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In addition to their express terms, leases are governed by so-called common law rules that apply regardless of what the agreement actually says. One of these rules is a normally obscure and arcane doctrine known as “frustration of purpose,” which applies when performing lease duties is possible but pointless due to some unforeseen event or circumstance beyond the party’s control. A close cousin is the doctrine of impossibility, which comes into play wh...
They say that no good deed goes unpunished. And if you’ve cut tenants a break on their rent during the COVID-19 crisis, you may have learned the truth of this maxim the hard way. This is especially so if the tenant later declared for bankruptcy. Thanks to the so-called rule of preference, you might have had to cough up the deferred rent payments to the tenant’s other creditors.
Although premises liability and the risk of negligence litigation are perennial concerns for commercial property owners, COVID-19 infuses these issues with a new immediacy. The nightmare scenario: Tenants and/or their employees, customers, vendors, or other invitees who get COVID will claim they contracted the virus on the premises and sue you for negligently failing to maintain the property in a clean, safe, and sanitary condition.
The tenant security deposit is the piggy bank that you don’t want to break open while the lease remains in effect, unless it’s absolutely, positively necessary. And with COVID-19 cases resurging and the prospects of business shutdowns looming, we may be getting close to that absolutely, positively necessary point.
Do financial losses that a landlord, tenant, or other business incurs as a result of COVID-19 and the resulting government shutdowns count as a “direct physical loss” covered by business interruption insurance?
By enabling tenants to surrender part of their space, contraction options can keep tenants viable, out of bankruptcy, and in their leases. This may be the perfect antidote to the staff reductions, stay-at-home orders, and uncertainty over future space needs created by the pandemic.
ADOPT SEVEN KEY PROTECTIONS IN YOUR LEASES FROM NOW ON.
As businesses reopen, landlords and tenants should be thoroughly preparing for the next public health crisis. One key question both sides will have to address in their future leases: To what, if any, kind of rent relief should a tenant be entitled if a new wave of COVID-19 or some other infectious disease emergency renders some or part of the property unusable for a substantial period of time?
It’s in your interests to ensure tenants maintain social distancing in the leased space.
As businesses reopen, landlords face the challenge of helping their tenants comply with social distancing requirements. Instrumental to that effort will be ensuring that tenants hav...
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