Managing Commercial Landlord/Tenant Relationships During COVID-19

In the aftermath of the coronavirus outbreak, many Florida businesses have been forced to tem­porarily close. Other businesses have had to scale back operations by decreasing their hours of operation, reducing employee hours, or even implementing layoffs. These changes have not only made it difficult for commercial tenants to comply with their leases, but also for landlords to keep their properties or businesses afloat.

While protection orders have been put in place for residential evictions and foreclosures, these protections have not readily applied to commercial tenants. This has led to concern for tenants occupying commercial space, as well as for landlords who must continue looking for better options to protect their properties and investments.

As of October 2, 2020 Miami-Dade Mayor Carlos Gimenez extended the stay on writ of possession enforcement. While this does not stop a landlord from initiating an eviction and obtaining a writ of possession from a judge, getting the sheriff’s department to enforce the writ may be difficult and time consuming, if not flat-out impossible for the time being. For this reason, it maybe be worth it for landlords to work with their tenants to reach a mutually agreeable solution.

As a landlord, when considering your next steps, keep in mind that your tenants may have little to no emergency funds, nor any idea whether customers will eventually return or whether they will be able to reopen at full capacity. Others have already incurred property damage losses and may be considering bankruptcy. Given the current uncertainty most businesses are experiencing regarding their future, the availability of potential new tenants to fill any vacancy is scarce.

Furthermore, the impact of the pandemic has been different from industry to industry. As such, it is a good idea to get a picture of the landscape in your market before deciding how best to approach your tenants. We assess some of the most common industries below.

  • Retail: this could differ depending on the type of retail. Stores like Target, Walgreens, or Publix and online retailer like Amazon have been doing well. However, clothing stores and restaurants are feeling the pain.
  • Corporate:  layoffs and remote working have diminished overall need for space, plus the ability to fill space is halted or delayed due to difficulty in showing vacant properties.
  • Hospitality: hotels and travel destinations, like theme parks, have been hit hard given the inherent nature of large amounts of people gathering in one place.
  • Residential Development: the multifamily housing sector may see significant upheavals as unemployment rises and eviction moratoriums come to an end.
  • Manufacturing: manufacturers of food and medical products have been in high demand the last few months, so properties in this supply chain are doing well. But other manufacturer may not fare as well.  

Before Starting Negotiations:

  • Ensure Proper Notice. If you believe your tenant is in default under the terms of the lease, make sure that all notice requirements to the tenant have been met as well as a reasonable opportunity to cure.  
  • Consider Nonmonetary Changes to The Lease. Waivers of claim/releases of liability or using a tenant’s business fixtures or furniture as collateral can be valuable should the tenant 1) continue to default or 2) make claims against you and eviction eventually occur.
  • Make Sure You Have Held Up Your End of The Bargain. Your tenant may be within their right to withhold rent if you have not been true to your obligations as a landlord. Things such as failure to maintain common areas, lack of running water or electric, and constant repairs affecting use of the building are all things that could give a tenant just cause.
  • Maintain Confidentiality of Negotiations. It is best to require that any tenants keep negotiations confidential, as negotiations between multiple tenants in the same location may be different.

You should also have an attorney review the lease and advise you of any strengths and weaknesses regarding your position.

Options for Your Negotiations

  • Reduction. You can reduce your tenant’s rent for specific time or the entire term remaining on the lease.
  • Deferral. Deferment delays rent payments either by increasing future monthly rent or requiring a lump sum at a later time.
  • Abatement. You can agree to forgive a certain amount of the past due rent if the tenant remains current moving forward.
  • Security Deposit. If you required a security deposit at the beginning of the rental period, you could credit the deposit amount towards past due rent.  
  • Loan Conversion. This option converts the past due rent into a loan. Like a standard loan, this would be paid back in installments over time.  
  • Subletting. Bringing in a new tenant to occupy part of or all of the space could help reduce or eliminate your tenant’s debt while providing you more steady revenue.

As with most landlord-tenant situations, knowledgeable legal counsel is crucial in navigating the variety of legal issues that may arise, especially in the unchartered waters presented by the pandemic. Capital Partners Law routinely works with business owner to protect their commercial property investments. Contact us now to see how we can help.

To learn more or speak with a knowledgeable Florida Business Attorney, contact Capital Partners Law today:

This article is provided by Capital Partners Law for informational purposes only. It is not intended as legal advice and does not form the basis for an attorney-client relationship. If you need legal advice, please contact Capital Partners Law or another licensed attorney.