What are the options for commercial tenants who can’t pay their lease?

On Behalf of | Apr 24, 2020 | Real Estate

The effect of unfavorable market conditions on a business can present untenable obstacles to that business or commercial property renter. When a tenant cannot pay the rent assigned in their lease agreement, they may choose to withhold that rent or abandon the property to avoid further payment. Commercial landlords typically have more robust lease agreements than those for residential properties. Relief for a property owner can come in the form of insurance policies, governmental grants.

Considering your lease agreement

As a commercial tenant, it is vital to your business to understand the routes that you can pursue when attempting to break or avoid the penalties laid out in a lease agreement. You want to uphold any necessary due-diligence to keep to the terms of your lease for as long as it is possible. But when you foresee an impending financial crisis for your business, it is crucial to assess your options with regards to your rent obligations. Here are some the best practices for making a proper assessment of your rsituation:

  • A business tenant should review the terms of the lease agreement to determine if there are any agreed-upon options for lease termination or to pursue a rent abatement or reduction, especially when the business is forced to close.
  • Regardless of your financial circumstances, you should maintain contact with your landlord to present your financial situation and to determine how receptive they might be to finding a temporary course of action to avoid a breach of contract dispute and the ensuing litigation.
  • Commercial tenants who cannot pay their rent (or choose, strategically, not to), may be able to avoid short-term penalties or remediation, especially in a scenario where the courts may be closed or a judge is reluctant to provide a remedy at the current moment.
  • In some cases, leases make provisions for termination if the landlord fails to provide agreed-upon services or utilities, or the building becomes unsuitable for use.

Getting your business back on track

There are a large variety of circumstances that could cause a business to fail to meet its financial obligations. If you’re concerned about violating your lease, contact an attorney with in-depth knowledge of lease agreements to explore your options.