It's Time to Revisit Your Lease... You May Have Options and Opportunities

On March 31st, I had my second episode of Marc Haine Live with today's guest, Jeff Granfield. At the time, COVID-19 was just taking root in Canada and many municipalities were talking about shutting down their economies. In fact, some had already started. Our episode at the time was centered on what business owners needed to do to weather the storm with their landlords. There's absolutely no doubt that small businesses are facing or even will be facing the most challenging times ever in their business. According to an August 6th article by Postmedia, 88,000 businesses have been closed across Canada since that time. The big fear is, well, if the fall and winter create a second wave or a new wave, the situation that we're seeing today can get much, much worse. But according to today's guest, there are still opportunities to be had for entrepreneurs. And that's coming up next on Marc Haine Live. Welcome to Marc Haine Live episode number 20. This is where small business owners and entrepreneurs pick up core skill sets to help them work on their business, not just in their business. I am your host, Service Expert and Master of Experiences Marc Haine. And if you are here live with me, welcome! If you're watching this on the replay, it's nice to have you here. Thank you so much for tuning in. I do encourage you to hit the like button and to hit subscribe. That'll give you first dibs whenever I bring you anything new. Our guest today is Lise Coach Jeff Granfield. He was on our show as I mentioned back in March when all this started happening. But we'll get to him in just a moment. But in the meantime, feel free to drop a question or your own thoughts in the comment box below so people can benefit from your experience as well. You know me. I truly believe that knowledge is power. But it's only powerful if we share it. So, go ahead. I'd love to hear your insight as we go through this. presentation. So please, please put your comments in the box. In previous episodes, we talked about businesses needing to pivot. We talked about businesses needing to reinvent. And we talked about businesses needing to adapt and adopt to what's going on. Unfortunately, for those businesses that couldn't or can't, the business environment today is very, very sleek. But, you know, if you read through every single recession that we've ever had since basically the turn of time itself, every recession has stories of how successful ideas came to the forefront and got launched during those downturns. Innovative people started thinking differently, developing business models that solved the new need of whatever the environment was. And now may be the time. to launch a business idea that you have? So, I'd love to know from you our Question of the Day. So, what is your situation as we enter our 6th month of COVID I'd love to hear what your situation is. How are you handling it? What's going on in your reality? I'd love it if you could share down below. and let me know. Joining me today is Senior Lease Consultant with The Lease Coach. Jeff Granfield has over 14 years of experience coaching and consulting tenants on their new leases, lease renewals, lease assignments, and midterm rent reduction negotiations. Jeff is a co-author of Negotiating Commercial Leases and Renewals for Dummies, which is part of the For Dummies program, and a frequent writer for industry publications. He is a regular speaker at events all across North America educating tenants on the important impact a lease can have on the success of their business. The lease is one of the biggest costs in any business. Welcome, Jeff. Thank you so much for joining me today. It's so nice to have you back on the show.

Yeah, thanks for having me, Marc. It's hard to believe it's been 6 months that we're through this and even the amount of time that's passed since we last spoke. There's Certainly been a lot of changes and, you know, my communication with business owners and tenants over those few months has certainly been a bit of a roller coaster from the initial panic and influx of calls on people just wondering where to go from here to, as you said, you know, businesses starting to see what the environment's going to look like and businesses and business owners determining how to change their business, how to reinvent their business.

Right.

how their business maybe is going to excel in these times. And of course, unfortunately, the realization for a lot of business owners that they just weren't going to survive through this. But that's where I like having these dialogues and conversations is to talk about ways to help business owners survive and maybe thrive coming out of this.

Yeah. Before we get into today's topic, could you please tell us a little bit about what you do Sure.

So as you noted, for the past 14 years or so, I work daily with small to medium-sized business owners, helping them basically with any aspect of their commercial real estate needs and leasing needs. So if it's an entrepreneur looking to start a new business, I'm working with them to identify sites that are going to be suitable for their business, negotiate their lease, guiding them through that process by handling it for them, coaching and consulting. And then when it comes to existing business owners, I do a lot of work negotiating lease renewals or helping them through challenging times like this. So I'm certainly doing a lot of lease renewal negotiations, early lease renew— lease renewal negotiations, and even, as you noted, midterm rent reductions and basically helping tenants through every aspect of their lease, whether it's a new business, renewal, expansion, whatever they may be doing. Helping ensure they're making educated decisions and leaving as little as possible on the negotiating table.

Are you surprised at all at the knowledge level of the people who come to you?

I wouldn't say I'm surprised. I think a lot of the people that are coming to me do come to me are the ones that realize how much they— what they don't know. They know what they don't know and they're realizing that they need some help and Given that this is a pretty critical component of their business, you noted it's one of the biggest expenses for most business owners out there. So getting it right is absolutely critical. I think there's a lot of business owners out there that don't realize how impactful negotiating a good lease is until they're in it, until they run into problems. So there's a lot of tenants out there that do stumble their way through and some fortunately do very well. Others make a lot of big mistakes and for some of those it has a dramatic impact on their business. I think the ones that do come to me have realized that there's— this is a complex process and a lot going on, and they realize that they've got to get it right to set the foundation for their business, or in the case of a renewal, to maximize the benefit of their lease negotiations for their business going forward.

Yeah, yeah. I can see it happening. I mean, you and I, before we got— went live, I was telling you how I've worked with a lot of small entrepreneurs, and, you know, once they sign the lease, I find that they They pack it away until something bad happens and then they're surprised to find out that certain things are happening within their lease.

Yeah, that's right. And that's what I get those calls every, almost daily, you know, really of somebody that signed a lease, whether it's 2 weeks ago, 2 months ago, 8 years ago, and they kind of look back and they've kind of stepped on that landmine in their lease or they've done something that's impacted them or Maybe they haven't even done something, but just the industry or their landlord's done something to impact them. And looking back with hindsight, they realize that maybe some of these things could have been prevented. And it's unfortunate because for a lot of those tenants, I'm still able to help them, but maybe not to the extent that I could have helped them early on had they done it right in the first place.

Right, right. So this episode of Marc Haine Live is brought to you by the Speaker Presentation Timer app, helping speakers and presenters who want to develop great stories and compelling presentations without ever breaking the fourth wall. It's available for iOS and Android-powered devices and is available at the App Store and on Google Play. So, go ahead and visit speakerpresentationtimer.com. Jeff, what's— so, we spoke March 31st and people, as you alluded to, the phone was ringing nonstop. What have you seen happen now since March 31st as far as the real estate market and the rental markets are going?

Well, yeah, a lot has changed since then, of course, that sheer panic and unknown there. I mean, since our last conversation, and I'm trying to reflect back on there, I don't think when we first talked there was even the introduction of some of these government programs that have come in. There may have been some discussions and inklings of them coming, but I think when we did that initial call, nothing had actually been put in place. So since that time, we've seen, you know, a lot of programs, whether it's wage subsidies, you know, forgivable loans, and more relatable to what I do, the CEQRA or CEQRA, the rent assistance program through the government. So those programs have helped, I think, a lot of business owners stabilize, you know, through that process. And that's That's helped keep a lot of businesses running, you know, that probably wouldn't have been running otherwise without some of those programs and subsidies.

Right.

And, you know, in turn, we've seen still opportunities. There's still, as you alluded to, I think 88,000 businesses across the country have closed. So those are vacancies in properties. And I don't— I think we'd be naive to feel that we're not going to see more vacancies in the coming weeks and months and, you know, time ahead of us. So we're starting to see, or I'm starting to see landlords being more willing and flexible to work with existing tenants, certainly trying to entice new tenants come in there through more inducements. I'm really seeing a lot more flexibility on things like free rent, maybe even tenant allowance. Rental rates, depending on whether it's a new property or an older property, if there's mortgages on it, we're seeing some softening. I still think we're going to see more downward pressure on rents, you know, coming, but a lot of that's going to be to be determined based on Are there going to be more than 88,000 businesses closing? How many more? And in turn, I think part of that's going to be determined by those programs. You know, the, the CEQRA program ended August. Doesn't mean that it won't extend further. It originally was only going to be for 3 months. It was kicked out to 5 months. So I think those programs, when they eventually wean off and end, is going to be a real determining factor on what's going to happen in commercial real estate.

Right. So did you— I mean, talking about the government programs, you're absolutely right. When we were talking about it, we were just talking— at the time, I had just read an article that Restaurant Canada were petitioning the federal government and the provincial governments to make evictions illegal. We were just, just talking about that. The government had yet to come out with any kind of data or details on how they were going to help businesses. They were still working on that.

Right.

So everything was really in its infancy. And then since then, we've just had a plethora of opportunities, I think, that we've seen come to the forefront. One of the ones that coming out, the rent assistance program. I read an article that said that the uptake on that program was very, very weak considering the strength of what that would have provided.

Yeah, I think it was, you know, and it's hard to know hindsight again on things are always, you know, maybe not even in this case, hindsight's probably not 20/20 on what we could change or do better on that program from the government perspective. But I think part of the challenge was that it, it wasn't something directly to the tenants. They put it directed— I think the intention was good in the framework by the government that the landlord would participate in it by, you know, subsidizing a portion of it. The tenant would pay some and the government would pay some. But the fact that it was at the landlord's discretion, I think, was very challenging. And then early on, the threshold to qualify for it, there was some confusion Confusing factors. So I think that was part of the problem where some landlords just said, well, I'll roll the dice and work with tenants individually and, and see how this is going to unfold, as opposed to feeling like they're forced into doing a program and sharing information with the government that maybe they weren't comfortable with. So I think there's a lot of reasons why it didn't maybe have the participation that you'd hope to help with many tenants out there. And, you know, could you look at something and maybe something will be coming different in there. I know in the US they did things a little bit different on how their programs are set up where it was basically the tenant, you know, business owners applying for, I think it was called their PPP program in there where they could use a portion of that for payroll protection, but they could also allocate it at the tenant's discretion, a portion of that towards other overheads including their rent.

Right.

So it put the ball in the tenant's court to manage government subsidies as they see fit. And, you know, maybe that, maybe that worked better. We're yet to see, you know, what it's going to be in both Canada and the US.

Yeah, I think as the years go by, people will be looking at the COVID-19 year, and, and they will have 20/20 hindsight.

Yeah, yeah.

The worst year ever. So, um, we know that we, we still have, um, people are, are still mid-lease. They still have challenges, some of them do anyway. Retail seems to be rebounding back a little bit, but for the people who still are mid-lease, do they have any leverage at all with their landlords to be able to go back to the table and do something if they're still in their lease? Absolutely.

I mean, I'm working with business owners daily and I started working with business owners Prior to these, these programs coming out and going to the landlords and starting to essentially renegotiate terms, whether it's short-term, long-term. So I think being able to paint the picture of what the situation is and what the reality of your business is with your landlord is really important in having that communication. So as the programs got introduced, you know, some landlords took those programs and worked with the tenants, and that's what was needed for time being. Others, landlords wouldn't participate for various reasons. Maybe the tenant didn't qualify. There's a lot of business owners out there that didn't have a 70% rent reduction, but talk to most small business owners and tell me what a 50% revenue reduction does to your business. It's not sustainable for most businesses. A lot of business owners that I was working with that didn't qualify for the program but still needed help. Landlords were generally receptive if you had the right communication to approach them and work together because my pitch to the landlords when I was working with my clients or communication was ultimately that this isn't fair to anybody. Nobody wants to be in this situation. It's not fair that the landlords aren't getting their full rent. It's not necessarily fair to the tenants that, you know, and the business owners out there that were running great businesses. They didn't do anything to take this downturn. So The reality is, is that whether it's through programs or discussions with the landlord, that for most businesses to survive out there, there's going to have to be a collaborative approach and willingness to work through this. So I've worked with a lot of tenants that we've renegotiated terms that were coming up maybe in the next year, 2 years, 3 years to renegotiate the renewal early and restructure the lease. In other cases, we've done short-term rent abatements and amendments that tenants that are maybe 1, 2, 3 years into a 5 or 10-year lease agreement. So there is opportunity to do it. You know, it is approaching the landlord. And if some of these government programs aren't extended, probably a lot more tenants are going to have to start approaching their landlords to work through this and find a way to be able to pay their rent for the next 5, 10, maybe 15+ years for these landlords.

Yeah. You know, it's so funny because when they announced the reopening plans of being able to jump back in and start reopening, A lot of business owners were kicking up their heels going, oh, thank God, we could start doing something. But then the realization where they could only— at first, it was only food services, for example, were only allowed to have a third of their occupancy, then it went up to 50% of the occupancy. Well, from every business I've ever built, we've always built it with what are our volumes? What do our volumes look like? And for food services, especially where the main volumes are coming out on Thursday nights, Fridays, and Saturdays. That was the brunt of their volumes. Then knowing that all of a sudden, hey, wait a second, I'm limited to 50% occupancy, how am I going to be able to make my money? How am I going to be able to pay my bills? Have you seen a lot of reopenings that all of a sudden created more problems than the closing did?

Yeah, I would say that the reopenings created a realization that this wasn't the magic solution on these, you know, all of a sudden we weren't turning that corner where everything's back to normal with restrictions on there. Like most of these small businesses, as you said, in restaurants with restrictions on their capacities, the margins are so thin in a lot of these businesses that they just can't survive at 50% capacity. The numbers just don't work, you know, without those overheads. I think for some businesses with the programs in place, wage subsidies and the loans and the rent assistance, I think they were in a position where they were doing well. And I spoke with a few tenants out there that said, wow, this is great. We're actually profitable. We're doing fine. But the realization was, is they were doing fine when they were paying 25% of the rent and they had their wage subsidy and they're banking on forgivable loans and things like that.

Right.

That was fine, but, you know, those— they were looking at in real time and feeling like everything is fine. But at some point, you know, that's going to end and they have to figure out how to get there. So I think to your point, there were some that were realizing that it wasn't working because they weren't qualifying for all the programs, or as much as it looked like it was fine today, they realized that several weeks down the road, this wasn't going to be fine, you know, if things didn't change. And Opening capacities and revisiting some of their costs and overheads and ways to increase revenue. So there's still a lot of challenges out there for sure.

Yeah. And then of course the next thing we're talking, they're talking now about this next wave that they anticipate coming as well. And so I don't insist, I mean, obviously the restaurants are talking about as soon as the cold weather hits, they're gonna lose their extended patios. They're gonna lose their outdoor dining, which in itself will create more issues. The talk is that now that you're gonna force people indoors, you're probably gonna see more cases. So it's scary. It's a scary time for small businesses.

Yeah, I think it is. And I think, as you noted, in the restaurant hospitality industry, they've— some have done well because of the outdoor dining. You know, people are getting that itch to wanting to get back to a normal life and trying to get out and do things. But I certainly think there's a way higher comfort level Regardless of what happens with cases, I think there's just that comfort level on outdoor seating and patios. So I think no matter what, there's going to be probably a bit of a lull in revenues when patios start closing down. And fingers crossed there's not an upsurge in cases because of people indoor dining, but I think it's gonna be slow for people to return to that comfort level, just like it was slow for people to return to even be willing to outdoor dine. That slowly came in, and now I think a lot of people are comfortable. You're gonna have, in my opinion, that process Probably slow transition into that for a number of reasons. And that's gonna certainly hurt businesses out there.

Yeah. And then of course, you add to that, that people's comfort levels of being out. Some people are going out and starting to come back, but there's definitely not the volume of shoppers that are out there. There's not the volume of people in shopping malls out there as there have been in past years. So people are a little bit scared that, you know, the The economy has not rebounded, and I think that's an important distinction to make at this point, is that we are not back to normal. And for anybody thinking that it's happening anytime soon, we really have to think a little bit more strategically, I think, right?

Yeah, that's right. And I think that's the key, is strategically. For some businesses, even in the food industry, there's certain subsections of the food industry that are still doing well. You know, outside, you know, fine dining and sit-down restaurants are, I think, taking the brunt of this. buffet-style restaurants, things like that. But I know there's a lot of quick-service restaurants and different stuff that have really adapted well to capitalize on the to-go orders and the delivery orders and things like that. And there's challenges with that, but I think a lot have adapted. And I'm still seeing some that are feeling very optimistic about the future, that even if things stay difficult through the winter, I think they're seeing their businesses doing well and maybe even see an opportunity within some sections of hospitality. And other retailers, I think, are seeing more comfort level coming back, even with mask mandates in a lot of cities and provinces and areas. I think that's giving a lot more of the public the comfort level to go in and shop and realizing that, debatably, whether it helps or not, I'm not going to dive into that. That's beyond my expertise. But I do think that is giving more confidence to retail shopping. So I think you're starting to see people being willing to venture into stores and shop again because they want to get out and do stuff.

Yeah, yeah, they really do. And so, you know, I talked at the very beginning about how in past recessions you always hear about how it was so devastating for existing businesses, but then these new businesses started to emerge. And so for those who are taking the plunge now, who have come up with a concept that they think is going to be sustainable now that they're smack dab in the middle of COVID-19, and they're wanting now to take the plunge into a brick-and-mortar location. What opportunities are you seeing out there in the marketplace?

Well, I think there's a lot of opportunities, and there's going to be more and more in the coming weeks and months. To your point on that is that I think there are a lot of entrepreneurs that are seeing opportunities, whether it's a business that was going and maybe it's pivoted, as people are saying, or they've They've been in a niche that this is accelerating their growth. They haven't been impacted and they're really ready to make that leap. I have other clients that their businesses had very little impact, you know, fortunately for them through COVID, and they're seeing this as expansion opportunities where they're opening up 2nd, 3rd, 4th, 5th locations, whatever they may be. So for those that have a strong business plan or a business that was growing and is continuing to grow or had a business that wasn't impacted, they're seeing a lot more opportunities through vacancies popping up, you know, in properties in there. Landlords being more aggressive to pull in especially strong operators. You know, those tenants that have existing businesses that are growing, these are ones that landlords are jumping on saying that we know this is going to be a stable tenant. What do we need to do to pull them into our properties?

Hmm.

So, as I said earlier in the call, I'm seeing, you know, certainly more flexibility on free rent and tenant allowances and inducements to get tenants into the properties and certainly even softening on rental rates. And I think that's going to be continuing. And that's where I think tenants that are looking for opportunities to expand or to open need to be patient and do their research. You know, do your homework, look around, figure out what's right for you because there are going to be a lot of landlords that are willing to battle and earn your tenancy.

You mentioned inducements. Do you have any examples of what kind of inducements you're seeing out there?

Well, it really is across— it really is all over the place from— and that's why I said, you know, do your homework and look around because some landlords are being far more aggressive than others on new deals offering, you know, extended free rent periods, you know, where they're only paying operating costs, you know, far in advance of what they might have, you know, pre-COVID, you know, offering a handful of free month— free rent months in there where that's really in some cases doubling or tripling out there, or landlords willing to put more capital into a property in there. So it's a big change. It depends on the property. Some of those properties are wanting to get— just plug holes and get tenants in there paying operating costs and are willing to give tremendous free rents. Others are pushing for that base rent to kick in, but want to see— we'll put money into the deal through tenant allowance or free rent. But it's all over the map. I'm seeing some landlords that are sticking to their guns and saying, we'll hold We'll hold vacancies. We can afford to do it. We'll wait for things to recover. We're not going to drop our rents tremendously. And, you know, they're optimistic that things will start recovering, you know, in 2021. And they'd rather take, you know, 6 months of vacancies and then focus on it. So it depends on the building, depends on the landlord, depends on your tenancy.

Mm-hmm.

There's a lot of different opportunities out there. And like I said, the key is doing your homework, looking at opportunities, and really making some educated decisions because there's going to be a Big spectrum of opportunity out there.

Now that we've been smack dab in COVID-19, we have a lot of companies, their employees are working from home. Are you seeing any adjustments as far as the office spaces are concerned?

Yeah, I think we're going to— we're starting to see that. I mean, there's a lot of companies that have basically said, you know, we're not bringing our staff back at least till 2021, you know, where regardless of restrictions and things like that in their business, just staffing, they're saying, well, we're only going to bring back 25% of our staff or none of our staff, or we're going to use it only for meetings. So I think we're seeing, you know, there's certainly been businesses that have closed that are opening up more office space, you know, for, for office tenants out there. But I think we're going to see some impact in the coming years as some of these leases expire where they reevaluate their space needs. And they might be saying, well, maybe we don't need, you know, 8,000 square feet, maybe we need, or 4,000 or 2,000, whatever that case may be. But they might say, we're in 4,000 square feet, our lease is coming up, and we've realized that we can have, you know, staff share office space certain days, work remotely part-time. I think there's going to be some companies that reevaluate their size, you know, footprint, and maybe they're cutting their space in half and having more staff work remotely at least part of the time. So I, I do think that's going to have some impact on office vacancies in the coming months and years for sure. And again, opening up that door for office tenants, whether they're downsizing themselves or staying in their footprint, there's going to be more space out there and more competitive landlords fighting for those tenancies. And we've, we've seen a little bit of this even in, in, you know, Alberta where I am, in Calgary, for when we've seen the oil, you know, collapse of oil prices in the especially Calgary downtown market, which was very heavy oil company saturated. You see those deals where landlords or Other companies trying to sublease the space are basically, you know, almost giving it away where they're, you know, saying pay the operating costs and take over this lease in here or pay the operating costs and, you know, we just need to keep our, our operating costs covered in here until things rebound. So that's going to be similar in a lot of marketplaces across the country. There's just going to be more office vacancy and it's supply and demand. It's, it's no different than any other industry. There's going to be more supply. than there is demand, you know, at least very likely in my opinion for many, many months to come.

So I'd like to get into some cautionaries, some yellow flags when it comes to negotiating or renegotiating contracts. But before we get into that, could you tell our audience how they could get in touch with you if they want to tap into your expertise? It seems like you're just a wealth of knowledge.

Sure. No, more than happy to share that and more than happy to speak with any listeners out there that want to take 20, 30 minutes of my time or drop me an email, more than happy to set up that. So 2 ways to reach me. Our toll-free number is 1-800-738-9202. I'm extension 3. Or they are welcome to email me, jeffgrandfield, which is J-E-F-F-G-R-A-N-D-F-I-E-L-D, at theleasecoach.com. And I'm sure through the magic of editing, that'll probably pop up on the screen in there so they don't have to worry about misspelling that. But yeah, email me or call me. I'm more than happy to to speak with any business owners.

That's great. Hey, so for existing tenants, so our episode that we did on March 31st, so just as a note to the viewers watching this, we use some terminology today when it came down to the different things that landlords were doing as far as rent abatements and that sort of thing. If you want to get definitions for those, you can go to our very first episode that Jeff and I did back in March. I will click— put the link here for you so you can just click on it. And there's also a timestamp, so you can actually go right to where it says definitions that are relative to our conversation. But Jeff, for existing tenants, what are some of the cautionaries now that they've gone in through this for 5 months? What cautions do you have for them as we tip into the 6th month of unnatural business operations?

Well, I think the biggest thing is maybe one of two things, rushing through it too fast. I'm seeing some business owners that are looking at this and going, my lease is coming up and my landlord's putting pressure on me to sign a deal. You want to be proactive. So you've got to start this process even if you're in an uncomfortable time. Sometimes they're just letting their leases run out and kind of waiting to see what happens in there. That's not ideal. You want to be— if you're any time under, you know, really, in my opinion, if you're any time under 2 years left on your lease, and especially if you're under a year, you want to start evaluating, you know, what are your landlord's expectations? What other opportunities do I— am I going to stay? Am I going to leave? Because being proactive and evaluating that and looking at your options are critical. I think even in non-pandemic times, landlords are— sorry, tenants are often just handing renewals over on a silver platter. You know, they're, they're just signing what's put in front of them. Their landlords are saying, here's the renewal rate, here's what you need to sign. And they're not realizing that as an existing tenant, especially in the times we're in, you should be able to negotiate free rent, tenant inducements, lower rental rates as part of a renewal. This, this now more than ever, landlords should be re-earning your tenancy and not taking it for granted. So I think the tenants that are rushing through that process are leaving a lot on the table and are making a lot of mistakes. The other big thing in there, I think, is, you know, some tenants are also coming in this with unrealistic expectations. You know, they hear stories of rents going down or inducements or certain tenants not paying rent. Every situation is unique. So you can't automatically go in and say, gee, my landlord shouldn't be charging me any rent, you know, through the next 6 months or 12 months or whatever it may be in there. I mean, you've got to have realistic expectations, and that comes with being educated. So doing homework, research, talking to people like myself that know what's happening out there, and being prepared to make those decisions on, are you relocating? Are you downsizing? Are you expanding? Are you staying where you're at? Are you closing? You know, there's a lot of different scenarios that can happen, and it really comes down to making educated decisions.

And it's funny that you say that because I would, I would even take it a step further and say what you're talking about now is this idea that You have to have a strategic approach to what you're doing with your business. So how important are strategic planning that you've seen when— how important is it when it comes to one's business lease? How important is that strategic plan?

Well, I think your overall strategic plan is you've got to know where your business is going, you know, and what you're going to do to succeed. Because there's certain businesses out there that, you know, their lease is coming up for renewal and they may have been struggling as a business pre-COVID, you know, and they're coming in there and they're looking at this. And, you know, the reality is, is that some business owners got to make some hard decisions on there. If that— if their business was struggling prior to this, how is it going to look going forward? And should they be signing a, you know, an extended lease in there? It doesn't have to be a 5-year renewal option, which is pretty common in there. If your business is in flux and uncertain, you certainly shouldn't be signing a 5-year deal, even if you think the rates are reasonable, and especially if you've got personal guarantees and other obligations. in there, you've really got to look at what are you biting off and does it make sense for your business? So not only what's the rental rate, but should you even keep your business open or commit to a long-term lease? Because it can have a pretty substantial impact both business-wise and personally if you commit to a lease and end up shutting your doors, you know, 6 months into a 5-year lease.

Yeah. You know, which actually takes us deeper into a different conversation actually, because it's this idea of what have— what has business owners done in the 5 months in order to make sure that they can reinvent, that they can pivot, and so on. And we've had many different episodes here on Marc Haine Live that talked about pivoting business, reinvention. We had a wonderful presentation from Barbara McKenzie over at the Business Link talking about pivoting. And there's so many different resources that are available out there for entrepreneurs right now. to help support them and help create these strategic plans. And with help with people like yourself, services that you provide, there's absolutely no reason why somebody should be teetering on the edge and not have taken this 5 months to be able to think about what they can do to reinvent and re-establish themselves so that they do have a bona fide business moving forward.

That's right. And even those businesses that, you know, we talked about existing ones that, you know, maybe they're on the horizon or the cusp of their lease expiring and they're planning for that, but Those businesses that are, you know, a year or 2 or 3 into 5 or 7 or 10-year leases, it doesn't mean you shouldn't be reevaluating that. You know, you need to be reevaluating every aspect of your business and saying, what does this lease make sense now? Because if it doesn't, you've got to revisit that. You've got to look at things with your landlord. You don't feel like you're locked into saying, well, there's nothing I can do because I've signed a 5-year or 7-year or 10-year lease.

Right.

While you may feel that way, I can tell you right now, I'm working with tenants daily that we're revisiting leases. In some cases, I'm working on leases that were signed January of this year and we're having to revisit them because a lot changed from January of 2020 to March or even August of 2020. And some landlords are more than willing to revisit this. Again, if the right approach is taken in there and you're strategically figuring out how to make those approaches and what your needs are, you're far more likely to be successful in revisiting your lease. And, you know, and I think some people look at that, the mistake they make is going, well, I've got 5 years left on my lease or 4, I'm going to renegotiate my whole lease. That might be great, but, you know, a lot can change in the world again in 3 or 4 years, and it's not unreasonable for a landlord to feel like they shouldn't have to give up everything. So for some of those tenants, you know, it's negotiating short-term amendments or repayment structures and things we touched on in that first video on—

Mm-hmm.

The difference between abatements and deferrals and repayments. So there's a lot of creative negotiation that can be done for tenants that still have a lot of term left on existing leases.

I think one of the best pieces of gold you gave in the March 31st interview, you, you said, you know, it's really important that tenants have a strategic plan on what they're going to do and not go to the landlord expecting the landlord to solve all their problems. Being able to go to the landlord And say, you know, I've talked to my suppliers, I've talked to my bank, I've talked to this person, here's what I— and you're part— with your help, you're going to be part of that solution.

Yeah, absolutely. I think this is going to be a— if you're ever going back to your landlord, especially when you're in the middle of that term, you've got to show them why. You've got to build a bit of a case of why this makes sense for them to do it. You know, you don't have to be, you know, coming at them aggressively saying, do this or else, because A lot of people get their back up when you come at them hard like that. And I think the reality is, is people often do that out of a position of fear and uncertainty and feel like they've got no option and feel desperate. But if you want to find a good solution, you've really got to work through that with your landlord and really understand how to approach that, build that case, and be able to show the landlord why it makes sense. For those tenants that are new tenants opening new businesses or leases expiring, you're in a different position. You know, it doesn't mean you have to be arrogant or, you know, or difficult to deal with. But the reality is, is you've got a lot more cards in your hand. You've got a lot more options and flexibility. And that still means you've got to play those cards properly and strategically to get the best deal or situation. But all of these situations really come down to strategic planning, evaluating where you are, what your options are, and what avenues you have to approach these.

Right. And I think you hit the nail on the head. You used the word earlier on about collaboration. So I think, you know, you get tenants and landlords working together with the mindset of collaboration, then it becomes more than, oh, I want to win and you're going to lose, or you're just going to take me to the cleaners, or whatever the mindsets are.

Yeah, that's right. And I mean, it's—

you still—

landlords, you've got to go in that You know, you don't want to come in necessarily a win-lose negotiation, but you also can't go in on going, let's negotiate a purely win-win or fair. You've got to make sure it makes sense for your business because if you go in not negotiating to win a negotiation, you're probably going to lose because, you know, landlords, this is a business too. So they're negotiating hard and aggressively to get, you know, the right deals and keep tenants in there. So, you know, any of these negotiations, whether in the middle of a lease renewal or a new lease, You've got to negotiate to win. You know, that's the biggest thing. As much as you're not trying to, you know, try to beat up and be unreasonable to a landlord, but I'll tell you what, landlords aren't gonna— nobody's holding a gun to their head making them sign those deals. So, you know, you've really got to have that mindset that you're going in negotiating to win, you know, and get the best deal possible for your business.

When it comes down to, you know, one of the big surprises that I think people had when all this started, the COVID-19, was they pulled out their lease and they said, oh, there's major force clause in my lease. And people were surprised because COVID-19 didn't cover that. Are you seeing now that people are building in this critical thing, this critical aspect into the leases?

It's a good question. And you're right. I mean, that was probably— I'm Pretty much had enough of hearing the word force majeure for my career now. I think— I don't think I heard that word, you know, that many times than I did in that first week of the pandemic. People saying, well, force majeure, what is this? What does it do? Is it going to relieve me of obligations? I spent a lot of time in those first weeks discussing that and talking about that in the lease. And, you know, to your point, and I know we just defined this in the previous video, but The idea was a lot of people said, well, doesn't this clause protect me from having to pay my rent obligation? Does it get me out of my lease? Does it get me out of my obligation to pay? And as we discussed in that early video, generally the answer is no. So to your question, are we seeing people negotiate those clauses in to modify the force majeure to cover specifically pandemics? And in a lot of cases, the force majeure clause didn't exclude pandemics. It just excluded language that said ultimately the tenants still had to meet their financial obligations. So it may have excluded— prevented them from, you know, being required to open their business, but they were still required to pay their rent. And the challenge is for that is most landlords are still not going to agree to clauses that allow tenants to not pay their rent simply because most of their Mortgage agreements do not have that clause that relieves them from paying their mortgage and different things to that for their lenders and investors or banks or whatever it may be.

Right.

So at some point, you know, the buck's got to stop somewhere. And I think that's where you have that challenge in there. And now, that being said, have I, have I been able to get some clauses or variations that allow tenants to not pay rent in these times?

Sure.

You know, I've done a lot of deals on renewals or especially new leases where we've said if there's shutdowns or, you know, restrictions, it's going to minimize their rent or relieve their rent. But it's for a short period of time. It's not for a blanket, if a force majeure clause comes into play, you don't have to pay your rent. Because landlords don't know. Nobody saw this coming. You know, reality is nobody saw this coming. And that's, that's the challenge. But you can negotiate some variations of those clauses, but I think it's going to be very difficult to see that becoming a common provision where tenants are relieved from paying rent obligations for things like pandemics.

Right. And, you know, what, what I find interesting about the line of thinking is nobody would ever come into your store expecting that they wouldn't have to pay for your goods. So finding ways to be able to manipulate, say, well, I don't have to pay my rent anymore, I'm going to just It doesn't seem realistic. It doesn't seem reasonable from the context of being a business person.

Yeah, I agree. I mean, I could be wrong and we could see this become a common provision, but given that leases are just built to favor landlords from day one, and that's just the nature of the beast, I think it's highly unlikely we're going to see this become a standard provision where, you know, it's a tenant-friendly clause. So it certainly doesn't hurt to explore what you can do to protect yourself on Things like, you know, relieving rent or partial rent, you know, at least even in the short term right now, should shutdowns or more come in the next few months. But I think as with any negotiation, you're trying to clean up and strengthen your lease as much as possible, but you have to be realistic on what's going to be feasible in the industry.

Yeah. And again, it boils down to what you talked about earlier about having those conversations, about having those discussions To be being able to figure out what is feasible and what's not feasible. Do you have any last thoughts about what we've talked about today? Is there anything that you feel that we've missed or skipped over?

Well, I think just to build on that note and then maybe some general comments is that, you know, with any lease negotiation, for those that are negotiating their renewal or negotiating a new lease, there, as much as it would be ideal to negotiate, you know, a force majeure clause that covered pandemic and covered everything that relieved your rent obligations, I hope I'm right with this, but I think there's probably 20 other clauses that tenants tend to overlook that are probably far more likely to impact them than, you know, a pandemic. You know, I hope we don't see a pandemic again for another 100+ years when we come through this, but— and I hope that's the case, but— and if it is, I think there's going to be far more dangerous clauses in their lease. So I think that's where some people have to not get that tunnel vision on what we're in now and purely focus on negotiating a lease with pandemic in mind. I think if you're in this now or coming out of it, there's a lot of aspects of a commercial lease that you really need to be aware of and negotiate and make educated decisions.

Good point. Good point. Because, you know, we do tend to be rather reactionary animals when it comes to our business. And you— I think you hit the nail right on the head that there I've seen leases where people just are shaking their head after this in normal times, even before COVID-19, where they just didn't understand or they just didn't think about one particular aspect. So again, but I love the thought and going back to this idea of strategic planning. I love the thought that, you know, if you have a good strategy, if you're talking to people in the know, people like Jeff, that you can get the information you need to help protect yourself. And in the long run, Save yourself time, misery, and potentially your business. That's all the time that we have for today. Jeff, thank you so much for being on the show today. Could you remind everybody one more time how they can get a hold of you?

Sure, not a problem. So, my phone number toll-free, 1-800-738-9202 extension 3, or by email at jeffgrandfield@ And I really appreciate the time, Marc, and I hope in our next call we're talking about the recovery, you know, in there and the challenge of negotiating a lease in a booming marketplace. But, you know, in the meantime, we're gonna do everything we can to help small business owners get to that point.

Thank you so much. I really want to acknowledge you for being here today. I love that you shared your knowledge and your expertise. As I mentioned the first time around, around when you were on my show, I said, I so appreciate that you bring the kind of value to my audience, which are the small business operators and entrepreneurs, as, as a subject matter expert. And I really appreciate your time and your attention today and your generosity of sharing your information today. Thank you so much for coming.

Thanks, Marc.

So why don't you give me a thumbs up if this was of value to you? As always, just like Jeff had his 30 offer for you, my offer stands. If you would like 30 minutes of my time to help brainstorm your business with you and your team, please feel free to book yourself on my online calendar. The link is below. It's meetme.so/MarcHaine. And that's Marc with a C. As always, I am at your service. And if you haven't done so, I would really appreciate it if you would hit the subscribe button and ring the bell. That'll give you first dibs whenever I bring you fresh content that will help you work on your business, not just in your business. Again, if you know of anybody who could use this information, somebody who's going through right now wondering about their lease, wondering about how they're going to get through the rest of the COVID-19, feel free to share this information with them because again, information is power, but only if it's shared. My name is Marc Haine. I hope you stay safe. Stay healthy and dare to be the exception.