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That’s right, free rent in commercial leases is a thing. Depending on the landlord, it may be easy for you to negotiate free rent, or you may have to work for it a little – either way it is very much possible and is one of the first steps during a commercial lease negotiation.
Free rent in a commercial lease is also often referred to as abated rent or rent abatement and is most often presented within the first few months of a lease or within the first few months of a renewal. A free rent period is described as a specified term in which the tenant does not need to pay rent.
Aside from the obvious reasons, this allows the new tenant to use money that they would have otherwise been used on rent, for any moving and build out expenses. In the landlord’s perspective, this allows them to more easily lease a space that would have otherwise been hard to fill.
A landlord may actually only offer the abated rent if the tenant agrees to have a slight increase in the following monthly rental fees.
Often times, abated rent will not be considered unless the lease being signed is long term (this is often dependent on the state but generally is 5 years or more).
Since asking the landlord for a period in which you do not pay for rent, this absolutely needs to be negotiated upfront, at the letter of intent (LOI) stage.
Free rent can be offered in a variety of ways, not necessarily just a set term of free occupancy.
It is possible that a landlord chooses to make the base rent free. They may also choose the month before your lease commences as a free early occupancy month.
You can also consider asking for free rent in place of any repairs that the landlord may need to make for the space. That way, the lack of paying rent replaces the cost of the repairs.
This would be beneficial for both the tenant and is something the landlord may be more likely to agree on.
If the space is being altered or renovated, you can request that this period of time is rent free since you are not able to actually use that space for your business.
A landlord is unlikely to simply offer you the rent-free period, it is expected that you request it yourself if it is something you are interested in.
Depending on region and how tight the real estate market is, rent abatement may not even be possible to negotiate due to a high demand for space or a lack of supply.
Good luck negotiating the best possible commercial lease! If you need our help, please feel free to check out what our customers say about us here: LeaseRef Reviews.
Follow up Reading: Rent Abatement: A Complete Tenant Guide.