business-handshake Image byShutterstock

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When a retail tenant defaults, usually it's time for them to go."By the time they are at the stage of default, the landlord-tenantrelationship is pretty fractured, and the landlord often feels likethey would rather roll the dice with a new tenant," says Steven J.Solomon, a Miami-based managing shareholder at the law firm of GrayRobinson.

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Usually, that landlord is working off of a list of companiesthat can take over the troubled tenant's space.

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But these aren't normal times.

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"Landlords don't want to lose tenants," Solomon says. "They'renot anticipating this to be a good time to replace tenants."

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In the vast majority of cases, these tenants aren't running intotrouble because of mismanagement. This matters to many of Solomon'scommercial clients.

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"That attitude is changing because the landlord is now sayingthis is not a tenant that runs a poorly managed business," Solomonsays. "The landlord understands why their tenants are not payingrent." In many cases, landlords are looking into their toolbox forsolutions when their tenants can't pay. The negotiations can be abit different depending on the type of tenant.

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"If you're a shopping mall landlord, your property has beencompletely shuttered, and your tenants haven't even had access totheir space," Solomon says. "That is a little different than astrip mall."

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A strip mall may still have some restaurants open that are doingtakeout and delivery. In theory, that property will need differentsorts of relief than a store in the giant mall that has been forcedto close its doors.

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"My landlord clients are very actively negotiating leaseamendments right now and working through a variety of differentcompromises," Solomon says. "It [the amendments] often depends onthe remaining term of the lease."

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Solomon says solutions can range from forbearance to a couple ofmonths of reduced rents with the remainder being deferred. Hisclients may also tack on rent over the rest of the lease. Byspreading payments out or agreeing to reduced rent for some time,the tenant can remain open and begin to generate some cash flow."Let's say the rent was not paid for April or May," Solomon says."They're taking that amount and adding it in some increment that ispalatable over the rest of the lease."

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In some cases landlords own real estate but also own operatingbusinesses, and may lease space to multiple tenants in a relatedindustry. For instance, a warehouse landlord may also offerlogistics services, such as shipping and delivery. In the aviationindustry, fixed base operators lease hangar and office space atairports, but also sell fuel and provide repair and maintenanceservices, according to Solomon.

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This can offer additional places to negotiate.

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"Certain types of landlords have been able to be a little bitmore creative by saying, 'Okay, we'll agree to a deferral of one,two or three months or a discount we can make up on the back end,'"Solomon says.

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"But in exchange, the tenant will be required to purchaseparticular value added services or goods from us (the landlord)exclusively or subject to a certain monthly minimum. This allowsthe landlord to provide a rent concession, while making it up onthe ancillary services or good sold.'"

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Leslie Shaver

Les Shaver has been covering commercial and residential real estate for almost 20 years. His work has appeared in Multifamily Executive, Builder, units, Arlington Magazine in addition to GlobeSt.com and Real Estate Forum.