Negotiating Rent - turnover linked

blueyedson

Hey,

Can anyone shed some light on negotiating rent ,where the rent paid is depending on the turnover?

Am looking at a retail unit where we knwo the asking rent is too much (still tied into old upwards only)

Was thinking of figures something like this for an example.

Asking Rent €50,000
We reckon the rent should be about €30,000 going by the current turnover / profit marhins / other expenses.

What way do rents tied into turnover usually work?

Could we offer say €30,000 bottom and say up to €60,000 ceiling. The variance of €30,000 on a scale of % of turnover than exceeds a certain amount.

Confusing or make some sense ?

antoinolachtnai

Are you talking about purchasing an assignment? If so, the person selling the lease isn't in a position to negotiate with you on the passing rent.

If you were dealing with the landlord, you could offer as you propose. The main issue is how he can find out what your turnover as a small owner-managed business really is.

blueyedson

Well its a sublet so were dealing directly with the landlord. We're trying to think of idea's to getting the overheads down and the main problem is the rent. We've been told the landlord wont reduce the rent and he doesn;t have to as per the old rent agreements.

It has been slightly reduced since a couple of years ago, but it is still higher than the going rate.

We see some potential in the shop and we know the landlord and person we would sublet from are interested in us, so feel we have a little bit of bargaining strength.

HellFireClub

I obviously don't know the unit size or area but 50K sounds like Celtic Tiger rent for a small industrial unit anywhere around DUblin. My advice to you if you think the rent is too high is just look elsewhere. There is loads of value to be had out there at the mo...

antoinolachtnai

If it is a sublet, you wouldn't be dealing with the landlord on the face of it.

A sublet is not necessarily a good place to be. You need to make sure you have tenure and the consent of the landlord.

Is the sublandlord prepared to absorb part of the discount? (probably not). But realistically this is the sublandlord's problem and it's up to them to come up with a solution.

You do not have any real bargaining strength here, at least nit with the landlord. As things stand the landlord has a tenant tied in to a good rent. Why would they now accept a lower rent from you? You might have a good argument in terms of local rents and so on but that doesn't mean the landlord has to listen.

maxer68

I'm gueesing the landlord is either trying to help out a current leaseholder or is trying to pull a fast one in getting you to take on the old lease.

Whatever way it is, avoid taking an old lease and ensure you ahve a new lease which prevents upward only reviews.

Your best bet is to look at similar properties in similar locations / towns and see what they are going for and benchmarking against them.

An option for you is to pay a base rent of €1000 / month + % of turnover. - % rate would depend on the type of outlet you are opening.

blueyedson

Thanks for replies

Sorry I menat to say we are not dealing with the landlord, we are subletting.

Its true the landlord has the tenant tied into a lease for another 8 years or so; so why should he reduce the rent more if he doesn;t have to.

On other hand, the business is not doing well (as many others out there) and the landlord doesn't want the business shutdown for obvisious reasons.

antoinolachtnai

So does the landlord have personal guarantees from the tenant? Do the current tenants have any assets that the landlord can pursue them for?

If yes, would the current tenants be prepared to accept a lower rent from you and top it up to the amount required for the lease?

I can't see this working out for you, but if you are going ahead, be sure to talk to local estate agents. They may be able to offer you as good or a better deal.

callummcg

Believe me its a renters market out Control is in your hands Average commercial property has dropped by up to 70% therefore rent should
eventually fall in line. Everything shall even itself out regarding commercial value of property V rent .Thats the beauty of a recession ,values are realistic and everything falls in line of its thru value.In these times 6 months rent free in not unheard off ,you can throw upwards reviews where the sun doesnt shine and yes you play the if I get I get card.Listen I am landlord of commercial property and I would be looking for rent to cover the interest only and rates