A major obstacle confronted by many retailers in formulating an Exit Strategy, is the problem of a lease obligation and terms that may prevent termination. Rather than considering an executed lease unchangeable, a retail tenant should look for ways to negotiate with the landlord for a solution that is mutually beneficial.

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How to Negotiate:

If a tenant wants to sublease space or sell a lease, this should be a subject of negotiation even if the lease contains provisions to the contrary. In some cases, this is the only way a tenant in trouble can solve the problem and still make sure the rent is paid.

Regardless of the negotiation taking place or the relative interests of the tenant and landlord, it is usually in the interests of both parties to be reasonable and to negotiate in good faith to solve their problems while minimizing the damage caused to the other party.

Although the initial negotiating position may be one of intransigence on the part of the landlord, it is likely that the landlord can be convinced to be reasonable.

Frequently, the negotiation opens with a landlord willing to make no concessions. The tenant may then make the decision to close the store. The store goes dark, rent and common area maintenance payments cease, customer traffic is reduced because one of the shopping center draws is gone, and the look of the center is impaired because of the empty space. The landlord may then become much more willing to look for a solution. If the tenant has offered a reasonable solution to begin with, which the landlord has rejected, the tenant will very likely have an advantage when put to the “fair and equitable” test.’

Reasonable people can often negotiate a solution to a problem. However, negotiations over a lease may need to be addressed by a qualified professional. A local generalist is often not up to the task of producing the best outcome for the retailer who may be dealing with a large, sophisticated landlord. Since these negotiations often involve retailers and landlords that operate in many states, the best negotiators are familiar with the issues in many jurisdictions.

In Summary:

It has been my experience of many years and hundreds of tenant/landlord negotiations that a tenant asking a landlord for any lease concession is normally met with a prompt refusal. The landlord has an overriding concern with protecting the integrity of the lease and not varying from the written word. However, the effort to negotiate should still be made. If the argument is reasonable and well supported, it is likely that the landlord’s position will soften.

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