The novel coronavirus pandemic is making life difficult for small business owners. Many of our clients are struggling to manage newly-remote employees who have been forced to work from home due to shelter-in-place orders, applying for emergency financing, weighing employee layoffs, and fighting to keep their doors open.
For many businesses, monthly rent is the largest line item in the budget. One of the most stressful and complex problems these business owners are facing is how to meet their commercial lease obligations as their business operations are crippled by the pandemic.
STRUGGLING BUSINESS OWNERS SHOULD ADDRESS THIS PROBLEM HEAD ON, AND QUICKLY. WAITING WILL ONLY MAKE THINGS WORSE.
If you find yourself in a similar situation, here are a few things to consider…
1. Look for a force majeure provision in your lease. “Force majeure” is a French term for “superior force” used to describe a type of contract provision that excuses nonperformance of a contractual obligation if the nonperformance is caused by certain events beyond the party’s reasonable control (floods, earthquakes, hurricanes, tornadoes, acts of God, etc.). Force majeure provisions are fairly common in commercial leases, so you should review your lease to see if it includes such a provision. Depending on the wording of this provision, you may be able to avoid certain lease obligations during the current crisis. An attorney can help you decipher your lease agreement and explain your options.
2. If your lease does not include a force majeure provision, certain common law doctrines (impossibility or impracticability) may provide some relief. These are complicated, so you’ll need to contact an attorney for assistance.
3. Finally, you might opt to negotiate temporary rent reductions or abatements with your landlord. During the financial crisis of 2008-2009, landlords commonly offered significant concessions to keep tenants in place because doing so was preferable to engaging in mass evictions. Landlords are business owners too. They’ll be making hard choices in the coming months just like their tenants, and it may be possible to negotiate a win-win lease “workout” that benefits all parties. It’s possible to do this on your own, but an attorney experienced in commercial lease negotiation may offer the best solution.