Visibility is low for many businesses. Stress is high while trying to keep your operations afloat. Your eyes are likely focused on the fixed costs and how to reduce them. At the top of that list is your commercial real estate expense AKA office rent.
In an effort to help answer some of the questions that may be on your mind, I have put together some FAQs with brief answers (we can address in more detail if you’d like) and some resources to help give you more information.
How do I get some rent relief? Some ways include:
Deferral of rent that will be paid back over a set period of time in the future.
Rent Abatement or Holiday where those “free months” will be added and paid in the future to extend the lease term.
(NOTE: Make sure you provide to the landlord proof of the financial health of your business so they can better understand your short term cash/ financial position. And, be proactive! Get in front of the situation by reaching out to the landlord directly, you’ll be in a much better position than if they are chasing you.)
People keep telling me I’m covered and don’t have to pay because of a thing in my lease “Force Majeure.” What is that?
First off, it’s complicated. Now that we have that out of the way and your expectations are tempered, let’s have a deeper look.
To summarize: It offers relief of responsibilities from parties in a contract (in this case a lease) due to the occurrence of certain events. But just because the clause is in your lease doesn’t mean it applies in the current situation. Why? In some cases the actual event needs to be detailed, in other cases, the language needs to be broad enough to include an actual event that occurred. Or maybe you are obligated to do things before the clause is triggered. Summary: It’s not a one size fits all thing so please reach out to your real estate attorney to understand your specific lease language. Cresa wrote a whole White Paper on it here if it helps.
My lease is expiring in the next 6-12 months, but there’s no way I can sign a new long term lease right now! What do I do?
No doubt visibility is low on all sides. A potential solution is a short term 6-18 month renewal. It buys you some time to focus on your business while removing the stress of looking for a new physical location as well as removing the stress of the long term financial obligation and the immediate capital expenditure for moving.
I’ve received a lot of questions recently from business owners about their commercial real estate exposure as it relates to the virus. No doubt, it’s impacting everyone’s’ business:
If you are struggling to figure out how to manage, if you are trying to figure out your rent obligations in the wake of State orders to keep your business closed, if your staff is largely working from home and you’re realizing you just don’t need as much space, if you’re struggling to make rent and trying to understand your options for the future, or if you are just curious to hear what I’m seeing from other businesses and hearing from landlords, please call me or email me. I’d be happy to offer advice, insight and any assistance I can.