Need to learn how to renegotiate a commercial lease? Here are some tips for tenants and landlords alike.
It is no secret that times are tough right now, especially for businesses. The coronavirus pandemic has all but halted the flow of cash from consumers to small businesses. Even as states begin a gradual reopening this summer, many of those businesses will struggle to pay the rent for their commercial spaces.
And any business that can’t pay the rent can’t stay open.
Whether you are a landlord for a commercial space or a business owner who rents commercial space, this is bad news. For the business, failing to pay rent means they will probably be evicted. For the landlord, having a tenant who can’t pay means empty commercial space.
The bottom line is this: commercial landlords and tenants will have to work together to get through this crisis, and renegotiating a lease is just the first step. Here’s how you can do your part.
Let’s Take a Look at How to Renegotiate a Commercial Lease as a Landlord
If you are a landlord, you know that renters are not the only ones stuck between a rock and a hard place. When tenants can’t pay rent, landlords can’t make mortgage and tax payments. You may want to talk to your lender to see if they will work with you on your payments, but once you know how much flexibility you have, these tips can help you during lease negotiations:
- Communicate with your tenants about the contingency plans you have in place during the coronavirus.
- Consider rent reduction, rent abatement, or rent deferral for impacted tenants.
- Be flexible with subletting restrictions.
- Keep your tenants informed of any changes.
It is better for landlords to work with their tenants on rent payments than it is to seek eviction in most cases. The time, energy, and money you spend could end up going to waste. Furthermore, a good tenant can be hard to come by, so depending on who you are renting to, it might be worth a loss to keep them in your commercial space.
How to Renegotiate as a Tenant
Small businesses have been hit the hardest by COVID-19 closures. If you own a small business and rent your commercial space, here are some tips to help you talk to your landlord:
- Know what you need in your renegotiated lease and make a plan to get it.
- Contact your landlord as soon as you think you will have trouble making rent.
- Consider alternative funding options to cover expenses short-term.
- Ask your landlord whether they would consider rent abatement, rent reduction, or rent deferral while your business is impacted.
When you speak to your landlord, it is best to do it over the phone or in person. That way you can be sure that your landlord doesn’t misinterpret what you say.
If you don’t know how to renegotiate a commercial lease and need the expertise of a real estate and business attorney, get in touch with AM Law today. We will work with you to come up with a solution that fits your needs. Contact us today.