For businesses who rent space for their company, such as an office building, a warehouse, or a showroom, the lack of revenue to pay the landlord during the global pandemic is a challenging one. Both tenants and landlords are struggling. Debbie Myers, Managing Director at Newmark Associates, Inc., shares some insight into ways to navigate these uncharted waters.
Don’t Avoid Your Landlord, Talk
Avoiding the landlord or simply saying “I can’t pay” isn’t a solution. Here’s an example where following the golden rule will oftentimes get you the best results–so treat others as you would like to be treated. Instead, pose the question, “What can we do?” in a conversation or a personal email. Remind your landlord how long you’ve been their tenant and of past on-time rent payments. Let them know if you’re trying to get financial assistance through the CARES Act and a PPP loan or any other grant or loan. This shows a desire to work together toward a mutually beneficial solution.
Check for a Force Majeure Clause in Your Lease
These are certainly unprecedented times and if you have such a clause in your business lease, this may be exactly the type of circumstances for which it was designed. If possible, have your real estate professional or a real estate attorney take a look at your lease. See if there is anything in there that can be used to give you some time to set a plan in action.
Come Up with a Strategy
In the long term, landlords don’t want to lose good tenants. If you approach your landlord with a plan of action that involves compromise on both sides, they’re likely to be more receptive. Even though small businesses may feel they have more to lose than a larger landlord, that landlord is facing the same problems with every one of their tenants. Each situation has to be considered on a case by case basis, so a proposal that has you working with your landlord and not against them will get a warmer reception.
Forbearance on Mortgage When You Pay Rent in a Building You Own
Again, the situation COVID-19 has put so many businesses in is unprecedented. If you pay rent to an entity you own but are now unable to fulfill that obligation with your business operations at a standstill, you can appeal to the bank that holds your mortgage. There is hope that the sudden disruption of a good economy will allow the banks to give some leeway to a landlord with solid standing. There is no cost to engaging in the conversation and it may result in a temporary solution for the landlord that can then trickle down to their tenants.
Whether you are a business tenant or landlord, this is certainly a time for everyone on both sides to try their best to help one another in any way they can.