Contacting Tenant. Why Should Seller Care.
many CAs for commercial properties prohibit the prospective buyer from contacting the tenant.
If the seller gets his or close to his price and I negotiate a rent rate bump, making my return better, why should they care?
Seller is probably concerned that if the tenant is contacted and then decides to move, they would have a property that is less marketable...
I am not pitching the lease of another property, just a modified lease on the same property...
e.g.
Current lease
expires in 2015
2 -5 yr options
My proposed lease:
Expires in 2020
1 or 2 5-yr options
in the 1st case the bank will own underwrite 5 yrs of income
in mine they underwrite 10 or 15 yrs making the payment alot cheaper.
Not your property to do anything with the lease until closing.
That is kinda the point. I negotiated the lease change to take effect at COE. No COE, no effect or impact on owner.
Legal side aside, psychologically, the seller likely will not want anything that jeopardizes his/her current relationship with the tenant(s). Some tenants might leave as soon as they hear there is a new owner. Other tenants will start asking the seller why are you selling and so forth. In the mind of the seller, nothing good can come out of it before the sale takes place. I have heard of cases, where a buyer offers better rates to tenants at other properties so they can pressure the seller.
I have contacted tenants to let them know their owner is going to be foreclosed upon to woo them to rent at one of my properties. While perfectly legal it is not something owners appreciate.
Also, tenants rarely have something good to say about the owner(s). By trying to contact them directly, the owner may be afraid they will bring out problems with the property that the buyer may not be aware.
Bottom line, as far as the seller is concerned, nothing good can come out of direct negotiations between buyer and tenants unless seller is in the room and the discussion is on extending the existing leases only. Keep it above board and hopefully seller will agree to such a discussion.
Legal side aside, psychologically, the seller likely will not want anything that jeopardizes his/her current relationship with the tenant(s). Some tenants might leave as soon as they hear there is a new owner. Other tenants will start asking the seller why are you selling and so forth. In the mind of the seller, nothing good can come out of it before the sale takes place. I have heard of cases, where a buyer offers better rates to tenants at other properties so they can pressure the seller.
I have contacted tenants to let them know their owner is going to be foreclosed upon to woo them to rent at one of my properties. While perfectly legal it is not something owners appreciate.
Also, tenants rarely have something good to say about the owner(s). By trying to contact them directly, the owner may be afraid they will bring out problems with the property that the buyer may not be aware.
Bottom line, as far as the seller is concerned, nothing good can come out of direct negotiations between buyer and tenants unless seller is in the room and the discussion is on extending the existing leases only. Keep it above board and hopefully seller will agree to such a discussion.
Real Estate Now has the idea. Tenants get nervous at any change of ownership. Nervous tenants start shopping for new locations. Who knows, they might find a better deal someplace and move out whether you buy or not.
That said, negotiating a rent increase or term extension during the due diligence period is not uncommon.