COVID-19 continues to impact our communities and the global economy. The inevitable hardships that commercial landlords and tenants feared have painfully hit home. The consequences of stay-at-home orders, mandated closures of “nonessential” and “nonlife-sustaining” businesses and consumer concerns have combined into devastating economic times for landlords and tenants. In the face of seemingly unprecedented consumer absence, resulting revenue losses, related tenant defaults and the cascading consequences up the ownership and leverage chain, we all seek viable solutions. Even with the beginnings of business reopenings in progress, much damage has already been done. We explore in this article a holistic approach that would help guide all parties through various strategies to weather the crisis and emerge to the subsequent rebound we all hope to find.
Recognizing the Economic Reality
There is no way to avoid the reality: A high percentage of tenants are in economic crisis, which means a great many landlords are struggling as well. In ordinary times, a landlord’s instinctive wish, when faced with tenant default, is to turn to a traditional response, such as demands for payment, default and suit for damages and to evict. In some cases, that still remains the necessary solution. Unfortunately, when the economy has suffered a tectonic shift, these traditional approaches are more often dangerous and destructive. Imagine the pyrrhic victory of “success” with traditional remedies: a dark, devastated and untenanted asset. Hardly the preferred result. But, lack of rental income is an existential threat to landlords everywhere, and even more confounding for landlords who rely on the rent stream to service debt.
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