How do I handle a situation when an applicant or tenant wants to negotiate a lower rent amount?
Prospective tenants and tenants wishing to renew their lease may ask for rent considerations from a landlord.
There are several factors that landlords may want to consider before entering into negotiation with an applicant or tenant for a rent concession.
Supply and demand of rental housing in the local market, the rental property location and its amenities, and the landlord’s rental policies greatly influence the landlord’s ability to fill a vacancy. The ability to fill a vacancy in a timely manner may be the decisioning factor for a rent concession.
In local markets where renters may have many rental housing choices, landlords may be challenged to fill vacancies. As a result, market conditions may encourage a climate of rental negotiation, compromise, or incentives.
Market research of the local area is helpful in general to evaluate a rental property’s competitive position in the market for rents, amenities, move-in incentives, unit size, and floor plans to gauge the attractiveness and desirability of the property in comparison to others in the area. By analyzing the market data a landlord can determine if a rent adjustment should be considered.
The season of the year and the geographic location of a rental property may also play a part in how quickly a vacancy might be filled. The winter season in many localities may be a factor in reducing the number of potential rental applicants. With the prospect of an extended vacancy due to low demand, a landlord in cold weather climates may be willing to consider a rental concession.
The number of current vacancies and timing of future lease expirations can also be factors in considering rental concessions. Analysis of business operations is always a consideration in a decision to modify or change any rental policy. The question to be answered is whether it is financially worth it to negotiate rents. There could be other alternatives that can be offered to an applicant/tenant besides a reduction in rent. Incentives in the form of new paint, carpeting, a dishwasher, or covered parking may be equally attractive to a potential tenant or a renewing tenant. Many times it comes down to market conditions and business necessity that determines the feasibility of rental modification or waiver. If it is truly an issue that the landlord will not negotiate, a firm restatement of policy should end the discussion.
As a checklist, before responding to any requests for rental modifications, waivers, or special incentives, a landlord should consider the following issues to determine cause and effect of his decision:
- Legal – There are certain legal landlord-tenant rights and obligations that cannot be waived or negotiated. Most aspects of landlord tenant relationships are regulated by state and local laws, and by federal statutory laws such as anti-discrimination (e.g., fair housing laws), and certain health or safety issues (e.g., lead-based paint).
- Market Condition – Does the current market condition warrant incentives or concessions? Does the rental property compare favorably with others in the same market?
- Business Condition – Is the business in good shape? How would changes impact business operations and bottom line?
- Cost of the proposal – What are the hard dollar costs of the request?
- Alternative options – What other options might produce a satisfactory compromise or relief?
- Tenant Relations – If the negotiated issue is approved or denied, would other tenants have cause for concern, or potential claims of discrimination?
- Reputation –Would this action be perceived as unfavorable to the rental community? Does the action create an impression of lax rental standards and policies? How would the action affect the landlord’s brand and market standing?
- Consequences of Approval/ Denial – Could this action ripple through to an unintended consequence now or later?