Commercial leases are just one of the financial obligations that can weigh heavily on small businesses, especially during a pandemic. Having good support and information can make all the difference to getting leasing right, and if things go wrong. Understanding the pros, cons, and differences with commercial leases is important. So is awareness of recent legal changes and knowing where to turn for help.
Review your lease closely, and immediately
The uncertainty of Covid makes it imperative to understand the rules of your lease. Now is the right time to review your contract carefully, regardless of whether you're just starting property negotiations, or if you've been settled for some time. As things are shifting quickly, it’s worth knowing your responsibilities and rights.
Commercial leases are all unique, and they lack a shared ‘safety net’. They have a wide variation in their treatment of things like rent hikes, access, penalties, usage, and fit-outs. Your lease agreement may be completely different from your neighbour’s, even if they have an identical unit in the same block.
Commercial leasing involves complex law and specialist understanding. Sometimes, it's essential to get professional advice. While a Mentor is not a professional advisor, they can help you understand when to seek expert help and what to look for.
Start with what suits your business
Before taking on a commercial lease, it’s worth making sure leasing is right for your business. A great person to talk to is your business Mentor; they have skills to help you deepen your thinking about key decisions. They may also have first-hand experience with their own commercial leases.
Small businesses are rarely able to own their commercial premises, so leasing is very common. Leasing offers the benefits of more flexibility, fewer responsibilities and less risk. However, it does put you at the mercy of your lease agreement and your landlord. What does this mean for you?
Keep up to date with new law
Although commercial leases don’t have inbuilt protections, the government has made some temporary law changes in response to Covid. These changes aim to help commercial tenants and their landlords s get through the pandemic. For now, tenants have more time to catch up on overdue rent before they can be evicted; the period has extended from 10 to 30 days. In turn, commercial landlords also get an extension overdue mortgage payments before they get a possession notice. You can find more information at www.business.govt.nz
Communicate and negotiate with goodwill
Unfortunately, things can still go wrong even when you’ve worked hard on getting things right. If they do, your approach and support can make a big difference. The first step should always be to talk to your landlord. Open, clear communication is essential. In most cases, there’s a shared incentive to find a solution.
Covid 19 has changed the business landscape along with the demand for commercial property. You may be surprised how this affects negotiations. A business Mentor can help you consider how to negotiate, and they can act as a sounding board for your thinking. You’ll also find that a Mentor is a powerful source of encouragement and support.
See what’s on the table in lease negotiations
Negotiating your rent can be an option even if you’ve had your lease for while. Your landlord may be able to provide reduced rent for a period of time. After the period has ended, the rental amount is usually reinstated to its original amount.
You may also be able to negotiate a rent payment plan. This can help you both. It gives you a chance to catch up on rent arrears while staying in your premises. At the same time, it ensures the landlord retains you as a tenant and is paid.
Remember that non-financial benefits also have value. Could relinquish, or gain something that helps the other party such as parking, signage and renewal options?
Make the most of a Mentor
Financial obligations, such as commercial leases, can be a daunting load for small business owners, especially right now. Shouldering this burden in isolation can be overwhelming. If you’re worried about your lease, or other areas of business management, then having strong support is essential. Visit www.businessmentors.org.nz today to be connected with a Mentor who’s ready to offer experience, perspective and wisdom.