Landlord responses to the tenant rent relief requests have ranged from sympathetic to tough, even for tenants that have lost income as a result of mandated closures. However, even within those groups, landlords are offering varied responses and solutions and repayment plans following the end of the pandemic emergency.
“Landlords’ responses to rent relief requests have been all across the spectrum. Some landlords are sympathetic to the plight of non-national retail tenants that have been shut down by governmental order or, in the case of restaurants, only have the right to offer take-out service,” Gary Glick, a partner at Cox, Castle & Nicholson, tells GlobeSt.com. “In these cases, most landlords seem willing to allow the deferral of base rent—but not triple net charges—from April 1 through either June 1st or the re-opening of businesses, with the amortization of deferred base rent in equal installments throughout 2021. Some landlords require the repayment of the deferred base rent with interest, while others do not require interest.”
Other landlords, on the other hand, are not allowing any abatement or deferral of the rent. Instead, these landlords expect the CARES Act to help aid tenants in rent payments. “In such cases, these landlords are referring tenants to government programs providing financial assistance, such as those available under the new CARES Act,” says Glick. “However, it certainly behooves landlords to do what they can to keep tenants from being permanently put out of business, which would not benefit either party.”
For landlords granting relief, the agreement should be well documented and confidential. “Landlords should include a strong confidentiality provision in their lease amendment documenting the rent relief,” says Glick. “Each transaction is unique, and it is in their interest that their other tenants are not aware of the specifics of each and every rent relief they grant.”
Landlords should also take extra steps to protect themselves. “Landlords will want tenants to waive any possible claims for a co-tenancy violation, a claim, such as the payment of reduced rent, that the tenant may use against the landlord if less than a certain percentage of the shopping center is open and operating,” says Glick. “Landlords should also request from their tenants a certification that they, the landlords, are not currently in default of the lease.”