Casa Realty Group LLC

Top Tips for Negotiating Leases with Your Tenants

September 8, 2023


Ludwig Erhard defined compromise as “the art of dividing a cake in such a way that everyone believes [they have] the biggest piece.” When it comes to negotiating a rental rate with tenants, this rings true. As a landlord, you want to make money on your investment, but keeping a quality tenant is much easier than finding a new one. It’s important to make money on your investment, but your tenants need to believe they are getting a nice big slice of the cake every month. To make that magic happen, here are 16 tips for negotiating leases with your tenants.

Know Your Minimum

If you’ve done your research, you know the minimum rent you need to charge in order to at least break even on your investment. This price-to-rent ratio is good to keep in mind as you begin negotiations. This is essentially how much rent you need to charge to recoup the price of the property. You want your tenants to be happy, but you don’t want to lose money.

Understand the Rental Market

Rental prices go up and down, and it’s important to know what similar properties in your area are renting for. It’s also important to consider the benefits of keeping a current renter in place by asking for a slightly lower rate versus raising rates to match the market and risking a vacancy.

Communicate Clearly

As a lease term ends, start communicating early about potential changes in terms and conditions. This gives tenants the opportunity to open negotiations, but it also builds trust. If a tenant believes that you value them and want everyone to get a good deal, they are more likely to stay in place.

Be Open to Change

Flexibility is key, especially if times are tough and tenants are scarce. Consider how your tenant’s needs have changed and be open to amending or adjusting their lease.

For example, if you have a commercial tenant that has changed the type of service they offer and needs to reconfigure the space or change their hours of operation, you might need to adapt the lease terms to allow for this in exchange for a rent increase.

Negotiate in Person

Tone and nuance are hard to read via email and text. If it becomes clear that changes to the lease are necessary, schedule a meeting to discuss it in person. In-person communication is best for building relationships, getting to know tenants better, and clearing up any concerns.

Be Compassionate

Listen to tenant concerns with compassion. It’s possible to make money on your investment and address tenant concerns simultaneously. If a tenant is struggling financially but has been a quality renter throughout their lease term, it may be worth lowering the rent to help them, even temporarily.

Write it Down

While it’s true that verbal contracts are legally binding in many states, the best way to avoid disputes is to write everything down. If you meet in person and agree to amendments to the lease, follow that meeting up with an email that includes an explanation of the agreed-upon changes and an attached document to be signed and returned. Always have proposed amendments reviewed by a licensed attorney who is familiar with the landlord-tenant laws in your state and local municipality.

Don’t Neglect Maintenance

Tenants are more likely to stay in your property (and renew a lease even if the price increases) if you keep up with maintenance and are responsive to their concerns. This includes regular maintenance of the property’s exterior and responding to any issues that arise inside.

Incentivize new renters

If you find yourself with a vacant property, fill it faster with incentives. You might offer a discount on the first month of rent or a reduced security deposit. Some landlords also offer discounted rental rates for longer rental terms.

Review Your Lease Regularly

Laws surrounding rental properties change frequently, which sometimes affects current tenants. Don’t rely on an old lease agreement to protect both renter and landlord. When a lease expires, update the terms to reflect any relevant changes in the laws, and make sure your renter initials those changes when signing.

Build Relationships

The key to a successful lease negotiation is goodwill. Take the time to regularly connect with tenants as people, not just as a source of income. This means emailing to see how they are doing or connecting over significant milestones (i.e., a business anniversary or a holiday).

Avoid Court

Sometimes, disagreements occur. Where possible, seek out mediation to resolve these disputes. Going to court is costly and adversarial, but mediation offers a way to address issues to the satisfaction of both parties. Mediation can also defuse potentially explosive differences and repair fractures in the landlord-tenant relationship.

Meet Your Responsibilities

Renters are required to pay rent and use the property responsibly, but landlords have responsibilities, too. Understand and meet these responsibilities, and you’ll have fewer problems (and more support) if issues arise.

Be Professional

Anger, accusations, and personal attacks are unprofessional and unproductive in negotiating leases. Even when the stakes are high, it’s crucial to remain professional, stay calm, and work toward a solution.

Offer Alternative Incentives

If tenants request a rent reduction, but that’s not possible, consider offering other incentives. This might include things like:

  • Painting
  • Free parking
  • Including utilities in rent
  • Carpet cleaning or other regular cleaning service

If tenants have been paying for these services, they may decide to stay once that financial burden is lifted.

Know When to Walk Away

Keeping your property occupied with a high-quality tenant is the ideal scenario. But this does not mean you should set yourself up to lose money or make concessions that cost you more in the long run.

Sometimes the best option is to part ways with your tenant and look for a new one. This may mean a short-term vacancy, but if lease negotiations create a contentious relationship and a compromise where both parties feel cheated, it might be time to walk away from those negotiations and find yourself a new tenant.




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