That commercial tenants are much different from residential tenants has never been more evident than now.
Unlike a primary residence where people look for safety and security, the sole purpose of a commercial establishment is for making money. Commercial landlords faced with tenants who cannot or will not make their rent payments are unfortunately under similar constraints as residential landlords, as a result of Covid. Commercial landlords, however, have different non judicial options.
Recently, I have helped my commercial landlord clients in negotiating commercial tenants out of their spaces. If they did not leave on their own nonpayment proceedings, suits for monies owed would have been necessary, and this could have resulted in a long, drawn-out and expensive scenario for everyone involved.
My conversations proceeded in two directions. Several tenants decided to close their businesses with some prompting. These were not necessarily strong businesses pre-Covid. Through dialogue with the tenant, we openly talked about the challenges they were confronting. It was then that they realized it was best to not go forward with their business — especially when the landlord agreed to allow them out by a date certain without penalty. Although the landlord may have challenges in renting the space, the landlord can be confident that the space will be clean and ready to rent, rather than left with cluttered remains from an unsuccessful tenant.
I have also had success explaining the self-help provision to a few tenants seeking to take advantage of the situation. A self-help provision provides for a landlord to restore itself to possession. It provides for the landlord to proceed without court intervention.
When the landlord threatened to change the locks to the premises in both of these instances, the tenant came back and asked for more time before that was to happen. To my surprise, in both instances, the tenant moved out without the landlord having to resort to changing the locks, a practice most attorneys would not recommend. The threat helped the tenant to move on.
During these new times, tenants have new reasons for not wanting to pay the rent, or not being able to pay the rent. Likewise, these new times call for new ways for attorneys to creatively negotiate this conflict between landlord and tenant, and some of these methods have not been used historically.
Michael Zapson is a Partner in the Real Estate Group. He may be reached at email@example.com or 516.296.7053.