Among innumerable other issues business owners are being forced to attend to as a result of COVID-19 is their struggle to pay rent and not knowing how best to approach their landlords. In these challenging times, many landlords have shown empathy and compassion. They will, however, be measured in their response, taking into account the viability of the tenant making the request. Some landlords also believe this will be a relatively short-term impairment, and think tenants may not require rent relief.
While not all landlords are able to allow these types of concessions, some are. These are unique times and most landlords are rational entities. Landlords will only take legal action against a tenant if they believe they will be better off doing so. However, in light of the COVID-19 outbreak, most landlords realize that most tenants are in the same situation – especially now that most businesses have been ordered to shut down.
Landlords and their lenders need to take a longer-term view and do what they can to ensure their good tenants remain viable. It is not known whether these abatements will be forgiven, or if in fact concessions from tenants will be required to receive current relief. (There may be mandated abatements from the Federal government that may not require repayment.) Discussions that take place too early or too late will not be productive. We recommend the tenant contact their landlord directly; this shouldn't come across as a brokered transaction.
Given the foregoing, here are the keys to a constructive rent adjustment conversation with your landlord:
- Be honest and open about your situation. Landlords would quickly be out of business if they granted rent relief to every tenant that wanted to lower its rent. Be prepared to explain and document your cash flow situation and why you will not be able to pay rent (or how much you will be able to pay).
- Be clear as to the specific relief you are asking for. Are you asking for rent forgiveness, a rent abatement or a deferral until things get better? Again, tie your request to your specific cash flow situation. A plan that shares the burden between you and the landlord is going to be more warmly received, as they have bills to pay as well.
- Articulate why this is a temporary situation and your plan for getting back on your feet. The first part is easy given COVID-19, especially if you otherwise have a timely and regular rent payment history with the landlord. Again, most landlords understand that it’s unlikely any replacement tenant will be stepping up any time soon to replace you. Your job is to convince the landlord that investing in you over the coming weeks/months will provide a better return than if they replace you.
We’re entering unchartered waters here, and deals will be cut between landlords and tenants that would not have been considered just a month ago. It is always important to remember that people usually act in a financially rational manner. In most instances, sticking with their current tenant is going to be the best bet for landlords. In approaching your landlord, be honest, respectful of their situation and creative.
We are happy to assist in locating the best contact, and talking through the discussion. Please let us know if we can be of assistance.