Coronavirus (Covid-19) is sure to quickly take its toll on commercial leasing for both Landlords and for Tenants.
Tenants may be asking questions like: How can I pay base monthly rent without any customers? Should I be obligated to pay triple-net expenses when services are suspended? What is the impact of government regulations on operations? What do I do if the Landlord closes my shopping center? These questions are particularly daunting for restaurants and small businesses.
On the other hand, Landlords are faced with loan repayment challenges because of the prospect or reality of declining income from tenants. Governmental regulations may also hamstring a Landlord’s ability to undertake even its most basic lease obligations, including providing a tenant space for the permitted use during regular business hours, and coordinating with its maintenance and service providers.
Landlords could also have difficulty turning to the courts where, in Maryland, nearly all civil proceedings have been either suspended or put on the backburner while emergency social distancing measures remain in place.
Landlords and Tenant could find the solutions to some of their questions through close review and interpretation of their existing lease. Generally, commercial leases will closely define the parties’ respective obligations for continuous operations and providing space, services, and payments. Some rent payments are based on income. Often reimbursement of additional rent is also based on actual costs. Certain obligations may be suspended or waived in the event of partial or total interference by governmental regulations, Acts of God, or emergencies. Both Landlords and Tenants should already be closely reviewing their lease obligations now and preparing for the worst.
However, the prospect of forced business closures and mandatory lockdowns of non-essential businesses, together with an economic tailspin, also creates new challenges that were completely unanticipated by both parties. Landlords and Tenants may be best suited to work together to enter into short-term renegotiated amendments or extensions to their leases, in order to ensure mutual benefit while the nation addresses the overall pandemic.
At McMillan Metro, our commercial leasing lawyers are experienced in negotiating and renegotiating leases on behalf of Landlords and Tenants for retail centers, office and professional office buildings, and restaurants. If you have a question about your lease, or need advice on negotiating new terms or making a demand, please call Peter E. Ciferri, Esq. at (240) 778-2307 or e-mail firstname.lastname@example.org for a consultation.