Weekly, I get the call, “My HVAC is out and the landlord is making me replace it at a cost of $5,000. My landlord does not care about my company or its success!” After a few minutes of walking the tenant through the situation, the following statement always rings true: YES! The landlord does care about your success… about 15-30 pages of it!
Let’s take a closer look at the landlord and tenant relationship. Landlords often appear to be the bad guys and often it feels like all they do is collect rent and get rich. It’s easily forgotten that most buildings were purchased with debt and secured personally by the landlord. They are running a high-risk business as well. LBR gets an insider’s look and understands many office buildings run on very low margins. An unfortunate roof replacement, an act of God, a sinkhole; you name it and the landlord has lost all their profit for the year or longer.
The tenant, however, does have the upper hand. The landlord is now fully indebted with vacant space and needs your rental income to succeed. In most cases the tenant, along with its brokerage representatives, has the power to negotiate rent, tenant expenses, and even tenant improvements provided by the landlord. The tenant, upon lease execution, should be fully aware of all their expenses for the entire term of the lease. Unfortunately, the landlord has no crystal ball to see what expenses he may incur in the foreseeable future.
To answer the earlier question; Yes! The landlord does care about your success, only as far as the lease allows him to care. If you don’t want to replace your HVAC at a cost of $5,000, then don’t agree to it in the lease document. Lease negotiation is probably one of the top 5 important negotiations in a business lifecycle. Often times the rush for the tenant to occupy, or not being aware of how to negotiate the lease, lead to the call described above. Ultimately, the tenant has the power to determine how much the landlord cares about their business success with a well-negotiated lease.
Rob Beckner, SIOR
Lightle Beckner Robison, Inc.