Commercial rent holidays are periods of time during which a company does not have to pay any rent to their landlord. Although rent holidays in place during the pandemic have long since expired, there are still occasions when a commercial tenant might request one; whether you grant this or not will take some negotiating and should depend on the tenant’s specific circumstances.
Useful Guidance on Commercial Rent Holidays
If a tenant simply approaches you stating that they don’t want to pay any rent for the foreseeable future, it would be understandable for you to escort them to the door.
However, there are circumstances in which tenants might make a compelling case for a commercial rent holiday. Here are some examples of scenarios in which a rent holiday may be appropriate.
Scenario 1: The Tenant is Offering to Conduct Repairs in Exchange for a Rent Holiday
Older commercial properties are often in various states of disrepair. Sometimes the problems are obvious, like a leaking roof, and sometimes they are subtle, like old wiring causing short circuits. Landlords don’t always have time to conduct repairs themselves, so the tenant might try offering to hire someone to perform the repairs in exchange for a few rent-free months.
Scenario 2: The Tenant is Asking for a Rent-Free Period While They Upgrade the Space
It’s not unusual for new tenants to want to reconfigure a commercial space to meet their particular needs. In some cases, those upgrades/modifications can be extensive and take many weeks or months. When negotiating the lease before moving in, they might bring up the issue of modifications and request a rent-free period to cover the cost of the work.
Scenario 3: The Tenant is Proposing a Rent Holiday to Cover the Cost of Lost Business
While the space is being renovated, there is a possibility that it will become temporarily useless to the tenant. If that’s the case, they may try and negotiate a rent holiday until the work is completed. This kind of approach is sometimes used as Plan B if they are denied free rent to cover renovation costs.
One Last Thing
Offering a rent holiday on commercial property can be used as a way to attract new tenants. It can be worth weighing up this option if you are struggling to find a business to make use of the space.
We hope you found this guidance on commercial rent holidays useful. For more commercial property insights, browse all of our blog articles here.