The novel coronavirus (COVID-19) has wreaked havoc on the world and our nation, casting widespread uncertainty and hardship in seemingly every corner of the economy. With many commercial tenants in dire financial straits – particularly those who rely upon customer interaction (i.e. retail, restaurant, and entertainment) – commercial landlords are susceptible to both short- and long-term effects if they are not proactive in identifying and in mitigating such negative consequences. Points of consideration and general guidance for commercial landlords include:
As mentioned above, many commercial tenants are or will be financially debilitated by this pandemic. Landlords should try to be proactive in attempting to limit their tenants’ shortfalls, not only to prevent them from becoming/adding to the shortfalls of the landlord, but also to help a fellow member of the community in a trying time – a community which, after all, is a factor in the desirability of the leased property.
Uncertainty in Enforcement:
Despite the above considerations, it is inevitable that there will be circumstances and tenants for which negotiations are futile and will thus require some sort of enforcement action. However, as with everything in this current environment, the availability and efficacy of such enforcement is just as uncertain.
With tenant issues likely to affect Landlord income generation and the efficacy of enforcement procedures uncertain, it is equally important for leveraged commercial landlords to evaluate their exposure and be proactive in mitigating any unavoidable effects of the current environment. Just as they should be with their tenants, landlords need to be proactive in identifying and communicating with lenders to ensure that any “downstream” issues do not affect any loans they may have. Be sure to examine your loan documents, with particular emphasis placed on any clauses related to debt-to-income ratios, vacancy or tenant delinquency thresholds, or rental revenue income requirements on a monthly or annual basis.
Both landlords and tenants should consider seeking experienced counsel to help analyze their current situations and their paths forward. The Strong Firm P.C.’s offices remain open as a deemed essential business and will remain open for as long as it remains safe and legal to do so. Should our office close due to government mandate, we have the ability to seamlessly transition to remote operations and continue representing our clients at full capacity. As a firm, we will continue serving the needs of our clients and community as we all navigate through these trying times. We are committed to ensuring that our families, friends, clients, and community emerge from this transformative period as we were before – Strong.
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