Four Tips for Negotiating a Commercial Lease Restructuring
The COVID-19 pandemic is affecting virtually every community in our region. To control the transmission of the respiratory disease, state and local officials have restricted many non essential activities. Unfortunately, this has caused serious financial distress to many businesses in South Florida.
As a consequence, some companies find themselves stuck in a commercial lease that they may no longer be able to sustain—at least under the current terms. Depending on the specific circumstances, a restructuring of the commercial lease may be in the best interests of both parties. Here, our West Palm Beach landlord-tenant litigation attorneys offer four tips for commercial lease renegotiations.
Restructuring a Commercial Lease: Four Tips for Effective Negotiation
- Be Proactive—Start Negotiations as Early as Possible
Both commercial landlords and commercial tenants can benefit from a proactive approach. If a tenant is facing financial distress due to the coronavirus shutdowns, any lease renegotiation should take place as early as possible. The sooner parties are able to discuss the matter, the more room that they will have to make an agreement. While a restructured lease may not be the right option in every case, it will be a lot easier to come to a mutually beneficial deal when the parties start negotiations early.
- Carefully Research the Market
The COVID-19 pandemic has created complex market conditions. Whether it makes sense for a landlord or tenant to work towards a restructured agreement depends entirely on the other options within their market. Before you begin negotiations, it is imperative that you research the market so that you know your alternatives. For example, it may not make much sense for a commercial landlord to play ‘hardball’ with a financially distressed (but otherwise reliable) commercial tenant if no other replacement tenants are currently available. You have to know your market.
Know Where You Can Compromise (And Where You Can’t)
Compromise is a key part of any effective negotiation. Before entering the process, parties should clarify where they can compromise and, alternatively, where they cannot. As an example, some commercial landlords may be in a position to allow distressed tenants to delay payments in exchange for any agreement to catch up on the full amount owed in the future. In contrast, other commercial landlords may need to put an emphasis on immediate cash flow.
Consult With a Florida Commercial Landlord-Tenant Lawyer
If you are preparing to negotiate a restructured lease with a commercial tenant, professional support is available. We can represent you in negotiations and help your firm find a solution that best protects your financial interests. In some cases, mediation may be the best option. In other cases, informal negotiation may be sufficient.
At Pike & Lustig, LLP, our Florida landlord-tenant attorneys are skilled, dedicated advocates for our clients. If you have questions about negotiating the buyout of a commercial lease, we are here to help. For a confidential consultation, please call us today. We represent commercial landlords throughout Southeast Florida, including in Miami-Dade County, Palm Beach County, and Broward County.