Shelter-in-place and similar orders arising from the COVID-19 Pandemic have disrupted many aspects of our lives. Whether your business has dropped off or been forced to shut down, you have been laid off or furloughed by your employer, or you are a landlord receiving requests for rent abatements or deferrals, this is affecting you personally. Fortunately, there are many options for handling rent issues in these tough economic times.
The most important thing to keep in mind is that every tenancy is unique. Lease terms differ from property to property as do tenant and landlord economic situations. These differences can broaden the available options for negotiating rent relief.
For example, although most leases include force majeure clauses which excuse a party from performing under a lease if it is unable to do so due to conditions outside its control, force majeure clauses are not all identical. In Texas, where courts interpret force majeure clauses strictly, this means consequences arising from the COVID-19 Pandemic may not qualify as a force majeure event under many leases.
Just as force majeure clauses differ, lease provisions are highly variable which means the available negotiating tools will be different for each leasing relationship. There are many lease provisions – options to extend, rights of first refusal, exclusivity provisions, etc. – that can be drawn from to determine a tenant’s consideration for rent relief.
This time is hard on everyone, but it may have also created a more even playing field for rent forgiveness negotiations. Although landlords can put pressure on tenants by declaring a default, the current leasing environment makes it more impracticable (or impossible due to moratoriums) to pursue evictions. These opposing factors, as well as the many forms of relief under the various federal COVID-19 relief packages, will hopefully help the parties quickly and easily reach an amicable resolution.
Regardless of which side you are on, it is in your best interest to seek solid legal advice to help you find the best solution for your situation. Libby Sparks’ team of real estate attorneys are ready to analyze your lease, review the various options with you and help you find a solution that fits your situation.