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Question
I am looking for a sample letter to present to our property manager requesting a rent abatement. Due to current economic conditions, we are asking for a reduction in rent. Our sales have been basically flat since August 2008 (we opened our retail business in March 2007). Since we opened, we have now had 2 big box retailers close their doors. Needless to say, this will reduce traffic to our mall. Any guideance is appreciated.
Teri:
The retail world is coming apart and I am sorry to tell you that it is going to get MUCH worse before the decline levels off. All my research sources - and they are very sophisticated professional sources - are projecting an economic horror story.
If you landlord is wise, he will accommodate any reasonable request you make for a rental deduction because NO ONE will be leasing those two big box stores for a long time. If he rejects you, he won't have anyone paying what you are asking to pay and replace you. He knows this whether he admits this to you or not. In fact, make sure you are asking for a big enough reduction.
Your landlord needs to keep you in your space paying him ANYTHING. You might find he wants to act out how hard it is for him to "give you a break" because he will be afraid you will go and tell all the other tenants how easy it was for you to get your rental reduction. He will have nightmares about all the other tenants lining up outside his office to make the same request as you.
I know that you worry because you fear that your landlord will chase you for all the rent stipulated in your lease if you don't get the rental reduction. That would be "pound foolish" on his part and I hope that your landlord is not foolish. I would not accept a counter-offer that you pay a lower rental now but pay a higher rate later on so the landlord does not lose any rental dollars.
You might find that the absence of the two big box stores gives you some protection in landlord / tenant court from the landlord attempting to collect the rent. Check with counsel, however, it may be that to escape further legal liability for your rental based on the two big box stores going dark, you must actually vacate your premises.
Whatever you do, understand clearly that your problems are not unique, absolutely everyone in retail - except maybe Walmart - is suffering and struggling to stay afloat.
I am very sensitive to your situation and feel terrible about this dramatic change in the economy. I have many of my own clients in your same situation and it hurts to watch them struggling when it wasn't their fault.
Good luck with you lease request, and do not feel any embarrassment in this effort. Everyone supports you.
In Hoc,
-Jim
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Answers by Expert:
Jim Avancena, CPM
Expertise
Best qualified to answer questions that involve commercial leases, that is, basic issues as well as the often unexpected effects of the complexities and inter-relationships of the provisions a lease may contain, explain how seemingly innocuous text in your lease can have a major impact on a Tenant or Landlord and their business operations, and the common practices utilized in the industry. I can untangle most matters that may come up from the time a tenant begins searching for a office or store space and the lease acquisition process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of problems that may come up during the lease term and even after a tenant moves out. I have practical experience with most property management issues and resolving landlord and tenant disputes - especially those involving what may appear to be overcharges assessed for additional lease charges like CAM costs, operating expense reimbursement, real estate taxes, utilities, construction improvements etc. Note that I am not an attorney and cannot provide legal advice.
Experience
Thirty years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area (DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.
Organizations
Currently my three children keep me so busy that it is difficult to participate in organizations with continuing and specific time requirements.
Publications
I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 full pages) feature story on January 13, 1993; titled "Overcharging Overhead".
Education/Credentials
BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license in Maryland and the District of Columbia.
Awards and Honors
The same plaques and honors that most others in my industry have earned. I have none that I consider especially meaningful.
Past/Present Clients
Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.
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