Retail Tenants Are Pre-Negotiating Forced Closures in New Retail Leases

Many retailers and landlords were caught off guard during the pandemic. With no modern precedent for any such event and no history of the government implementing the widespread closure of private businesses for an extended period of time, there was no guidance on how to proceed with the lease agreement. Should tenants get full rent abatement? Rent deferral? Nothing, a combination? The response varied wildly from tenant to tenant, but moving forward, tenants are looking to establish game rules in advance. Provisions addressing a future government-forced closure of businesses are becoming popular in new retail leases.

“Retail tenants are asking for some form of pre-negotiated rent abatement or rent deferral in the event of a forced government shut down of retail operations,” Russ Arouh, co-chair of the industrial and warehouse industry team at Arnall Golden Gregory, tells GlobeSt.com.