The coronavirus pandemic forced the closure of nonessential businesses throughout the country, and these closures remained in effect for several weeks. Even after these businesses reopened, distancing and other safety guidelines were put in place, and many of them were not allowed to open at 100% capacity. This situation has left millions of commercial tenants struggling to pay rent, and many of them are grappling with the question of whether or not they can even stay open.
In most areas of the country, state and local governments put a freeze on tenant evictions at least for the first few months after the shutdowns began. In addition, a special forgivable loan program called the Paycheck Protection Program (PPP) was set up through the Small Business Association (SBA) to help businesses that were struggling.
It has been several months since the pandemic started, and much of the relief that was available to small businesses has come to an end. Many of these businesses are now facing the reality that they can no longer defer paying rent on their location, and there are far fewer resources available to obtain financial help than there were at the beginning of all this. So, if their business is not back to pre-pandemic operational capacity, they are looking at some very difficult days ahead.
For business owners that are in this situation and lease the space in which they operate, the one party that they will most likely need to work something out with is their landlord. Rent is always among the biggest expenses that a commercial tenant has to pay; and coming to a workable arrangement with their landlord could be the one thing that will determine whether or not they will be able to stay open.
Negotiating Commercial Lease Modifications during COVID-19
At this point, a business owner could be several months behind on rent for their commercial space. And although the terms and conditions of leasing agreements vary, in a large number of cases, the landlord will have a legal right to evict a tenant if they do not catch up on rent. The question, however, is should they proceed with an eviction, or is there a better way to handle this?
Looking at the big picture, it is generally in everyone’s best interests to work out an acceptable arrangement rather than having to evict a tenant from their space. Of course, the business owner will most likely want to stay in the same location (if at all possible) in order to maintain some type of stability during these unprecedented times. And if the owner has been a good tenant up until now, the landlord should also want them to stay.
Landlords must also keep in mind that in the current business climate, leasing an empty space might be very difficult. In fact, they could wind up not having the space occupied until the economy recovers, which might not be until sometime next year at the earliest. There is also the issue of the court backlog that has been created by the COVID-19 shutdown and the fact that it will take a lot more time to complete an eviction than it did before the pandemic started.
With all of these factors in play, negotiation is going to be the best option for most landlords and tenants. But this might not be an easy process either. There are a lot of issues to work out, and each side is going to have to be flexible and compromise in some areas. You could hire lawyers to do the negotiation for you, but this could be very costly especially at a time when everyone is being very careful about every dollar they spend.
One of the most preferable ways to resolve a landlord-tenant dispute and/or negotiate a modified lease agreement is through mediation. With mediation, the participants meet with a neutral, third-party mediator whose job is to facilitate a constructive discussion that guides the participants toward a peaceable and workable resolution. The process is entirely voluntary, and no agreement can become legally enforceable unless all participants agree to it.
In many cases, landlords and tenants can use mediation to work out the terms and conditions of a lease at a fraction of the cost of traditional legal methods. And in addition to saving money, participants are more involved in the process, which makes them more likely to take ownership of the results and abide by whatever agreement is ultimately reached.
Contact AMS for Business Mediation that Works for You
If you are involved in a commercial landlord-tenant dispute or any other type of business conflict, Advanced Mediation Solutions (AMS) is here to help. Our business mediator, Carmela DeNicola, has decades of experience working in both the corporate world and with small businesses. Over the years, she has seen virtually every type of dispute that may come up in the commercial realm, and she can often help clients develop innovative and practical solutions that they may not have been aware of on their own.
We are currently offering extended hours to make things easier for those who have had their schedules disrupted by COVID-19, and we can provide either in person or virtual mediation, whatever works best for you.
For a free consultation with a member of our team, message us online or call our office today at (856) 669-7172. We look forward to serving you!