Commercial Rent Obligations in a Pandemic
In recent weeks, every commercial landlord and business owner has scrambled to develop a strategy for responding to COVID-19 hurdles. I have received numerous inquiries asking what can be done in this novel situation when tenants are required to pay rent for commercial spaces they cannot occupy by no fault of the landlord or their own.
This blog post is not designed to tell you what your legal rights are under a commercial lease or what legal arguments you might consider making. Instead, I lay out some considerations for both landlords and tenants as they try to develop mutually beneficial solutions that avoid breach of contract claims and otherwise degrades their long-term relationship.
Government Funding: Many of the programs recently released by federal and state governments allow businesses to use stimulus funding to pay rent. Commercial landlords should be encouraging their tenants to apply for those loans most of which are being offered on a non-recourse basis. To learn more about available programs click here.
- Modifying payment frequency from monthly to quarterly or vice versa to help tenants manage cash flow.
- Agree tenant is not required to pay rent while the governmental restrictions are in place, but tenant agrees to pay landlord’s monthly operating expenses in the interim.
- Agree tenant is not required to pay rent while the governmental restrictions are in place, but tenant agrees to extend the lease for the time period the restrictions were in place.
- Agree to a reduced rent while governmental work from home restrictions are in place in exchange for the tenant’s agreement to increase the rent for the remainder of the lease term to account for the reduction.
- Agree rent will be paid out of security deposit in exchange for agreement that tenant will not need to replace the deposit until after the work from home restrictions are lifted.
- Agree to an allowance for space improvements and/or refurbishment of the tenant’s furniture, fixtures, and equipment as an incentive to encourage the tenant to continue paying rent.
For as fun as that sounds, channel your inner Axl Rose and remember that all we need is a little patience. And to the extent you don’t think you can do so on your own, Russo Law LLC will happily back you up.
Republished 4/22/2020 by CourtBuddy
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