This week I was engaged by two clients who wanted my advice about approaching their landlord for rent workouts during and after the COVID-19 lockdown.  One was a retail business that had to close their store but that still does a fair amount of online commerce.  The other is a salon that is just sitting on their thumbs – they can do nothing until the economy opens up again.

 

The financial workout strategy naturally looks different for each of these tenants but the principles listed below apply to all tenants that need to work things out with their landlord right now:

 

• Treat the landlord like a business partner that you are striking a deal with or a bank you are hoping to get a loan from.  Certainly, financial hardship is what brought you to the table but mix some optimism into your negotiations.  Something like “this is my challenge today but with your assistance, I will be strong and profitable again soon.”

 

• If you can pay any rent, pay something.  That accomplishes two things: 1) Your debt to the landlord will be less and therefore easier to pay off, and 2) It shows tremendous good faith and respect for the lease contract and the landlord.

 

• Keep in mind that the challenging economic conditions will continue for some time after the economy reopens.  By most accounts, we will be coming out of the “freezer” of the lockdown into the “winter” of a recession.  Try to extend some level of rent relief several months into the future.  You will be glad you did.

 

And while we are on the subject of relief, many tenants may have some relief coming if they have business interruption insurance.  In fact, many tenants are required by their lease to carry such insurance.  However, many insurers are denying business interruption claims.  I have resources that can help you if your insurance company is pushing back.  I will be happy to point you to someone who can be a valuable advocate for you.

 

If you or your clients are feeling unsure about their options or strategy going forward with respect to their business real estate, feel free to reach out to me for some complimentary guidance at (213) 258-6921.