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Delays In Commercial Lease Negotiation Resulting From COVID-19: Address These Types Of Issues Up Front In Your Leases

Author: Date: 04/21/2020

Categories: Commercial Leasing, Covid-19 News and Resources, Real Estate Law

Vacant Retail Building with For Lease Real Estate Sign in Front.Any of you that are in the process of negotiating a new lease, or considering negotiating a new lease in the near future, should expect some issues regarding delays.  Tenants are finding themselves tentative to pull the trigger on signing leases due to uncertainty of their business moving forward in the short term. Additionally, there should be expected delays in the ability of the parties to deliver the space, obtain building and occupancy permits and have construction of new improvements performed on time, due to COVID-19 related issues.

Landlords and tenants should anticipate these delays and be willing to provide leeway and draft provisions into leases that allow for such delay without penalties being imposed.

Parties to leases may also want to consider revising their force majeure clauses to include pandemic related issues, government-mandated closures and the like, so that these events now and in the future are addressed and the parties do not find themselves without relief from defaults resulting from such actions.  Landlords and tenants may also want to consider including rent deferral language in future leases. Consider allowing tenants the ability to defer several months of rent and have those payments spread out over the remainder of the lease term, so that both parties can get some benefit from the situation, rather than just asking for rent abatement, never to be paid back.

You may also want to check with your insurance agent to determine how pandemic or government-mandated closures are addressed in your insurance policies from a business interruption standpoint and a loss of profit and damages standpoint.

Please contact Michael Faerber at (301) 251-1180 or by email at mfaerber@mcmillanmetro.com if you would like to discuss commercial leasing and other real estate issues.