If your business has been affected by Covid-19 you need to consider the following.
- Read Your Lease
You should always read your lease first, or have a lawyer assist you in reading your lease. Commercial leases are similar in that they are always favourable to a landlord and they will contain key provisions to protect a landlord, but you need to read and be familiar with your lease so you fully understand your position and what options are available to you. For example, if you do not pay rent is it an automatic default, or does the landlord have to provide you notice, does the lease contain any deferral options, etc.
- Speak With Your Landlord
Simply having a conversation with your landlord will not put you in default under the lease. Your landlord likely has mortgage payments on the property you are renting so she or he may be limited in any relief they can provide but it is worth the conversation. If the landlord is in a position to assist their tenant they likely will; from a business perspective it makes more sense to keep a good tenant and have partial rent being paid over the summer rather than terminate the relationship and look for a new tenant during a pandemic.
- Can I Seek Relief Under The Force Majeure Provision In My Lease
It is unlikely this provision will be of any benefit to you. If a force majeure clause is in your lease then read it carefully because there is almost always an exclusion that it does not apply to the payment of rent. An example of where you might be able to rely on a force majeure provision could be if you had a deadline for completing tenant improvements, and because of Covid-19 you are now delayed or prevented from doing so. It is important to know that your lease must have a force majeure provision in order to rely on it, this term cannot be implied if it is not written in the lease.
- Is My Lease Frustrated?
It is unlikely that a commercial tenant could claim their lease has been frustrated in the current circumstances. For a lease to be frustrated Covid-19 must essentially make it impossible for the parties to perform their obligations. While the effects of Covid-19 are devastating to businesses, the threshold for frustration is very high and it is narrowly interpreted.
- Check Your Insurance
You may find relief or assistance through your insurance policy; if you have not done so already or if there has been a recent change in your circumstances then confirm what you may have coverage for.
- What If You Do Not Have A Written Lease?
You as a tenant will need to have conversations with your landlord so you can both determine how you are able and willing to move forward. As noted above, having this conversation will not put in you default, and it is key that you communicate your circumstances to your landlord.
The information in this article is a general overview and each lease is unique. If you have specific questions about your lease, or questions about how to approach your landlord, then reach out and we can assist.
The foregoing is intended for general information purposes only and should not be construed or relied upon as legal advice. If you require legal advice, please contact the author who would be pleased to discuss the issues above with you in the context of your particular circumstances. We are available for videoconference and phone calls to adhere to physical distancing recommendations.