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After several weeks of restrictive measures implemented to mitigate the effects of the coronavirus (COVID-19) pandemic—including the closure of non-essential businesses and orders to “shelter in place”—business owners are increasingly being required to make difficult decisions in the face of significant liquidity shortfalls. In particular, commercial tenants are weighing the decision to abandon premises they lease or to withhold rent due to their landlords, which decisions raise a number of legal issues. Tenants have considered various legal theories to support rent abatement and lease termination claims, though at this point in the process, many tenants have come to agreement with their landlords on interim relief.

Negotiated Settlements

As a consequence of the substantial, in some cases complete, loss of revenues for many tenants, commercial landlords have generally taken a pragmatic approach, which is also driven by limited access to the courts and a perception that courts will not be sympathetic to any attempt to evict tenants based on pandemic-related defaults. Another factor for landlords is the belief that it will be quite difficult to replace an existing tenant in this environment.

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