Working Together as a Team: Negotiating with Commercial Tenants During COVID-19

The COVID-19 pandemic caused widespread mandatory closures of all types of commercial properties. These closures, along with reduced consumer spending, have hampered business operations and created challenges for many businesses that lease office and industrial properties – some of which have asked their landlords for assistance in the form of rent abatements or deferrals.

Landlords facing this issue should refer to a research brief issued by the NAIOP Research Foundation that identifies best practices for triaging office and industrial tenant requests, offering reasonable accommodations to those tenants who need short-term assistance and responding to affected tenants.

Based on input from brokers and building owners as well as NAIOP data, the brief identified these common practices:

  • Rent relief. Building owners are generally willing to offer tenants reasonable rent relief to help them weather short-term disruptions due to COVID-19. The most common practice is to offer tenants a few months of deferred – not forgiven – rent that can be repaid over the remainder of the lease. Some landlords also agree to rent abatements, but only in exchange for a longer lease term.
  • Due diligence. Owners commonly request tenant financials to confirm that the request for relief is due to COVID-19 and to determine if the tenant is able to fulfill the lease terms.
  • Lender assistance. Many owners seek assistance from their own lenders to help them pay for property maintenance, taxes and insurance during periods when tenants are deferring rent payments. Lenders have been amenable to borrowers deferring principal payments as long as they can demonstrate need and maintain the property.

Source: century21.com

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