Business is hurting and your lease or rent payment is due. Now what?

Business is hurting and your lease or rent payment is due. Now what?

By Brad Jankowski

April 20, 2020

 

 

I am having difficult discussions with my clients lately about their business options in the time of Coronavirus, and in several instances how to deal with commercial leases. 

 

Governments are providing support in the form of several programs detailed here (https://haileshaw.com/sba-programs-are-complicated-let-us-guide-you-through-it/), whereby a portion of the funds may be used for payment of rent. However, this process may take some time before your company receives funding under these programs. So, in the meantime, here are a few options on how to mitigate rent costs –

 

  • Remember, the worst-case scenario for both you and the landlord is having to shut your doors and default on the lease agreement. It is in both parties’ interest to work together.
  • Notify your landlord before paying rent becomes an issue. A phone call is better than an email.
  • Try to negotiate at least a partial payment of rent. Remember, the landlord often has to make mortgage payments too. 
  • If you can make full payment, continue to do so. 
  • Propose a partial rent abatement such as 50 to 75 percent of your rent for the next three to four months. Perhaps even propose to payback the difference over time with interest.
  • If your agreement allows for it, or your landlord is in agreement (and why wouldn’t the landlord be open to the idea if it is reasonable), try to sublease a portion of your space. Many businesses and companies are downsizing, perhaps leaving the company or an employee without space; you could fill that need.
  • Ask for 100 percent rent abatement if your company simply needs a break over the near future (three to four months). Offer to tack on those months to the end of the lease with a percent increase (3 – 4%) for those months.
  • Apply for a relief program such as the Paycheck Protection Program. More and more, landlords are now requiring that the tenant show proof of application to such a program prior to agreeing to deferring or abating rent payments. 

 

What should you be thinking of doing now? 

 

If you would like to further discuss your options with an experienced real estate attorney, and have your lease reviewed, please give us a call at your convenience.

 

The first conversation will not cost you anything, and hopefully it will start you on the road to peace of mind.

 

Thank you.

 

Brad Jankowski

bjankowski@haileshaw.com

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