I have recently negotiated a lease extension with the landlord for a high street retail business I own and share the story here.
I nominated that I wanted to take up the extension permitted in the current lease. This triggered a market review opportunity for them which they embraced. The landlord engaged a single local real estate agent who came back arguing for a 10% increase with little hard evidence. The double-digit rental increase was put to us by the solicitor for the landlord.
With the solicitor being difficult to deal with, I went back to the landlord explaining that I felt a fairer increase would be 5%. I explained that I had the option to reject their proposed increase through a more formal channel but would prefer to negotiate a middle-ground solution both parties could live with. I refused their argument of evidence form one real estate agent as being sufficient and reinforced that we had always paid on time and have been good tenants.
I was certain that QCAT would reject the landlord’s use of a single real estate agent and that the letter from the real estate agent did not, of itself, represent a fair market review.
After a couple of weeks consideration of my middle-ground proposal and several emails from me restating my case, the landlord agreed to the proposal of a 5% increase. While no increase can be considered to be good, it works in this situation. The business is tracking well and can digest the increase with much of what we sell not being fixed-price. Our approach is to chase more traffic, get existing traffic buying more and increasing our margin on all items through small steps on price.
I wanted to write about this today to encourage newsagents facing lease negotiations to be fair in their discussions with landlords, to always copy the landlord on any letter to their solicitor and to be clear in understanding what your next steps could be if you were to take a more formal dispute resolution approach.
While having a landlord who is committed to fairness is important, I think we can facilitate this in our approach to them when negotiating. They are entitled to ask for whatever increase they like. It’s where we end up that matters most. Where we end up often depends on how we approach the negotiation.
Negotiating a lease with a high street landlord is completely different to negotiating with a shopping centre landlord.
