How COVID-19 Could Affect Your Commercial Lease

How COVID-19 Could Affect Your Commercial Lease

How COVID-19 Could Affect Your Commercial Lease

The COVID-19 pandemic’s effect on commercial real estate is unprecedented. Both landlords and tenants have struggled to find realistic solutions for extraordinarily unique problems. There are a number of ways COVID-19 could affect your commercial lease now and going forward.

Negotiations and Renegotiations of Your Commercial Lease

While you and your potential landlord discuss the terms of your lease, you both might be wary of commitment. Also, you might both seek ways to minimize damage if faced with other public health emergencies and government lockdowns.

Your company’s current leases also might need to be renegotiated with an eye toward pandemic-related provisions.

Commercial Lease Provisions Matter

Certain covenants and terms within your business lease might take on new meaning because of recent events. For example, a force majeure clause allows tenants to alter their performance of the lease based on certain events. Historically, force majeure provisions did not specifically name ‘pandemics’ as a triggering event. You might be forced into legal disputes with your landlord to have this clause take effect for your commercial lease.

Also, some commercial landlords require tenants to buy business interruption insurance. If you have business interruption insurance, your landlord might require you to file a claim. Your insurance proceeds could replace the income you have lost, allowing you to continue paying your rent obligations.

Government Restrictions

Some commercial leases prohibit tenants from “going dark.” In other words, your company is required to maintain continuous operations. However, government mandates forced many businesses into temporary lockdowns. Your landlord might attempt to use this lease against you, but your legal counsel can discuss defenses.

For example, you might use “frustration of purpose” or “impracticability” in commercial lease actions. These standards are used to show that you were unable to perform your contractual obligations for reasons beyond your control.

Also, government restrictions might affect the actions your landlord can take against you because of COVID-19. For instance, landlords have been prohibited from evicting tenants. However, it’s best to discuss issues with your landlord as soon as they arise rather than hoping your landlord will be unable to evict you.

Solutions Other Than Defaulting on Your Commercial Lease

Some standard protections existed before COVID-19 but now take on a new urgency. For example, if your company is having trouble making its commercial lease payments, you might ask the landlord for:

  • Rent abatements,
  • Rent deferral, and
  • Waiving lease defaults.

In some situations, adapting the lease to COVID-19 allows you and the landlord to maintain your business relationship. This could be good news for both of you.

Has Your Commercial Lease Been Affected By COVID-19?

Chances are, it has. Talk to an attorney who knows Florida commercial real estate law to discover more about your options.

Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.

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