What to do when landlords collect hard

One of the most powerful unsecured creditors that many businesses have to face is a landlord, and if you owe past due rent, navigating your way out of your downward spiral can be difficult, if not impossible, if the landlord if not handled properly.  When you owe past due rent that you cannot pay, along with other secured and unsecured debt, a landlord has powers that your other creditors do not.  Depending on which state you operate, they can come change the locks with little to no notice.  The have the ability to shut you down, period.  Killing any possibility of a revival of your business.

So what do you do when negotiating with your landlord?  Your objectives are debt forgiveness or decent payment terms on past due rent and to obtain a new lower rent rate moving forward. Your landlord’s objectives? to get paid as much as possible.  A good landlord will have some concern for your future wellbeing and will want you to succeed in order to preserve you as a tenant, but in the end it all comes down to arithmetic… you need to find a reasonable conclusion for both sides. Understanding these objectives, here are a few tips for dealing with your landlord.

1. Communicate early and often – As soon as there is a problem, communicate it to them and ask for temporary relief.  Waiting for a massive debt to accumulate                                                                          before contacting your landlord is never a good idea

2. State your objectives clearly – Debt forgiveness and new terms.  Don’t beat around the bush, tell the man exactly what you need to survive in the new economic                                                                        conditions.  Being anything but blunt is a waste of his time and yours

3. Support your plan with data – Show recent financials and create a pro-forma for the next 6 months – 1 year.  You are asking your landlord to help you, do not                                                                          expect hm to do it on your word alone.  PROVE it through financial data

4. Acknowledge Landlord’s objectives – Get paid a reasonable amount and avoid a vacancy.  Be reasonable and give him a plan that acknowledges his objectives.                                                                     You cannot expect to operate for nothing.  Find a payment amount amount that works within your cash flow and is reasonable

5. Act Quickly, As Promised – When you strike a deal, follow through as promised. Going back on your word at this point will likely end in eviction.

6. Be Prepared to move – Have a Plan B.  Your struggling cash flow may be insufficient to cover the minimum payment your landlord will accept.  Look into to other                                                            spaces, be prepared to move.  No business wants to do it but if you are in a difficult situation and do no prepare properly, you will                                                                  find your doors locked one day

Respect and acknowledge the power of your landlord.  Not doing so will be a costly mistake.  You will find that most landlords are reasonable people and will do more for those who communicate and respect them.  Those that run, hide, and don’t pay end up on the street.