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Covid-19 Resources

How to Negotiate Rent for Your Small Business During COVID-19

May 1, 2020
Written by Samantha Novick
May 1, 2020 | Written by Samantha Novick

This is a contributed article from Samantha Novick, a senior editor at Funding Circle.


COVID-19 is making rent a nightmare for local businesses. 

In Alignable’s latest Pulse Poll of 9,500 small business owners nationwide:

  • 34% of respondents said they will not be able to pay May rent in full 
  • Of that 34%, 84% will only be able to pay half or less of the May rent

With little-to-no revenue coming in the door, it's difficult to pay your heftiest bill on time month after month. And it's only getting more challenging. 

Every day, local businesses are contending with stay-at-home orders, and mandated closures make it harder and harder to make rent. And most cannot afford to wait much longer for small business loans to save the day, or for things to return to “business as usual”. 

Fortunately, your rent might not be completely set in stone. This may lead you to wonder, can you negotiate rent?

With record numbers of unemployment claims, loan defaults, and small business bankruptcies, now is the perfect time to open up negotiations with your landlord. You need office space, and your landlords rely on you to stay in business. COVID-19 is reducing their potential tenant candidate pool, meaning they'll likely have more wiggle room to keep you as an occupant.

Negotiations could lead to:

  • Better terms and rates
  • Payment deferments
  • Subletting agreements
  • Potential subdividing
  • Late-payment fee waivers
  • Selling your contract to another tenant
  • Lease buyout
  • And more...

A little negotiation can make a difference in your business's obligations, but it's not a conversation you want to walk into without doing a little bit of homework. You'll need a well-thought-out plan and some bargaining tactics in your back pocket. Having a good relationship with your landlord, a solid record as a tenant, and a history of on-time payments can also help. This is important if your business is struggling and you’re looking to find ways on how to avoid foreclosure.

First, let's break down the current COVID-19 situation, so you have a complete context of you and your business's circumstances. Then, we can dig into the nitty-gritty of the rent negotiation.


411 on the COVID-19 Rent Situation

According to a recent survey conducted by Alignable, about 50% of the more than 1,000 small business respondents have not paid their full rent or mortgage in April because of coronavirus. 30% reported making no rent or mortgage payment this past month, and 20% had only made a partial rent payment. 

Federal, State, and City Protection

Rent situations vary around the country due to differing shelter-in-place orders. Several cities and states are passing their own eviction moratoriums, meaning your business's rent obligations may be very different than your friend in the neighboring town.

According to the CARES Act, tenants in properties that are part of government programs or that have federally-backed mortgage loans are protected by a 120-day eviction moratorium. States and cities, however, have passed their own informal and formal laws governing small business evictions bans.

For example, Oakland, CA, has an eviction moratorium in place until the end of May, plus landlords can’t charge late fees. And in New York, the governor signed an executive order to pause any residential or commercial evictions for 90 days

And in New York, a proposed bill is in discussion that would prevent landlords from holding commercial tenants personally liable if their business is closed because of COVID-19. 

Some businesses are finding power in numbers by banding together to create "universal terms" for financial relief. The Restaurant Network, for example, has formed to draw up a roadmap to help restaurants survive the COVID-19 pandemic and eventually re-open.

Resources for COVID-19 Rent Legislation and Tenant Rights

Landlords Want You to Stay in Business!

Eviction bans aside, some landlords are proactively offering more extensive aid options to their tenants. 

Whether for charitable or business purposes, these landlords are forgoing profit now to keep their tenants afloat:

  • In Portland, OR, one landlord decided to cut April rent by 25% for any tenant who'd lost income due to COVID-19.
  • Amazon gave free rent for March and April to all of its commercial tenants.
  • Greystar announced they'd modify leases if tenants provide them with recent financial information reflecting the damage done by COVID-19.
  • One real estate company announced it'd waive April rent for small businesses and nonprofits in its buildings.

“We have had landlords reach out and ask us how they can be of assistance to their tenants,” said ARVO Realty's Tiffany Ryland. “They understand the option is to lose a tenant entirely, or they can figure out some way where they can offset the cost and keep the tenant as well.”

However, every business isn't lucky enough to have these landlords. In fact, according to the Pulse Poll from Alignable, while a majority of the 9500 respondents were able to make arrangements with their landlords, 36% can’t get their landlords to budge.

If rent is threatening your company's survival—and your state, county, or city hasn't passed any protection—then it's time to negotiate with your landlord. 


Negotiating Rent: A Primer

Negotiating rent with your landlord is a lot like asking your boss for a raise. Go in unprepared, and you could look like a fool and hurt your chances of ever getting a promotion. But if you follow the steps and get it right, you'll be in a prime position to get the relief you need while protecting (and building) the relationship with your landlord.

It’s worthwhile to consider hiring an attorney for this process. Legal jargon is confusing. Deciphering contracts can sometimes feel like reading a foreign language. And when it comes to something so high stakes, professional expertise can be invaluable.

Review Your Lease

It's time to pull out your lease and dive deep into all the technical mumbo jumbo. Review the following sections:

  • Rent: Is your rent price pretty straightforward, or are “pass-through” expenses included, too? What is the rent amount, and how often is each rent increase scheduled?
  • Lease Expiration: When does your lease end? Do you have a lease renewal option?
  • Default: What does the contract define as a default of the lease? If a default occurs, what are the ramifications (eviction, interest, late penalties)?
  • Guarantees: Who's liable (besides you and your business) if you default?
  • Security deposit: Did you pay a security deposit to your landlord? How much was it? 
  • Operating covenants: Are you required to open your business a certain number of hours on specific days? Must your landlord maintain a specified occupancy-level?
  • Insurance: What insurance do you have? Do any of your policies offer protections, given the current circumstances? 
  • Clause: Is there anything in your lease that excuses either party due to outside circumstances, like, say, a global pandemic worse than most humans have ever witnessed? Is there a force majeure clause, or other language that suspends (or excuses) monthly rent payments under certain scenarios, like government-mandated closure? The chances of COVID-19 being considered a "force majeure" event is more likely if your contract explicitly lists “diseases,” “epidemics,” “pandemics,” “quarantines,” or “acts of government” as examples of events falling within the definition of “force majeure.”

Although this lease is legally binding, that doesn't mean your landlord won't be willing to make adjustments. 

Armed with this knowledge, you now know the conversations you need to have. For example, if you have (or are going to) default on the lease, can you reduce, postpone, or eliminate any short-term consequences? 

Now, let's look at the different potential relief strategies at your disposal.

Understand Relief Strategies

Understand that your landlord is probably struggling as well. They have bills to pay, too, and the way they make money is by collecting your rent. No rent means they can't pay the mortgage on the property you're staying in, which translates to big trouble. In fact, of  64% of small businesses who were able to make arrangements with their landlords: 

  • Nearly 50% were able to defer rent by a month
  • 22% were successful in delaying rent for three months
  • Only 3% pushed off rent for six months

So, while it’s tempting to go in with big demands, keep in mind your landlord's position. You want to be fair to your business and the dire situation it's facing. But, you also want to provide realistic relief strategies that are beneficial to both parties. Here are a few reasonable negotiation requests and what exactly they mean:

  • Rent reduction: Rent reduction could decrease the amount of rent you owe for a set period.
  • Rent deferral: Have your payments postponed for a set period.
  • Rent abatement: Have your payments suspended for a set period. This essentially halts each monthly payment until you can work out the rest of the negotiations.
  • Loan conversion: Late payments are converted into loans that you pay back over time.
  • Grace period: An extended grace period gives you time to make payments without incurring penalties. If your cash flow cycle is all out of whack with COVID-19, this is an easy fix.
  • Security deposit: If you've given your landlord a security deposit, you could request to credit that amount against your current rent debt.
  • Fee waiver: Request to have late monthly payment, parking, maintenance, and administrative fees forgiven or postponed.
  • Lease extension: You might be able to claim a longer-term lease at a lower rental rate.
  • Temporary lease: See if you could renegotiate a short-term lease that'll cover the COVID-19 period and then expire when normal operations resume.

With your lease in hand, determine which rent relief strategy will be most beneficial to you and your landlord. Come up with a Plan A, B, and C, and be prepared to negotiate something entirely different. You're now ready to communicate with your landlord. 

How to Execute the Rent Negotiation Conversation

It doesn't matter how great your plan is if you can't communicate it properly. Follow these simple steps to approach the conversation appropriately:

Step one: Contact Your Landlord

If you want to negotiate with your landlord, you're going to need to initiate the conversation—don't wait around for them to come to you.

Contact them and share that you'd like to discuss your lease, and then determine where to have further conversations. Due to COVID-19, a video chat, FaceTime, phone call, letter, or email would all be great viable options.

Let your landlord know the extent of COVID-19's impact on your business. Open up a conversation around adjusting your lease to find a solution that works for both parties.

Step two: Find a Compromise

Your landlord may agree with your solutions, or they may have their own in mind. Have an open dialogue, and be willing to make demands and requests, but also be willing to compromise. Remember, you've signed a legal contract, and now you're trying to make adjustments to it—be sensitive to your landlord's needs, as well.

To get your landlord to agree to any form of rent relief, you may need to make some sacrifices:

  • Added interest to future monthly rent payments
  • Commit to an extended term
  • Provide a guarantee or additional co-signer
  • Trade shares of your business

Step three: Confirm and Document

Once you've agreed, make sure the new or adjusted lease is documented, confirmed, and signed. 

Nolo says that the most common change that landlords agree to make to a lease agreement is reducing rent during a period of reduced or no operation. They recommend you make sure to detail the following if you’re amending the “Rent” clause: 

  • whether the rent price will go down to a specified figure, or by a percent
  • whether the landlord is forgiving the rent or postponing it (consider extending the term of the lease to cover any abated or forgiven rent; or specifying that once the rent resumes, it will increase by an amount that will cover the abated amount)
  • when the original rent be reinstated, and
  • if the rent has been postponed, at what point the unpaid rent will be paid back, and whether the tenant will owe interest.

And if there is an existing eviction moratorium in your city or state, be sure that you know the terms and account for that in your lease amendment. 

Congratulations! You did it!

Negotiation Best Practices & Other Tips

These best practices will help your negotiations go quicker and smoother:

  • Know your numbers - To find a solution that works for you, you need to know where you financially stand. Take a close look at the numbers and project your cash flow for multiple scenarios. You want to make sure that whatever new agreement is negotiated, you can realistically afford to hold up your end of the bargain. 
  • Start the conversation early -  Don't wait until the end of the month when you can't pay your rent to start negotiations with your landlord. Anticipate the need early on and start conversations as soon as possible.
  • Include “Without Prejudice” in your communications - This indicates that you want to discuss and come up with a solution, without going to court. 
  • Prepare your evidence of hardship - Your landlord may (or may not) request documentation of your coronavirus financial challenges. Make sure you have the paperwork prepared so that you can prove your need, and avoid any delays. The information landlords might need generally include some or a combination of:
    • Your 2019 (and 2020 YTD) financial statements 
    • Financial projections through the end of 2020
    • Summary of government assistance you have applied for, or plan on applying for
    • Description of the pandemic’s impact on your business
    • Summary of rent relief request and proposed repayment plan
    • Updated business plan for upcoming 12-18 months
  • Leverage your track record - It may be beneficial to remind your landlord why you're a good tenant. Do your due diligence and get the dates right to prove your reliability.
  • Get it in writing - Verbal agreements won't cut it. Make sure any changes to your lease are documented and signed by both parties. If possible, keep records of your email conversations, too.
  • Find professional help - Money is tight, but getting this right is important. Don't be afraid to hire a lawyer to understand your rights and to ensure agreements are enforceable by law.
  • Research the property value - Take some time to look into the current property value of your building. Reach out to other landlords to see if your rates are appropriate for the given market. If they’re not, this may give you more leverage when negotiating. 
  • Find a backup plan - If your landlord refuses to negotiate, you might need to move your business somewhere that is more affordable. Doing this ahead of time will save you lots of time and money in the future. 
  • Apply for COVID-19 financial assistance - Several programs that have been introduced to help small businesses stay afloat. 
    • The Paycheck Protection Program (PPP): An extension of the SBA 7(a) loan program, the PPP offers 100% forgivable loans to help businesses maintain payroll and meet certain other operating expenses — including mortgage interest payments, utilities, and rent obligations. A paycheck protection loan could be what your small business needs to get back on its feet.
    • Local and state governments are also offering loans and grants to help struggling small businesses. See what’s available and if there’s anything that could help cover rent. 
  • Tap into COVID-19 relief -

Negotiating rent can be awkward, but a little preparation can make a big difference. Review your lease, do your homework, and open up a candid conversation with your landlord. Remember, they need you as a tenant, so you do have a fair amount of leverage. Don't worry—you got this!


Nextdoor knows that local businesses are facing unprecedented challenges. To support our community of small business owners, Nextdoor has put together State Guides with information on business relief resources available to small businesses by state:

For more resources to help your business during coronavirus, visit our Small Business Guide for Coronavirus Relief.

Claim your free Business Page to get started on Nextdoor. For resources on how to use Nextdoor to stay connected with your local customers, pertinent news affecting business, and more, follow us at @nextdoorbusiness on Facebook

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