistakes that I made, or have seen others make.

Based on my experience, here are the top five rules of thumb when it comes to managing your premises lease.

1. Don’t forget about your lease. For some reason most tenants do not pay any attention to their lease and often wait until a crisis occurs. Most tenants don’t know what their lease says or means, or even where their lease is! Remember, your lease controls amongst other things:

a. your ability to sell your practice and retire, your ability to market your practice through signage,b. the ability for your patients to access your practice through parking and hours of operation,c. your ability to finance your practice,d. your practice profitability,e. what you can practice within the premises, andf. who you can share your premises with.

These are key issues concerning the very foundation of your practice! You need to be aware of what your lease says and how it works; those who fail to plan, plan to fail.

Get your lease reviewed and become familiar with the fundamental terms, conditions and opportunities. Look for what’s there, and what could be there.

2. Choose who should manage your lease affairs carefully.a. Do not negotiate your lease yourself. What you don’t know can and will hurt you. You wouldn’t hire a lease consultant, lawyer or a realtor to treat your oral health!b. Pay your representative to represent YOU, not themselves.i. Do not retain someone to represent your interest who is paid by the landlord, because that person is in a direct conflict of interest. Their incentive is to convince you to pay as much rent as possible because they are paid a percentage of rent.ii. Do not retain someone who charges an up-front flat fee, because that person is in a conflict of interest. Their incentive is to complete your file with minimum effort so that they – not you – make as much money as possible.c. Do not retain someone who does not have extensive personal experience. Even if the company they work for has experience, it’s the person, not the company, who will be doing the talking. The person representing you has to be able to walk the talk.

Choose someone to represent you who is working for YOU, has extensive personal experience, and who bases their fees on a cost: benefit basis.

3. Look for the positive. Being a tenant has certain advantages you need to keep in mind. Tenants generally spend a lot of time and energy complaining about what they don’t have and what they wished their landlord would do, often at the expense of realizing that there are opportunities as a tenant if you look for them. For example:

a. With low interest rates, landlords are often looking for an opportunity to finance tenant improvements and will do so if terms and conditions permit. So instead of complaining about a high rental rate, ask for an allowance that makes the higher rental rate rational.b. Your capital is not tied up in a property, you can pack up and leave, and you enjoy the synergy of being one of many tenants. If you own a property, you are stuck with a large capital investment, you can’t leave, and you may be “off by yourself”.

4. If you don’t ask, you won’t get. If your representative has enough experience, they can quickly develop alternatives that will turn a negative situation into a positive. But your representative has to know what to ask for.

5. Time passes quickly. Let time negotiate for you. Your lease is a static document that controls a dynamic process – your tenancy. If you play your cards right, you can benefit in a negotiation by using passage of time to “get what you want”. Often, landlords will agree to something you really want if it doesn’t kick in right away.

Still, after all of these years, I look forward to each day, each opportunity to resolve an issue and help a client become more successful. Recently a client emailed the following which summarizes why I do what I do:

“It was my pleasure to work with you in negotiating my lease renewal. Your professionalism and diligence allowed me a beneficial lease arrangement that should take me to the end of my career. I also know that my landlord felt very comfortable working with you”.