Most retail leases require that retailers remain open for business, but in the time of the coronavirus, lease requirements have entered a gray area. Many COVOD-19 restrictions have put retailers in a compromising position, and while some have found ways to remain open and cope, others have decided to close until the restrictions allow for normal—or at least closer to normal—business operations. So, what rights do landlords have in this decision?

"Tenants whose operations are significantly affected by stringent Covid-19 restrictions will want to reserve the right to stay closed until such restrictions are lifted, even though the shopping center requires them to be open for business," Gary Glick, a partner at Cox, Castle & Nicholson LLP, tells GlobeSt.com. "However, landlords should be able to request that they open for business if the restrictions are not too onerous. For example, if a restaurant is able to operate for indoor dining at 50% capacity, the landlord should require the restaurant open at that level."

Of course, these restrictions not only have an impact on business operations but also business revenue, which is often a factor of base rent. "In this situation, in lieu of paying the base rent set forth in the lease, the tenant will want the right to pay a percentage of its gross sales as base rent for as long as the capacity restriction remains in effect," says Glick. "However, this arrangement shouldn't dispense the tenant from paying its share of taxes, insurance and common area expenses. It is in most landlords' interest to agree to such an arrangement since it is often preferable to keep a store open rather than having it go "dark" for any period of time."

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.