Retail owners have been flooded with rent relief requests as the coronavirus pandemic has caused prolonged retail closures. With different lease provisions and new ordinances that vary market-to-market, rent relief will require a more tailored approach than a one-size-fits-all solution. While landlords should be proactive in working with tenants, determining a win-win solution will require reviewing individual leases for default language, reviewing new local ordinances pertaining to leases and evictions and working with tenants to understand how businesses have been impacted.
“Landlords need to have dialogue with their tenants. There are a lot of different ways to approach that, but most properties are in areas that are subject to no-eviction orders, so the regular process is no longer applicable,” Justin X. Thompson, an attorney at Nixon Peabody, tells GlobeSt.com. “Landlords are asking, ‘what do I do?’ We need to look individually at the leases, and see what it provides with respect to defaults. Let’s factor in the overarching landscape within which we find ourselves, taking into account that it seems to be changing every day and every week.”
New ordinances present a unique hurdle, particularly because local municipalities have control over these temporary regulations regarding evictions and rent collection. “The process is the same across the board, but when you break it down, you need to get hyper local because of the way that jurisdictions in L.A. County and across the country are working right now,” says Thompson.
In Los Angeles, for example, there is a moratorium on evictions during the emergency period and tenants have three months following the end of the pandemic to raise rents. “In terms of differences between the ordinances, some require specific documentation that the tenants have to provide,” says Nahal H. Adler, an attorney at Nixon Peabody, tells GlobeSt.com. “Other ordinances require that the tenant contacts the landlord to notify them, and there are some that allow more repayment time following the expiration of the emergency period. We have seen anything from three months to six months.”
This becomes especially cumbersome for landlords with portfolios spanning the county, the state and even the country. “There are 88 cities in L.A. County alone. We have to check the local jurisdictions, and there could be profound and even slight variances that have been adopted, if they have adopted any,” says Thompson. “This is truly a case-by-case situation. For some landlords, that is going to be very difficult, if they own properties across the county, state or even country. It doesn’t lend itself to a one-size-fits-all approach.”
Ultimately, both Thompson and Adler said that landlords taking a proactive approach would benefit. “You have to try to work to some sort of resolution that is in everyone’s best interest,” says Adler. “Checking in with the tenant is the best approach for landlords. Starting the conversation and showing some compassion in these really crazy times that we are finding ourselves in makes a lot of sense.”