In the face of a novel pandemic and revenue dropping to next to nothing, many businesses need commercial lease workouts to avoid closing down operations for good. Some landlords will be more open to a workout than others. Here are some tips to help business owners identify if the assistance of an attorney is needed or if the business owner and landlord can accomplish getting together an agreement to allow both parties to survive COVID-19.
READ THE LEASE
It is important to locate a copy of the signed and final lease agreement. Read the provisions of the lease agreement to see what the landlord’s remedies are if rent is not paid. What cure provisions are there to allow you to catch up? Is the Force Majeure clause triggered?
GATHER YOUR BUSINESS FINANCIALS
If you are behind on your books, then you need to catch up. It is essential to know what your monthly expenses are, what can be scaled back or cut, and when you will be able to resume your lease payments. For the lease payments your business has or is proposing to miss, you need to be able to agree on when the business will be able to catch up for an effective commercial lease workout.
Many commercial landlords will request a copy of current financials with a request for a commercial lease workout or temporary abatement of rent payments. The landlord may have a lender that needs to be part of the discussion to make lease concessions, so be cooperative in getting the landlord what it needs to make the decision.
MAKE THE CALL
It is not a good idea to pull a Cheesecake Factory and write a letter to inform your landlord that your business will not be paying rent until operations resume. Small companies do not have the franchise leverage that a large chain has with a landlord. Before defaulting on your rent payments, reach out to your landlord contact to give information about the trouble you are having and see if the landlord is open to discussing an agreement.
Do not make an offer without having all the information. During the call, listen to the landlord and see what arrangements the landlord would consider. You can use that information to formulate a commercial lease workout that will work for your business or convey that to the attorney you choose to assist you. Let the landlord know that you will circle back with a proposal. Before finalizing a commercial lease workout, consult with business partners and analyze your business’ financial abilities. If you are uncomfortable, then an attorney with workout experience may be able to help negotiate the concessions you need and formalize the commercial lease workout.
NO WRITTEN AGREEMENT, THEN NO DEAL
If an agreement is reached with your landlord, then formalized it in a lease amendment. The amendment should have the details of when payment will be made, the effect on the other lease terms, specify that the landlord will not take any legal action if your business, the tenant, remains in compliance with the amendment terms, and other essential terms specific to the situation. The lease amendment should be signed by the same parties that signed the lease. It can be signed by another representative of the landlord with apparent authority or a party with a document giving them the authority to sign for the lessor, aka landlord. It is a good idea to have an attorney review the agreement before signing if you have access to one.
ASK FOR HELP
During this time of uncertainty, it can be overwhelming to try to keep the business afloat. It is better to delegate and hire a professional to help than to not take care of getting an agreement in place. Contact Roberts Law, PLLC for a free consultation to discuss your needs.
Disclaimer: The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction or the jurisdiction applicable to your issue/matter. No information contained in this post should be construed as legal advice from Roberts Law, PLLC or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.
