Online Alerts

RSS

With most office workers able to work from home, the pandemic hasn’t hit office tenants—and thus their landlords—as hard as it’s hit tenants in the retail, restaurant, and hospitality sectors. But with employees productive at home, office tenants are reconsidering their need for office space.

In their eagerness to get the lease signed, brokers may be inclined to make statements about what the document says (or doesn’t say) to allay the concerns of one of the parties. So, what happens if the landlord or tenant takes the broker at its word and signs the lease, only to discover that the broker’s assurances were wrong? Does the party that relied on the assurances have a valid claim for fraud against the broker? A recent case from California sheds some light on this question.

Liquidated damages clauses can be a convenient way to incentivize performance and avoid disputes over the price tag of breaches. One common use of such clauses is to require the tenant to pay predetermined rent increases in the event it violates a covenant not to open a competing business within a specific radius of the leased property. But getting courts to enforce such a provision can be difficult, as illustrated by the scenario below.  

We polled our experts about what they’ve learned so far about lease renegotiations during the COVID crisis. Here are their top 10 takeaways:

1. Importance of Tenant Communication: Landlords were more likely to grant concessions to tenants that were able to clearly articulate their COVID-19 financial hardships.

On June 2, Commercial Lease Law Insider received the First Place Award for Best Business Newsletter, presented by the Specialized Information Publisher’s Association  at its annual conference.

The judges based their decision on 2019 issues in which our editor explained:

While each lease is different, COVID-19 generally doesn’t excuse tenants’ duty to pay rent. But, in times of pandemic, having the lease on your side may not count for much. The simple fact is that for many landlords, strict enforcement of lease rent obligations is not a realistic option; it might even be illegal under the emergency decrees of some jurisdictions.

The most pressing concerns the coronavirus is likely to pose to commercial property owners stem from these three scenarios:

    What Happened: When Sears went bankrupt, its Mall of America (MoA) lease was taken over not by another retailer, restaurant, or amusement venture, but by Transform Leaseco LLC, a “very unshopping-mall-like” corporate entity created by Sears executives to secure control of the retailers’ many real estate assets during bankruptcy p

Courts have made it very clear that a landlord who allows a tenant to sell counterfeit goods on its property can be liable for “contributory infringement.” Not satisfied with prosecuting small-fry retailers, Louis Vuitton, Coach, and the makers of Ray Bans and Omega watches have gone after the landlords of properties where tenants sold counterfeits of their luxury goods—and each walked away with seven-figure awards. So even if you have no direct involvement in a tenant’s illicit sales, you could end up paying millions of dollars in damages.

So much retail business is done online that it’s common for tenants that are pulling in profits that way to use their brick-and-mortar spaces for purposes related to the business, but not to actually sell products. For example, a tenant with a successful website might turn its store into a service center, a display room, or merely a counter where customers can return or exchange online purchases. But if there isn’t merchandise for sale, it’s bad for your business; the service center won’t generate any percentage rent if the tenant doesn’t make any sales there.