Dealing With Commercial Real Estate Issues During Pandemic
Owning a business is frustrating for entrepreneurs right now. Due to the coronavirus crisis, many businesses have had to shut down due to shelter in place orders. Due to the lost revenues, they don’t have the money to pay for continual expenses, such as rent. Inability to pay rent has been a major landlord/tenant issue for individuals and businesses alike.
Tenants and landlords have been dealing with legal issues as they figure out what they can and cannot do during this crisis. Tenants have been struggling with early termination of their leases, while landlords have been trying to provide as much financial relief as possible. The key right now is flexibility.
One thing that commercial landlords have been doing is negotiating settlements. They are seeing losses because tenants are unable to make their rent payments in full. In normal circumstances, a landlord would be to evict a tenant who isn’t making payments. However, due to the fact that we’re in the middle of a pandemic, courts are likely to be more sympathetic to the tenant, not the landlord. It is in the landlord’s best interest to work with the tenant on repayment, especially since replacing a tenant would be difficult right now.
Many landlords are modifying the terms of their leases. Some are deferring their leases for up to 90 days and are allowing flexible repayment plans, such as installments. Some are temporarily reducing rent, while others are extending leases or terminating leases ahead of schedule.
Some lease agreements may include a force majeure clause. This clause applies to obligations that cannot be fulfilled due to acts of God and things beyond a person’s control, such as the coronavirus pandemic. However, force majeure clauses apply only to performance issues, not payment issues. Plus, force majeure clauses are not commonly invoked, so there needs to be a high burden of proof.
Some clauses in leases involve casualty or condemnation. This means that if the commercial building in question is damaged by some sort of casualty or condemned by the government, then the rent could be eliminated or the lease could be terminated. Many may try to argue that COVID-19 could be considered a casualty, but typically the damage would have to be physical in nature in a standard lease clause. If the clause could be interpreted that the casualty has “rendered the premises unfit for occupancy,” then the tenant could argue for a break on the lease or monthly rent payment.
It is important for all the parties involved to review their lease agreements to determine what legal options are available. Tenants may not have the right to terminate their leases or withhold payment without some sort of penalty.
Seek Legal Help
The COVID-19 pandemic has made it difficult for businesses to pay rent. As a business owner or landlord, it’s important for you to understand your legal options.
Fort Lauderdale real estate lawyer Edward J. Jennings, P.A. can help you handle landlord/tenant issues. If you’re willing to be flexible, there are many options available. To schedule a consultation, call 954-764-4330 or fill out the online form.