Resources

Commercial Rent Relief on the Rise

April 30, 2010

Due to the effects of the recession on commercial real estate, landlords have increasingly used lease amendments to provide more manageable terms for struggling tenants. In many cases, landlords have a choice of either providing rent relief or losing valuable tenants entirely. Landlords should ensure that any such amendment is drafted to minimize the risks of future tenant defaults while also providing the landlord with additional protections.

Key considerations that should be included:

First, the amendment should include the outstanding amounts owed to the landlord. In most cases, by the time the parties are prepared to amend the lease, the tenant has likely already defaulted on several rent payments. To avoid any future disputes over the issue, the parties should acknowledge the exact sum of the delinquent rent owed to the landlord, including any accrued interest or late fees.

Second, the amendment should explicitly reserve the landlord's remedies relative to the rent delinquency. In some cases, a landlord may be willing to waive the rent delinquency entirely, provided that the tenant remains in compliance with all other terms of the lease going forward. However, depending on the situation, the parties may be willing to agree to a manageable repayment plan whereby the tenant can slowly pay down the outstanding rent delinquency. In any case, the amendment should clearly state that the landlord retains all rights and remedies to pursue collection of the entire rent delinquency should there be any future tenant default.

Last, the amendment should include language that specifically waives any potential defenses the tenant may have with regard to the rent delinquency and releases the landlord from any liability for events that pre-date the amendment.

While negotiating the terms of a lease amendment, landlords may also consider utilizing their bargaining power to craft more favorable lease provisions. For example, landlords may wish to include the following terms:

Confidentiality. To avoid other tenants seeking similar rent relief, landlords should be sure to include language in lease amendments that requires tenants to keep the terms of the amended lease confidential.

Right to Terminate. If such language is not already included in the lease, landlords should include language that grants the landlord the ability to terminate the lease should a more suitable tenant become available.

Make Relief Personal. To avoid tenants seeking to make a profit from the rent reduction, landlords should include language in a lease amendment that requires the entirety of the rent delinquency to be paid in full in the event of an assignment or sublease.

Eliminate Tenant Favorable Provisions. Landlords may wish to eliminate co-tenancy clauses, rights of first refusal or exclusive use protections, which benefit the tenant and limit the landlord's ability to lease other portions of its property.

For more information on commercial leasing, contact Neil Neumark at 312-627-2276 or Anthen Perry at 313-568-6899.


As part of our service to you, we regularly compile short reports on new and interesting developments in Antitrust and Trade Regulation law and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments on this newsletter, or any Dykema publication, are always welcome. © 2010 Dykema Gossett PLLC. 

As part of our service to you, we regularly compile short reports on new and interesting developments and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments are always welcome. © 2018 Dykema Gossett PLLC.