Rent Free Periods

Next segment in our Leasing Series…Rent Free Periods.

Once we begin the process of strategizing proposed terms & conditions on a lease deal, what sort of rent free periods can we expect to obtain? As the saying goes – “as much as you can negotiate“.

But once we consider what might be considered reasonable from the Landlord’s position, you soon realize that there are a certain set of expectations which typically apply. Let’s look at the two scenarios below:

Example 1-
In a case where a tenant is proposing a reasonable term lease and accepting the premises in ‘as is’ condition, generally a landlord will provide a better rent-free
incentive. The rationale is that the tenant, in exchange for a rent-free allowance, will undertake their own tenant improvements at their own expense - thus saving the landlord any tenant improvement cost at the front end of the lease. It will vary deal to deal, but 3 months r/f on a 5 year deal should be reasonable - and assuming the tenant is investing their own funds to complete their improvements.

Example 2-
If the tenant has a requirement for the landlord to invest considerable dollars into tenant improvements on behalf of the tenant, then typically any sort of r/f allowance becomes a token amount. Although it can differ deal to
deal, generally a 30 day r/f might be the best case expectation – often times referred to as a fixturing period. In this scenario, the landlord has a further investment
into the lease and as a result, wants to realize the cash flow from the rent as early as possible after commencement.

Again seek out experienced commercial realtors with strong leasing backgrounds, to assist you in negotiating the rent free terms within your agreement.