It is no secret that businesses are struggling right now in every aspect — from supplier to manufacturing and paying their rents, through to compensating employees and staying afloat. But what happens if a business has to close temporarily because of the coronavirus outbreak? What if business is so slow that they cannot pay their commercial rent anymore? What should these businesses do? Lie down and take the beating?
Talk with your landlord. You should not wait for commercial rent bailiffs to knock on your door because you failed to talk the issue over with your landlord. Many tenants assume that their landlords want payment right now. While of course, they do, your landlords also understand that this is an unprecedented time. And an unprecedented time often calls for extraordinary measures.
Read the Contract
What does your contract allow and what does it not? You made a deposit and advance payment when you occupied the space. Are you allowed to use that money under these circumstances? If you paid your rent in advance, what happens to it if you have to temporarily close because of safety measures and the government’s health policies?
The first thing you have to do is to read your contract. You need to find out where you stand. Will you renegotiate from a position of strength? What are the terms of your contract? Is there a way to bend these terms a little to your favor?
Tenants assume that their landlords don’t want to renegotiate the contract. They think the worst before they even have a chance to meet with them. Reach out to your landlords. The government provided made small business loans available. You and your landlord can avail of these loans if you want. While many laws protect your rights as a tenant, you can talk things over with your landlord first. You should try to avoid going the legal route as much as possible.
Know Your Rights
In many countries, the government put a moratorium on the rights of the landlords to evict and forfeit your lease because of non-payment. The period this covers depends on your government, so find out until when you can take advantage of this protection. Hopefully, by the time this policy ends, your business is already back on its feet.
Also, know if these special circumstances will temporarily suspend the penalties and interests imposed on the non-payment of rent. Generally, a landlord can charge a penalty over the non-payment of rent. These are extraordinary times, though. Ask your landlords if they are willing to waive the penalty until you can make the rent.
Ask the Landlord
Revisit your contract with the landlord. Ask what help they can provide to their tenants right now. Remember that a lot of businesses had to close. This is not the best time to lose a tenant who’s willing to stay and pay (subject to the renegotiation of the contract). Though they also have taxes and mortgage to pay, landlords understand that they need tenants, too, especially at this time.
If you want to close your shop, ask if you can get even half of your advanced payment and deposit. As long as there’s no structural damage on the property, you should receive your security deposit. That is equal to a month of rent. You can offer to pay the outstanding balance of your rental fees once you have sold your office and store supplies to another business owner.
Does your contract allow the sub-leasing of the space? That is also another option you can talk about with the landlord. You can sub-lease the space so someone else can cover half the rent. If it’s large enough, you can divide the space and run your businesses side by side. For a landlord, this is better than not having a tenant at all.
You have a good business. You saved money before the pandemic. However, that does not mean you can incur losses. Be open to your landlords that you also have bills to pay. You’re paying mortgage on your house, too. You’re sending your kids to an online school. So, asking for an allowance now when times are extra hard is completely understandable. Lay it out to your landlords. If you were a good tenant in the past and are only asking for this favor now, chances are that they’re going to be lenient in renegotiating the lease contract.
Again, the world is coming to grips with a crisis that eroded time-tested institutions and policies. Businesses are absorbing the impact of the pandemic as well. Everybody is doing their part in trying to help each other survive the biggest threat to economic institutions in the modern world. You are no different. Your landlords are experiencing the same financial insecurity as you do. Keep this in mind during the renegotiation process.