Rent Relief Amid COVID-19
Rent deferral or forgiveness?
Advice from GSWIDA President Jim Hazard (Partner at ESRP Commercial Real Estate firm)
Locally and nationally, companies are asking if they have to pay rent and operating expenses during this lockdown.
While every lease is different, typically 100% of a lease obligation is due the moment a lease is signed, but payable in monthly instalments. This means, regardless of Covid and unless your lease has a special provision, most firms owe rent and operating expenses. If someone is advising you to not pay rent, please be sure they have also advised on the associated liability of that decision. While I do not advocate withholding rent without approval, I strongly believe mutually beneficial negotiations can be had at any time.
Our firm only represents Tenants, never landlords, and has been assisting firms with this issue both locally and nationally. Here are some thoughts to help your preparation on seeking assistance (if needed):
• Per my first paragraph, respect the fact rent is due and that the landlord is not being mean or opportunistic by asking for it to be paid. Just as you have a rental obligation they likely have mortgage and/or investor obligations. By not viewing them as the enemy, dialogue between landlord and tenant can begin on a positive note. The only guarantee I will give in this article is yelling at your landlord will result in ZERO assistance.
• While rent may be due, you are 100% in your right to ask the landlord for assistance to help navigate this unprecedented time. Asking for some sort of assistance is not a violation of your lease nor your honor.
• No landlord is the same. Your friend may have received deferment or an abatement, but your landlord may not be able or willing to. There is no “one size fits all” solution right now.
• Take the time to understand the financial position and structure of your landlord. This allows you to structure a proposal which works for you and is actually possible for them. For example, whether the landlord has debt or not is a huge factor in determining how the landlord can assist.
• Most landlords say “no” the first time or have a property manager respond with a “no”. If you have a real need, ask a second or third time as many landlords are trying to flush out who is real and who is just opportunistic.
• Be prepared to show financials, business forecasts and update the landlord on your government assistance applications. If a landlord is willing and able to help, validating your financial position and ability to repay the obligation is reasonable.
• There are many, MANY, ways to approach the landlord and structure cost savings over the coming months. Work with your real estate advisor to come up with ideas. If your advisor won’t broach rent assistance with your landlord, or is noticeably hesitant, find another advisor! Fact is, most real estate professionals represent both landlords and tenants. Some of these dual agency advisors are unwilling to jeopardize landlord relationships and cannot, or choose not, to advocate for the Tenant.
This is a hard time for everyone and I wish all of you the best in navigating your firm through it. If you would like to hear how various landlords have responded to tenant requests, discuss opportunities to cut overhead at your firm and/or discuss unique opportunities this creates for tenants, please do not hesitate to call me at 214-394-3626.