Whether you are a landlord or a tenant, the impact of forced business shutdowns is hard, and the consequences will be equally hard as we pull together to get back on track as the crisis subsides. Now is the time to plan ahead, and to take steps to mitigate or avoid consequences that are foreseeable.
Avoid the worst-case scenario. If tenants are forced to default, they will be unable to reopen their business. Landlords will also be left with vacant, unproductive space. Both sides of the leasing relationship should be motivated to overcome this outcome if possible.
Evaluate and Communicate: For some tenants, they may be able to continue with business as usual. However, what the economic future holds is ultimately unpredictable in these uncertain times. Landlords and tenants should have their leases reviewed, and their options identified, just in case. In the meantime, it is a good time to open a line of communication, for the tenant to let the landlord know that they are fine for now, and for the landlord to check in with their tenant regarding the tenant’s present and anticipated condition.
Some tenants may already be suffering and in need of present or foreseeable adjustments to stay viable. These adjustments are subject to negotiation, taking into consideration the circumstances unique to each situation. Evaluation and assistance in this regard is well worth the small investment in legal advice. Some common options are:
- Request or propose a partial or complete lease payment abatement for a set period of time. This may be in the form of a complete forgiveness, or a loan with a repayment plan, or a partial forgiveness plan.
- Sublease the entire or portion of leased space.
- Renegotiate the lease to reduce the lease payments, or to reduce the leased space and corresponding lease payment.
There are other options, again, that a willing landlord and tenant may also develop, depending on the unique circumstances.
Whether you are a landlord or a tenant, plan ahead!