The last year has seen a rather unique situation in the Toronto real estate market – tenants were seeing a decrease in rent prices brought on by the COVID-19 pandemic. The trend, which was brought on by a surplus of short-term rental properties suddenly being offered to long-term renters, has since started to rebound, but has presented the opportunity for some Toronto tenants to negotiate with landlords on leases coming up for renewal. While prices look to be increasing once again, some landlords in the city may have tenants looking to negotiate on a lower rate.
Do your research before sitting at the negotiation table
Before you get ready to negotiate with your tenant, it’s critical that you do your research. Since market prices are constantly in flux, it’s a good idea to get familiar with what the going rental rates currently are. What are other landlords in your area charging for rent, and do they seem to have any difficulty filling vacancies? If the average rate of rentals in your area is around what you’re charging for rent, you’ll be better prepared to justify what you’re currently charging your tenant. If the market seems to have decreased recently, you’ll be prepared to negotiate with your tenant on the price.
Ask yourself some additional questions once you’ve gotten a feel for the general rental atmosphere. Does your property compare to those with higher rates in the same neighbourhood? Does your property have a unique selling feature that differentiates it from other rentals in the area? Are other landlords in the area lowering (or increasing) their rent, and how are their tenants reacting to these changes? Use these and other answered questions to inform your negotiations so both you and your tenant come out satisfied with how things went.
Does it make sense to lower rent?
In addition to doing your research on the current state of the market and what other landlords like you are currently doing, it’s a good idea to consider whether lowering the rent makes sense right now. There are two main things to consider – are you close to a vacancy, and how long would it take you to find another high quality tenant? If you believe that your tenant is prepared to move out in the event that negotiations don’t go their way, would you be able to fill that vacancy quickly or will it cause major headaches?
Every landlord has different experiences when it comes to finding quality tenants, and that will inevitably affect a potential decision to lower rent. If you think it’ll be difficult to find another good tenant to fill a vacancy you might be more likely to accept a rent reduction, even if the market doesn’t necessarily justify it. If you haven’t had any problems finding good tenants in the past, you probably won’t have any trouble declining a rent reduction, even if other landlords have been doing so. Ultimately, this will be up to and informed by your own experiences.
Counteroffer – is there anything you can do instead?
When faced with a situation where your tenant is likely to move out in the event that their rent isn’t decreased, you might have the option to make a counteroffer. If you’re unwilling to go down on the rent price, it’s possible that your current tenant might accept incentives rather than a direct reduction in rent.
This could simply be making improvements to your property like repainting or purchasing new furniture, or something more complicated like offering free parking. Perhaps the best incentive would be to offer free utilities like internet or cable, which could be more than enough to justify their staying and paying the same rate. This saves a bit of money for your tenant, and allows you to make them happy without agreeing to a full rent decrease.
No matter what decision you make when it comes to negotiating with tenants, you should never have to worry about collecting rent on time and in full. That’s why Toronto property management companies like HighGate Properties handle it, along with time consuming processes like tenant screening, maintenance, and everything else that comes with being a landlord – including negotiating with tenants. To learn more about the GTHA residential property management services offered by HighGate Properties, reach out to us today.