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Hoops Rumors Glossary: Renegotiations

Fans often wonder if NBA Team X can renegotiate its contract with Player Y, as is common practice in the National Football League. The answer is almost always no, and it’s a firm no if the follow-up question is whether the sides can renegotiate the value of the contract downward. But, renegotiations are allowed to make the contract more lucrative, and they can happen as long as a specific set of circumstances are in place, as the Nuggets have proven this month.

Denver renegotiated its contract with Wilson Chandler as part of their deal on an extension. The move lifted Chandler’s salary for this coming season from close to $7.172MM to more than $10.449MM. Danilo Gallinari is reportedly set for a similar renegotiation simultaneous to an extension, taking his salary for 2015/16 from more than $11.559MM to about $14MM. Chandler was the first player to renegotiate his contract since the existing collective bargaining agreement went into place in 2011, and Gallinari is poised to become the second. It might be a while before we see the third. No player aside from Gallinari is eligible for a renegotiation, as former Nets executive Bobby Marks points out (Twitter link), and that speaks to just how stringent the restrictions on them are.

Only contracts that cover four or more seasons can be renegotiated, and rookie scale contracts, which run four seasons, can’t be renegotiated, either. Renegotiations can only occur after the third anniversary of a contract signing, extension or previous renegotiation, if the previous renegotiation lifted the salary in any season by 4.5% or more. Teams can’t renegotiate any contracts if they’re over the cap, and they can only increase the salary in the current season by the amount of cap room that they have. Renegotiations can’t happen as part of a trade, and if a player waives a portion of his trade kicker to facilitate a trade, as Roy Hibbert did earlier this month, he’s ineligible to renegotiate his contract for the next six months. Teams can renegotiate contracts once the July Moratorium ends, but not after the end of February.

A further set of rules restrict just how much can change in a renegotiation. The raises for any seasons that follow the first renegotiated season in a contract are limited to 7.5%. That’s also true of salary decreases, though if a renegotiation happens simultaneous to an extension, as was the case with Chandler and will likely be the case with Gallinari, the player’s salary can drop by as much as 40% from the last season of the existing contract to the first season of the extension. That won’t happen for either Chandler or Gallinari, each of whom is set to see more money in 2016/17 than in 2015/16. Also, only renegotiations that happen in conjunction with an extension may contain signing bonuses.

All of this helps make renegotiations as rare as they are. However, with the salary cap projected to surge beginning next season, and surge again for 2017/18, more teams will have cap room, one of the necessary elements for amending contracts. Conceivably, that’ll open more doors for renegotiations, as well as veteran extensions, which are also rare under the current collective bargaining agreement. Teams can entice players they want to keep with added salary this way, and prevent them from hitting the open market. The rules are subject to change if the union, the owners or both exercise their mutual option to end the labor agreement in 2017, but in the meantime, the power to renegotiate will continue as an obscure but sometimes useful tool for roster building.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA’s Collective Bargaining Agreement. Larry Coon’s Salary Cap FAQ was used in the creation of this post.

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