Hoops Rumors Glossary: Renegotiations

It’s common practice in the National Football League for a team to renegotiate its contract with a player, but we hear far less about the concept in the NBA. So can an NBA team actually renegotiate a contract with one of its players?

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. Unlike NFL teams, an NBA club can’t create extra cap flexibility by renegotiating a contract to push present-day cap hits into future years.

However, renegotiations are allowed to make an NBA contract more lucrative, and they can happen as long as a specific set of circumstances are in place:

• Only contracts that cover four or more seasons can be renegotiated, though that rule doesn’t apply to rookie scale deals — even though they run for four years, they can’t be renegotiated.
• Renegotiations can only occur after the third anniversary of a contract signing, an extension, or a previous renegotiation (assuming the previous renegotiation increased the salary in any season by 5% or more).
• Perhaps most importantly, teams can’t renegotiate any contracts if they’re over the cap, and they can only increase the player’s salary in the current season by the amount of cap room that they have (or to the player’s maximum salary).

The raises for any seasons that follow the first renegotiated season in a contract are limited to 8%. That’s also true of salary decreases, though if a renegotiation happens at the same time as an extension, the player’s salary can decrease by as much as 40% from the last season of the existing contract to the first season of the extension.

Here are a few other rules related to contract renegotiations:

• Teams can’t renegotiate contracts between March 1 and June 30, so the last day of February is always the deadline to complete renegotiations in a given league year.
• Renegotiations can’t occur as part of a trade, and if a player waives some or all of his trade kicker to facilitate a trade, he’s ineligible to renegotiate his contract for the next six months.
• In order for a signing bonus to be included in a renegotiation, the contract must be extended as well.
• Two-way contracts can’t be renegotiated.

Renegotiating a contract to include a significant raise for the current season can be a clever way of incentivizing a long-term extension for a player who would otherwise reach free agency. However, an extensive set of rules limits the appeal of that sort of deal, and teams generally require substantial cap room to pull it off, so contract renegotiations are rare.

The last NBA contract to be renegotiated was Robert Covington‘s with the Sixers in November 2017. At the time, Covington was earning a minimum salary of approximately $1.6MM and the 76ers had just over $15MM in cap room available.

Since Covington had outperformed that contract and Philadelphia wanted to lock him up long-term, the team used its remaining cap room to renegotiate his deal, giving him a raise to nearly $16.7MM for the 2017/18 season, then tacking on four more years, the first of which was worth just over $10MM, representing a 40% dip.

Because two NBA teams – San Antonio and Indiana – currently have substantial cap room available, the renegotiation tactic is worth keeping in the back of our minds this season.

Unfortunately for the Spurs, the team’s top extension candidates – Jakob Poeltl and Tre Jones – signed three-year contracts during the 2020 offseason. That makes them ineligible for a renegotiation, since only contracts covering four or more seasons can be renegotiated.

The Pacers, on the other hand, have one renegotiation candidate in Myles Turner, who signed a four-year rookie scale extension in 2018. Turner has an $18MM cap hit this season, so veteran extension rules would typically restrict the Pacers from offering more than a 20% raise, which would work out to a $21.6MM starting salary in 2023/24.

However, by renegotiating his contract, the Pacers could get more creative if they want to try to extend Turner, offering him a big raise on this year’s $18MM salary — in theory, they could double that figure and still have a chunk of cap room (approximately $10MM) left over. Doing so would reduce the trade opportunities the Pacers’ cap room affords them at the trade deadline, but they’ll need to spend that money somehow in order to reach this season’s salary floor.

Additionally, because a renegotiation in conjunction with an extension allows for a 40% dip in the first year of the extension, the Pacers could still start an extension offer for Turner at $21.6MM even after increasing his current-year salary to $36MM. It’s not as if a big salary bump for this season would force them to keep increasing that cap number in future years — a Turner extension could theoretically look the same beyond this season as it would without a renegotiation.

Keith Smith of Spotrac explores the concept of a possible Turner renegotiation and extension in more detail.

Turner may prefer to test the free agent market next summer; perhaps the Pacers would prefer to trade him before this season’s deadline. But if there’s any mutual interest in a long-term deal, the two sides would be wise to explore the renegotiate-and-extend route, since this could represent a rare instance where it makes sense to take that path.

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.

Earlier version of this post were published in 2015 and 2017.