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How Tenants Should Approach Their Landlords During COVID-19 Pandemic

by Andrew Margolick, ARM Consulting LLC

armconsultingllc.com


Simply put, we are in virtually uncharted territory.


Not only are many stores closed, but each day brings new and increasingly scary news as well as the likelihood of a longer shutdown for non-essential functions.


Tenants are uncertain about their future as operators. In nearly all cases, they are unsure of how to manage their leasehold obligations. Keeping the current business climate in mind, there are three “must-do” items for tenants as April’s rent approaches:


1. Speak with a lawyer


I work on business terms of leases on behalf of tenants and my role usually comes before the lawyers. However, in this case, a thorough review of a lease could present an opportunity not to pay rent because of legal means.


I have heard the buzzwords “force majeure” more in the past two weeks than at any time in my 20-year career. An experienced lawyer can be crucial in this situation.


2. Take a short term view


While it’s understandable to say, “I need to restructure my lease moving forward,” or, “I’m not sure when I’m going to be able to re-open so I need to look at everything”, the reality is that everything right now is a big N/A for both tenants and landlords, plus lenders, suppliers, customers.


Landlords are not going to agree to long-term concessions at a time when they have as many issues as their tenants.


3. Be transparent


I firmly believe that the best way to work with landlords is through transparency. Simply not paying rent and “ghosting” a landlord will likely lead to problems down the road.


With the larger landlords, it’s not a question of if you’ll hear from them, but when. On the other hand, calling and/or writing a landlord with an explanation of the losses will grant you a better response.


For example, losses suffered due to closure, being take-out/delivery only, etc. is the reason why you will not be able to pay some or all of April’s rent (or will need to defer it) resonates more responsibly with your landlord. This detailed response will also make the inevitable future negotiations less contentious.

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Following these steps doesn’t guarantee a successful outcome, but does put you in the best position to achieve one. For more information on how to negotiate your lease during this time, contact Andrew Margolick at andrew@armconsultingllc.com

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