What does it mean when your tenant asks for a decrease in rent? Simply, that the rent you are charging is higher than market value. So why is my rent higher than market value, other leaseback rents?

 

This could be because of two things or both: 1. The building was overvalued thus overstated the expected rent or 2. Leaseback prices were inflated due to the economic situation at the point of purchase, thus inflating the expected rent. Due to French law, if the rent is truly higher than market value, then your tenant has the right to ask for a rent decrease. If the situation were reversed and rents are actually lower than market value, then the tenant has legal protection for you to not raise rent.

 

In short, your rents need to be at market value. This is why it is important to understand the leaseback market in the area you own or plan to buy or sell.

 

To further elaborate on this and understand French leaseback pricing, click here.