We Are Sunshine

Negotiating Rent Relief During Shutdown

Friday, April 17th, 2020

We’ve heard reports from salon owners about requesting lease adjustments due to forced closure, with varying results. Some have reported landlords being completely understanding and agreeable to adjusting terms, while many property owners and managers seem to expect business to proceed as normal. Best case scenario, there’s a clause in your lease that will entitle you to some relief, but when if your landlord is completely within their rights to require payment as normal, there’s no harm in trying to negotiate.

While some retailers are telling their landlords they’re not paying while they’re not open, this will probably result in lawsuits. A more constructive approach can result in at least some leniency and avoid souring the relationship. Some landlords might show compassion or, more practically, understand that it’s in their best interest to help your business make it through these challenging times.

As one real estate attorney told commercial real estate publication Bisnow, “in her experience, a congenial approach can pay off in times like these, as landlords and tenants are incentivized to preserve their existing business relationships and lease agreements.”

“Most folks who are business-minded are trying to get through this as best they can and are hoping that they can get through it with their tenants in place on the other side of this,” Rosenberg & Estis managing member Luise Barrack told Bisnow. “And if they have to defer some rent, that’s what they’ve been doing.”

Here are some appropriate measures to consider:

  • Check your “force majeure” clause in your contract to see if that covers you during a forced shutdown.
  • Open a line of communication with your landlord immediately and ask for a deferral until SBA funding arrives or after your store opens.
  • If stronger requests are denied, consider asking to defer lease payments for three months and adding those three months to the end of the lease.
  • Be completely transparent with your landlord. Send your financials showing the landlord how much you’ve lost along with projections for the remainder of the year. Hopefully, they’ll work with you to keep you as a tenant.

Click here to view an example of a request for rent relief provided by The Tanning Depot, a Canadian indoor tanning product and supply distributor.