Commercial Landlord Responses to Tenant Requests for Rent Relief During COVID-19 Pandemic
On April 1, 2020, the coronavirus (COVID-19) hit home to many commercial landlords around the country, as a huge wave of tenants requested rent relief of some form or another. Landlords obviously are aware of the economic pressures their tenants are facing because of shelter-at-home orders and COVID-19's effects on the economy and understandably don't want their tenants to fail. So while landlords want to be as accommodating as they can, they also face their own financial difficulties in meeting their obligations under mortgages and paying other expenses.
As might be expected, landlords' responses to their tenants' rent relief requests have varied depending on location, the type of tenancy and many other factors. But one common response has been to ask the tenants for more information that would support the tenants' claims that the requested rent relief is a result of the effects of COVID-19 on their businesses. The information that landlords are seeking generally includes some or all of the following:
- financial statements and other financial information for 2019 and year-to-date 2020
- projections of financials through the end of 2020
- a summary of governmental assistance that the tenants have applied for or intend to apply for
- some sort of narrative description of the impacts of the COVID-19 situation on the tenant's business
- a description of the tenant's plans and strategies for improving operations over the long term
- a summary of the rent relief requested and a proposed repayment plan
Commercial landlords are reviewing this information to evaluate the tenant requests on a case-by-case basis. In addition, landlords are reviewing the myriad governmental orders relating to rent relief or eviction moratoriums, prohibitions in their loan documents on modifying leases without the lenders' consent, the ability for the landlords themselves to seek relief from debt payments and opportunities to apply for governmental assistance or insurance proceeds to assist with the rental interruptions.
As the full scope of the economic effects of COVID-19 is beginning to be understood, the ability of landlords and tenants to work together to try and weather this storm will be one important factor in the ability of the economy to recover once the public emergency has abated.
DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact your responsible Holland & Knight lawyer or the author of this alert for timely advice.