Should I hire an attorney to negotiate my tenant buyout?

My office provides 'Cash for Keys'/ tenant buyout services in two options: (a) agreement drafting only and (b) a negotiation package, including drafting the agreement. My presentations, whether they are in person, webinars, or YouTube are geared towards giving landlords tools and tips on negotiating buyouts directly with tenants. However, the question is always posed- "Is it better for the landlord to negotiate directly with the tenant or have a third-party negotiate?" The answer- it depends.

Landlord Negotiator

Pros: The landlord negotiator works best when they are directly known to the tenant and on good terms. Tenants respect when the person they have known as their landlord discusses this matter directly with them. This is especially true for landlords that have worked with these tenants for a long time and/ or there are not a lot of units at the property the tenant lives in. Smaller properties tend to be owner-managed and the tenants already deal directly with the landlord.

Negotiating directly with the tenant can sometimes be faster. The landlord presents an offer, lets the tenant think about it, and mutually agree to a follow up call or meeting. Tenants will usually honor making that appointment. Credibility is not an issue because the offer is coming directly from the landlord.

Many of my clients do a 1 hour consultation with me, go over all their questions, applicable buyout rules, come up with a strategy, and the client implements it. Not to my surprise, but to my clients' own surprise, that are able to get a lot of deals done. While this consultation is paid, it is affordable and worthwhile because it prepares the landlord for making an good faith offer and avoiding procedural mistakes.

Many mom and pop or smaller portfolio landlords have successfully negotiated deals with terms and amounts that were reasonable by simply talking with the tenant directly, being honest, and hashing things out.

Cons: Of course, negotiating buyouts are not always easy. One reason for a landlord to not negotiate directly with a tenant is if there is "bad blood" between them. There are those landlord-tenant relationships where the two do not like each other. If a tenant does not like their landlord, for any number of reasons, having the landlord try to broker their own deal may be a non-starter and could potentially run the landlord into the position of being accused of violating an anti-tenant harassment law.

Another drawback is if the landlord is new or not well known to the tenant. There is no rapport between the landlord and tenant to have a gauge on what the tenant may or may not perceive of the landlord and the buyout offer. There is not established credibility. This may also require the landlord to start engaging in the day to day activities that they otherwise do not engage in, because the tenant will direct not only negotiations but other requests directly to the landlord.

For buildings with lots of tenants, having the landlord try to negotiate directly can be overwhelming. When making offers to multiple tenants, the first phase is usually the tenants talk to each other (despite negotiations being confidential), try to join forces to drive up their own buyout amounts, and turn to tactics to intimidate the landlord into offering more. This puts the landlord in the direct position of having to deal with negotiations, tenant personalities, and the tenants' own negotiating tactics that can be stressful for the landlord to navigate.

Many landlords have full plates with their own jobs or other businesses that are not related to real estate. Trying to negotiate directly with a tenant can be a distraction to your other work or responsibilities. It takes a lot of time, discipline, and organization to keep track of the negotiations and follow up with a tenant. Many deals have taken landlords years because they just did not have the time. This also frustrates the tenant and leaves the impression the landlord's offer was insincere.

Third Party Negotiator

A third party negotiator has several advantages to the landlord: knowledge of the rules, negotiations skills, acts as a buffer, and is diligent.

In Greater Los Angeles, where I do most of my buyouts, there are several jurisdictions with laws about buyouts, such as the font size, required language, required disclosures, required bi-lingual drafting, certain tenant rights, mandatory filings, and even mandatory minimums for buyout amounts. Some landlords are tempted to bypass these rules and just do it themselves "off the books." This is a terrible idea because it provides no benefit to the landlord and increases their chances of later getting sued for violating not only the buyout rules, but other pro-tenant laws. Further, if the agreement is not valid or done properly it cannot later be enforced by the landlord. At minimum, every landlord should consult with an attorney before attempting negotiations with a tenant to make sure they are following correct procedures.

Not everyone is great at negotiating. That isn't a knock on the landlord, it is a reality for many people. Negotiating is a skill. With buyouts not only do you need to understand different negotiating tactics, such as different ways to structure an "appealing" deal without hemorrhaging money, you also need to have emotional intelligence and patience. I direct you to my one liner for landlords "this is a business decision for you, and a life changing decision to the tenant."

You need to be very empathetic, and that often times requires just listening to the tenant speak. A tenant will be more honest and open with a third party that is empathetic and willing to hear them, than their landlord. This is in part due to the negotiator opening that door, but also the fact the negotiator is not their landlord. I have the patience to meet a tenant where they are at or listen to them complain for an hour about the condition of their apartment. Giving them that space to vent helps the tenant, but a landlord does not want to hear it.

Dealing directly can result in hurt feelings or tempers rising because the other side is not getting what they want. Sometimes it is hard for landlords to bite their tongue and not want to shout back at a tenant or get defensive. Having a third party in the middle can defuse a lot of the tension that arises in these negotiations because the third party is hearing the cries of protest, filtering those cries into valid negotiating points, and working towards a deal (not a match of who has the most complaints).

Lastly, negotiators want to get deals done. They are systematic about following up with tenants. If a tenant is interested the negotiator makes the time and facilities discussions so opportunities are not missed.

I service landlords to get them the best chance of making a deal possible, whether it is prepping them for negotiations or handling the negotiations for them. The first step is always to get informed about buyouts and any applicable rules.

The information in this post is for general information purposes only. Nothing on this post should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.