In the best of times, negotiators brim with resources, energy, and optimism, which inspire collaboration and creativity. In the worst of times—such as now—negotiators are so stressed and fearful that they can be distrustful and rigid. During the Covid-19 pandemic, we’ve often seen the latter negotiation style. But several collaborative negotiation examples have emerged in the realm of tenant-landlord negotiations—including in the notoriously cutthroat New York real estate market.
When New York City went on lockdown in the spring of 2020, even thriving retailers suddenly teetered on the edge of disaster. Forced to close their doors, they wondered how to pay their rent. Although some landlords flatly refused to negotiate, many were willing to bargain, writes Anne Kadet in the Wall Street Journal.
Josh Goldberg, co-principal of New York storefront property owner Goldberg Group, told Kadet that he has been motivated to keep tenants in place. “The cost of replacing a retail tenant is very high and there is a lot of uncertainty as to how long the space will be empty,” he explained. As a result, he offered many tenants short-term rent reductions during the pandemic, from 30% to 100%. That kept his vacancy rate relatively low for Manhattan—around 5%.
Just five weeks after opening the Brooklyn boutique Rue Saint Paul, Kelly Wang had to close its doors for three months. Her landlord, who lives in the building, told her not to worry about paying rent until after the lockdown. Wang’s business rebounded when the lockdown ended, and she asked her landlord about repayment. The woman told her to make up half of the amount over the remainder of her lease. Her landlord’s son, Salvatore Licata, said his mother wanted Wang to be successful—and, hopefully, “a long-term tenant.”
Of course, not all landlords are able or willing to be flexible. But 90% of the disputes that Davidoff Hutcher & Citron attorney William Mack encounters in New York end in an agreement where “everyone is sharing the pain,” he told the Journal.
During the pandemic, collaborative negotiation examples between landlords and tenants can go well beyond flat rent reductions to involve advanced negotiation techniques. Some landlords are willing to negotiate “percentage-of-sales” deals with struggling retail tenants. In such a deal, the tenant pays a percentage of its retail sales—typically 5%–20%—to the landlord in exchange for a rent reduction ranging from 25% to 100%. Third-party sales verification services, such as Guesst, can provide a full accounting of a tenant’s earnings, writes Kadet.
That type of flexibility can extend to new tenants as well. Although landlords are often unable or unwilling to reduce the advertised rent on their properties, they might be willing to make some other concession, such as a year’s free rent on a long lease or funding for a renovation, according to the Journal.
Learning from Collaborative Negotiation Examples
With these collaborative negotiation examples in mind, you should be in a good position to apply proven negotiation principles to difficult situations. The following advice is tailored to tenants but should be useful to anyone who thinks they lack negotiating leverage.
- Recognize that you have power. Tenants who can’t afford to pay the rent on their retail space or home as a result of the pandemic often assume they have no bargaining power in negotiations with their landlord. But unless your landlord believes they can easily replace you (as is likely the case in some areas), they probably have a strong motivation to maintain you as a tenant, assuming you’ve been a good one. That motivation gives you leverage.
- Research market rates. Before negotiating with your landlord, look at local listings to see what others are paying for similar properties, as well as the types of deals that your landlord and others are offering to fill vacancies. If your rent is on the high side, that data could help make a persuasive case for a rent reduction or new creative deal terms.
- Find out what they value. In exchange for a break on the rent, is there something you can offer your landlord in return? Think about what they might value, such as a longer lease or a home-improvement service you could provide. If necessary, ask questions to find out more. By offering a concession, you can build trust in negotiation, increase the odds of agreement, and strengthen your long-term relationship.
What collaborative negotiation examples have you seen emerge during the Covid-19 pandemic?