A common issue a pharmacy deals with is their lease. Today, we are excited to have guest blogger David Halvorsen help shed light on this popular topic. He is a Pharmacist also with a Master of Property degree. Furthermore, he is the Director of Tenant Lease Advisory, where he works exclusively to advocate, advise and negotiate on behalf of small-medium sized business tenants, specialising in Pharmacy leases.
Why not improve your business with a better lease?
The time is right, and this is how to get a better deal:
1) Get expert help from the beginning.
Most people would have little confidence using a surgeon that only operated once or twice every few years. If you’re only operating on one or two lease deals every few years then it’s best to get expert and experienced help from someone that works with lease negotiations regularly.
2) In addition to getting expert help, here are some extra tips to keep in mind:
a. Understand your situation.
Start with 3 hours and a good coffee. Read your lease front to back, then do it again the following day. You’ll also need to read the Commercial Tenant Act & Regulations (CTA) in your state or territory as many leases contain terms that are overridden by the CTA. These overriding provisions are often in your favour and if you’re simply following the lease literally, all your potential options and leverage may not be clear.
b. High rents are more contagious than the flu!
You can catch a high rent from suburbs away, or even a different state. What’s going on in the industry and with other pharmacy leases matters to you. If there are businesses similar to yours or in a similar size shopping centre, ask to catch up with the proprietor to discuss rents and leases. There’s a good chance the landlords are already talking to each other and if there’s evidence of higher rents anywhere around the country, odds are your shopping centre landlord will know about it and try to make you catch it to – just like the flu.
c. Why should I reduce your rent?
You need to be able to answer this question convincingly. Practice explaining it to a family member or friend and consider
i. PBS reform
ii. How your business is performing
iii. You’re strengths as a tenant
iv. What other similar businesses are paying in rent
v. What you propose as a realistic rent, and
vi. Why your proposal is in the landlord’s interests
d. Act with time on your side.
Some parties to a negotiation like to drag things out because it works in their favour. This almost never works for a tenant – a landlord can generally cope with a vacant premise for a few months or more, but a business can’t shut down, move out, and make good, only to potentially come back a few months later. Therefore, it can be a good strategy for a landlord to delay until the last minute so you’re forced to either take their deal or close your business. Don’t let this happen to you. It is not too early for you to initiate negotiations 1-2 years prior to expiry and respectfully pressure for a response.
e. Create backup options.
What are you going to do if the negotiation doesn’t progress well? - Capitulate and pay what the landlord wants? If this is your back-up option then it’s time to get creative. If you don’t reach agreement to begin with, options can include:
i. Escalate to another representative of the landlord, or the landlord personally if possible.
ii. Have someone else handle the negotiation on your side. Keep in mind this generally works better if you start with someone else handling it (and then you can always personally step in). It’s a more difficult dynamic to manage in the negotiation when you, the final decision maker, attempts to step back mid-negotiation because it’s not going well.
iii. Plan a move to an alternative site. For some occasions the business may be better off to relocate but in others simply demonstrating an alternative option can show the landlord you’re serious about not accepting their current proposal and help to reach an agreement without relocating.
To find out more about Dave and how he can help your pharmacy with it’s lease visit http://tenantlease.com.au/ or call 1300 537 733