Landlord/Tenant Tensions Resolved With Open Communications

There is no playbook for the times in which we are now living. On Main Street, USA, the COVID-19 crisis has impacted businesses such as mom and pop stores as well as large commercial properties housing retailers, restaurants, and other companies. With most of these establishments closed or limited for the foreseeable future, many are struggling to meet their rent obligations as eateries and stores remain void of paying customers.

 Yet, even without a prescribed solution for addressing these unique circumstances, landlords and tenants can work together to find common ground, as each adjusts to the changing landscape while attempting to navigate monthly lease obligations with little to no revenues coming in to sustain their businesses.

 The time for open and honest communications is now.  Landlords must avoid taking a hard stance at rent payment due dates, while tenants must also reject taking advantage of the situation. Each must share the pain – at least temporarily.

 Early into the crisis and perceiving what might lie ahead, many tenants proactively contacted their landlords and negotiated payment plans that would keep both in the black, at least temporarily. Others, who chose not to communicate or decided to issue strong notices of default, have risked a potential breakdown in their partnership. 

 Both tenants and landlords are feeling the pain as revenue streams run dry. However, as in any negotiation, cool heads do prevail and common ground can reached when each party can empathize and be reasonable.

 Here are a few suggestions that have proven successful with my clients:

·        Utilize security deposits to offset some unpaid rent and restore them in the future.

·        Negotiate a percentage rent deal based on your sales until they recover to pre-COVID-19 levels.

·        Propose to cover tenant’s proportionate share of the landlord’s carrying costs (which should be reduced based on the landlord seeking relief from its vendors and lenders) until all restrictions are lifted. 

·        Extend the term, Where rent relief is agreed to by the parties, to ensure that the landlord and tenant both get the “unrestricted” use and rent they originally negotiated.   

No doubt, the landlord/tenant relationship is being tested right now. However, as long as each party strives to keep the lines of communication open, transparent, and reasonable, this partnership can get through the Pandemic by working together.