Fair rental negotiations

Dont' frighten off a potential land user

“Hey Pebbles big news! A company called the other day wanting to enter into a rental for that craggy pasture land out back,” explains Freddy enthusiastically.

“You mean alongside the service road that goes along the east-side of the farm?” asks Pebbles.

“I sure do. How good is that?”

“But Dad, who would want to rent that land? What possible use could they have for it? I thought you said it’s not very productive,” Pebbles inquires, rapid firing her questions.

“Well Pebbles, that’s the thing. A local construction company has projects in the area and needs a little extra land to store some of their equipment and to use as temporary workspace. Now I know what you’re going to say; make sure they don’t want to take a lease, make sure they’re not causing an environmental impact, make sure…I don’t know you always have warnings. But I’ve checked it all out,” states Freddy definitively.

“OK Dad, and what did you come up with?”

“Well for starters, they just want to rent the land as storage, so they don’t need to take a legal interest in the land. They just want to pay for temporary use and access; it’s like free money!”

“As you know, not taking an interest in the land is one thing but what about being responsible for any damage they might cause during the rental period,” enquired Pebbles.

“Pebbles, come on! I’ve been listening to you all the times you’ve given me advice in the past. These lands aren’t really usable and, being mostly rocky, the potential for damage is limited. Besides, that’s not all. They’ve also agreed to only store materials like pre-formed concrete and construction materials. So really the only thing I have to decide is what to charge them…and I’m thinking of a big number!”

“That’s excellent news,” says Pebbles, “but before you go too far with your negotiations you should really make sure you’ve got a strategy in place. A strategy that looks at all potential outcomes and not just maximizing the price you receive.  You should be considering what your most desired results are, what you can live with and what you’re not willing to accept at all.”

“What do you mean Pebbles? What else should I be thinking about, these guys need space; I’ve got space. They’re a big firm; they can afford big bucks.”

“That’s a perfect example of what I’m talking about Dad: Just because you think that a company can afford to pay a lot of money, it doesn’t mean that you are right, or even that they will. Also, you might want to consider that if you’re not using this land that any rent you get is a bonus. You should consider taking a reasonable position in all negotiations.”

“So what else should I be thinking about?” asks Freddy.

“Well, you might want to consider getting a deal that everyone is happy with. A deal which is fair. The company isn’t going to be silly about this. They know that the land is of little use to you, and they might even be looking at other options. If you negotiate too aggressively, you might aggravate them and encourage them to find an easier agreement with someone else, or to avoid you in the future. If you are fair now, there is a better chance the company will be easier to deal with in the future. You also stand a better chance of being approached for similar opportunities in the future.”

“So Pebbles, you think that I might be able to benefit more, in the long term, if I don’t try to press every advantage I might have now?” asks Freddy.

“That’s exactly what I’m saying. A fair negotiation strategy should take a number of factors in to account, including the position of the other company. One last thing Dad, please make any agreement subject to a legal review and then let me read the terms before you commit to anything.”

“So once again, Pebbles, your advice is to take it slow and find the best results,” says Freddy. “You really did get your mother’s good sense.”

The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document.

If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser. 


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