Commercial Leases: Communicate with Your Landlord for Options

This past spring, when the Covid-19 pandemic began, both the federal and state governments issued various orders to help businesses stay afloat. However, some of these protections have now expired, leaving business owners wondering what to do next.

An important development to know is that the rent moratorium is over. Until recently, business owners were not subject to being evicted due to failure to pay rent. Now that the moratorium is over, those who cannot or do not pay rent will be subject to eviction. However, it is still possible to negotiate with landlords to reach a solution that is satisfactory to all involved parties.

Check the lease contract. If the landlord has a duty to mitigate damages, this means that they must take reasonable steps to avoid or minimize financial damages in the event of a breach of contract. Therefore, they cannot sue for an unreasonable amount of damages if they did not fulfill their duty to mitigate the impact. With regard to the pandemic, such a clause will motivate landlords to work with tenants to identify workable solutions.

Get started now. Landlords are much more willing and capable of working with tenants who approach the situation early and proactively. Those who know that they won’t be able to make rent should start the conversation sooner rather than later.

Emphasize your strengths. Remind your landlord of facts such as a solid rent payment history before the pandemic, high credit score, investments you have made in the property, or anything else that makes you a good tenant.

Focus on the future. If your business fails, you will default on the lease anyway. But in the meantime, working with you to help the business stay afloat will help ensure that your landlord keeps a long-term tenant as the economy recovers.

Hint: Landlords know that during a serious economic downturn, it can be difficult to find new commercial tenants.

Bring something to the table. Business owners who can’t make full rent should be prepared to offer something to the landlord. For example, some might accept lower rent payments in exchange for a longer lease term or upward-adjusted lease payments as the economy improves.

Know what you want, but be ready to compromise. Approach mitigation as a discussion and an attempt to find a reasonable solution that benefits all parties. Landlords have their own concerns and limitations that must be considered as a compromise is negotiated.

For more information or assistance with renegotiating a lease, call our real estate attorneys for guidance. We can help you reach a conclusion that benefits both parties and helps your business continue to operate during this difficult time.

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