Practice Management

Commercial Lease Renewing Dos & Don’ts for Veterinarian Tenants

By: Jeff Grandfield and Dale Willerton – The Lease Coach

As an existing veterinarian tenant approaching your commercial lease renewal, should you blindly accept the same terms and conditions from your landlord that you did when you signed your initial lease? No. A veterinarian tenant can often renegotiate a lease renewal to his/her benefit.

Therefore, before you simply sign on the dotted line, here are a few “commercial lease renewing” do’s and don’ts to remember:

DOs

Do create competition for your tenancy. Negotiate on multiple locations simultaneously – especially with lease renewals. Even if you don’t want to move, create options so you can play one landlord against another. The Lease Coach makes the landlord earn (and re-earn) your tenancy.

Do plan well in advance. For existing clinics and lease renewals, we recommend that you start at least 12 – 15 months ahead. This allows for ample time for completing paperwork, searching for alternate sites (if necessary) and accounting for Murphy’s Law.

Do keep your success quiet. One reason your landlord will raise your rent for the lease renewal period is due to your success. If you have been profiting in a particular location, you likely will not want to move but simply absorb the rental increase. Some agents and landlords will take advantage of veterinarians knowing how expensive it can be to move and set up a new clinic.

Do talk to other tenants. For lease renewals, talk with neighboring tenants who have recently renewed leases. Be direct. Ask what the landlord agreed to in terms of rental rates and further tenant incentives.

Do negotiate for lease renewal incentives. For some reason, tenants neglect, or are simply fearful of negotiating for lease renewal incentives. If your lease is expiring, ask yourself what inducements would the landlord give to a new veterinarian just coming into the property. Examples of such inducements that The Lease Coach gets include free rent and tenant allowances. If these were being offered to a new veterinarian, then why wouldn’t an established veterinarian tenant get the same (or more) consideration?

DON’Ts

Don’t have false optimism. When veterinarians tell us their clinic isn’t doing well, but they want to renew their lease anyway, this is false optimism. Without changing location or something else about the way you practice, you should not realistically expect your next five years to be better than your first five years. Moving may be difficult, frightening, time-consuming and expensive to consider, but may become absolutely necessary.

Don’t settle for your same rental payment. A lease renewal rent reduction can be attainable. If your landlord is leasing space to new tenants at less than what you are currently paying or if your current rental rate is artificially high because of your last tenant allowance, a rent reduction on your renewal term should be a given.

Don’t accept the first offer. Once your landlord has made the first offer or proposal regarding your lease renewal, the real negotiations begin. Don’t jump to accept that first offer, even if it seems reasonable. With patience and good communication, you can almost offer any first offer, which may be nothing more than a smokescreen anyway. At The Lease Coach, we counter-offer multiple times for the best end result.

Don’t allow the landlord to retain your deposit. If you have paid the landlord a hefty deposit on the property, request this back upon your lease renewal date. You have proven yourself as a responsible tenant over your initial term. The Lease Coach frequently gets the veterinarian’s deposit back when renewing a lease.

Don’t disregard your Operating Costs. Having your lease and/or operating costs analyzed is a simple and effective way to keep your landlord and property manager honest. Operating costs can be padded or miscalculated and veterinarian tenants can pay too much. Often, it can be advantageous for groups of tenants sharing the same property to unify for an operating cost analysis.

Don’t exercise options. Even though you have a renewal option, you may not want to exercise it – especially if the renewal term rental rate automatically increases or can’t decrease. If you are certain that your landlord wants you to stay and market rates (the “going rate” in your neighborhood) have softened, you may want to negotiate your renewal without, officially, exercising the option.

These are only a few of the Dos and Don’ts that will help you when it comes to renewing your commercial lease for your own veterinary clinic.

For a copy of our free CD, Leasing Dos & Don’ts for Commercial Tenants, please e-mail your request to JeffGrandfield@TheLeaseCoach.com.

Dale Willerton and Jeff Grandfield – The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Dale and Jeff are professional speakers and co-authors of Negotiating Commercial Leases & Renewals FOR DUMMIES (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com or visit www.TheLeaseCoach.com.

 

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