How to negotiate with your landlord to temporarily reduce rent
In less progressive states or developing countries like Cambodia, a stimulus package into the economy is either unlikely to happen or unlikely to be spent correctly, this means it is crucial for the private sector and the public to work together to prevent a recession.
Just bear in mind: Recessions are bad . You can read more about this here. In fact, read that before continuing as there will be economic relationships you’ll need to understand before you see how a negotiation with your landlord can actually help save your community and even your economy.
In these situations it is counterproductive to blame the Government when they are scrambling to stop the spread of the virus and trying desperately to keep their population alive, the reality is they don’t have enough resources to keep up their healthcare systems let alone have access to liquidity for countrywide spending.
“What does this mean for communities?”
We need to keep businesses running, and slow the movement of mass layoffs.
“Why?”
Besides from the obvious social issues of unemployment, we want to keep up demand. Businesses fire staff because of perceived drops in sales. And in some cases, actual drops in sales due to lockdowns. When unemployment happens due to layoffs, the entire economy has less spending which turns perceived sales drops into actual sales drops. Or in some cases, worse drops than predicted.
“So how does negotiating with my landlord help with keeping the economy going?”
It’s to help keep you going. If you haven’t seen our last post then click here for a video tutorial and very useful tool for keeping your business afloat. The idea is that if you can sustain, your supplier can sustain. If your supplier can sustain, their suppliers and their other customers can sustain too. And if everyone can sustain then staff aren’t fired, spending continues and we can avoid a recession. Social crisis avoided (Increased fear, crime, mental illness to name a few).
The negotiation is to reduce your cash outflow, because after your COGs and salaries, your rental or mortgage is one of your biggest cash outflows in your business and in your personal life. If we can manage this expense, we can manage one of the biggest deciding factors that keep you afloat.
So without further ado, here is a sample script that you can use to negotiate with your landlord in a simple bullet point format:
Thanks for your support of our business/organization/school/cafe/climbing gym etc.
As I’m sure you are aware, the impacts of the virus has caused economic problems for everyone, including us.
This is why I’m reaching out to ask for temporary assistance during this period so we can continue running our business and renting from you in the future
After running our cash flow forecast we can see these next few months will be quite financially difficult for us, so we're asking if it's possible to either hold our rent for a short period, or discount, or temporarily finance us, and we can start a payback scheme once the lockdowns are over.
Again, we intend on staying and continuing business and renting here, we are just asking for your needed support for a short time, and we can even discuss what a payback period will look like.
“And if they object?”
Don’t start with ‘But this', ‘But that’ or “Why don’t you understand'“, in fact, really consider what your response would be if you were on the other side of this conversation. They are in panic mode too and are not likely in the right frame of mind to understand why they should be helping other people instead. So try something along these lines:
“I understand it's a tough moment for you as well, I'm sure your friends and family are also afraid of what’s happening and the lack of information about lockdowns and increasing numbers of infected people is making it worse. The reality is that we want to stay here and continue renting from you, and we also want to continue paying our staff who have families and children.
We don't have income coming but are committed to looking after many of these families. So if we have to continue paying full rent, we simply won't have the cash even after pay cuts and will need to move out of this location now, we won't be able to give you any more cash for [Period ie) March/April].
This means you will have to look for a new tenant, and at the moment as you are aware, no one is investing or opening new business, it may be best to keep what income you have coming.
What I do know is that I will continue doing business here and can continue paying you rent if we work together, please have a think about my request, I’m happy to give you some space to think about it.”
Now, if this all still seems a bit complicated and you’re afraid you won’t be able to remember everything word for word then remember this:
Your landlords are people too. They suffer the same fears and anxieties as everyone else, about their children, their parents, their health and their sources of income, so your dialogue with them will be much more successful when you can make them feel understood. This means exercising the full power of your empathy in order to really connect with them. You’ll be surprised at how far a little bit of empathy and compassion can take you.
And if they’re still pushing back, it might be a good moment to move (if you can). Best of luck!
If this article was helpful please share, and if you have any questions please feel free to ask us.
The Idea has committed our consultants to pro bono support of SMEs during this period to businesses from failing which lead to layoffs, and to help direct donations, manpower and other resources for those in need. Please contact us if you’d like to learn more.