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5 tips for negotiating a rent reduction when you're financially struggling

3-minute read

What can you do if your business can no longer afford to pay rent? Here are 5 practical tips for negotiating a rent reduction with your landlord. 

Key take-outs
  • Update your books and speak to your landlord about your situation as soon as possible
  • While you’re negotiating a new lease term, look at other ways to cut down expenses and take advantage of financial relief measures
  • Seek professional advice before agreeing to new rental terms or signing a new lease agreement

The coronavirus (COVID-19) pandemic and subsequent lockdown laws left most traders facing a loss of revenue. As a result, many businesses are grappling with how to pay rent on commercial storefronts (if that's how they're still trading).


So, what can you do if you can no longer afford to pay your rent? Here are a few tips on negotiating a new commercial lease with your landlord. 

1. Ensure your books are up-to-date

The government recently announced the intention to introduce a mandatory code of conduct for commercial tenancies to support small and medium-sized businesses impacted by COVID-19. This means commercial landlords may be required to agree to a rent reduction, so that the burden is shared between both parties.


At the time of writing, legislation outlining how exactly the code will be enforced has yet to be enacted, however, the government has indicated that rent reductions may be based on the business’decline in turnover. 


With this in mind, ensure your books are up-to-date and reflect any loss of revenue incurred as a result of closing your business, or, any loss of sales due to the coronavirus crisis.

2. Start the conversation now

There’s no time like the present to start negotiating new commercial lease terms with your landlord. So, set up a time with your landlord to discuss your current situation.


Here, some preparation can go a long way: consider putting together a proposal for reduced rent, including detailed information about how you have been impacted financially. Even if your landlord won’t agree to a rent reduction now, being transparent about your circumstances can make it easier to negotiate lease terms in future.

3. Consider your other expenses and financial relief options

While you’re in negotiation, you can also look at other ways to cut down your regular business expenses. 


If you’re not trading, consider freezing outgoings such as cleaning and maintenance costs, subscriptions, app fees and paid software which could free up some funds in the short-term. 

4. Put your new lease terms in writing

Whether you’re agreeing to a temporary rent reduction, a deferral or a new lease agreement altogether, be sure to get the details of the agreement in writing so both parties are clear on the terms. This includes:


  • What’s changing, e.g. whether rent is being reduced or deferred
  • The timeframe for the changes or new agreement
  • The rights and responsibilities of both parties, including how the lease can be terminated by the tenant and the landlord
  • Terms of renewal or further changes to the agreement

5. Seek professional advice

Remember, a commercial lease is a contract, so it’s a good idea to seek independent legal and financial advice before signing on the dotted line – even if changes to your agreement are temporary.


Regardless of where your business stands in the current situation, it’s never too early to start the conversation and ask for help so that you, and your business, can get the support needed during uncertain times.

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Things you should know

This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business.