In this time of uncertainty and uncharted territory, NAI Partners is a resource for you as you weigh your real estate needs, obligations and decisions. COVID-19 is impacting business in a way we’ve never seen, and much like the reactions to the outbreak, the legal ramifications will be fluid. Communication has never been more important for landlords and tenants.
We’re getting a lot of questions about lease provisions from our clients and hope some of the following will be helpful to you. Keep in mind that we’re a real estate firm, not a law firm, so this should not be construed as providing legal advice, and you are encouraged you consult with legal counsel on any legal question or issue you have.
We do, however, have decades of commercial real estate experience and can partner with you to ensure you make the right real estate decisions for your business, and can help you connect with the right professional to review your specific circumstances.
You’re sure to hear all kinds of advice and opinions about how leases will, or should be, administered in today’s circumstances. Our most important piece of advice is to review your specific lease with a professional to understand your specific set of circumstances. No lease is the same, and if you have multiple locations, expect each lease to be different.
Another regular question we’re getting involves “business interruption insurance.” We recommend reviewing your policy and visiting with your insurance professional about potential coverage for your business as it relates to the COVID-19 measures being taken. Generally, “business interruption insurance” applies to physical damage to the property governed by the lease, and not the circumstances we find ourselves today.
Other circumstances may pop up in your business, including the build-out of your premises if you’ve already signed a lease but haven’t opened yet. We can help you connect with the right professional to review your specific circumstances.
Please consider NAI Partners as your partner in real estate as we navigate through these unique times.
Understanding Office, Industrial and Retail Lease Provisions During the COVID-19 Pandemic
We also recommend familiarizing yourself with the following lease provision summaries from Baker Donelson’s “Coronavirus: Impact on Office, Retail and Industrial Leases.”
Force majeure provisions in commercial leases call for the postponement of certain landlord and tenant duties due to an unforeseeable circumstance. In the case of COVID-19, this would most likely apply to the obligation of a tenant to continuously operate its business from its premises.
Tenants and landlords should review the force majeure provisions of their leases to determine whether events related to the COVID-19 pandemic are covered.
Operating Hours, Cessation of Business, Abandonment or Vacation of a Leased Space:
Commercial leases often require tenants to operate for minimum business hours and may also include a tenant obligation to continuously operate.
Lease parties should review their leases to understand what amount of detail is devoted to operating requirements, while landlords and tenants should engage one another to understand any modifications of lease requirements regarding operations.
To aid in social distancing many landlords are closing or imposing restrictions on the use of common breakrooms, workout facilities and other building amenities.
Landlords pondering common area changes should carefully review leases to understand obligations, and also communicate so that tenants may make appropriate plans.
Tenants are considering whether and how best to de-densify work space to mitigate the risk of social spread of COVID-19, which may require physical changes in some instances.
Landlords should reasonably consider emergency alterations, while tenants should approach alteration requests in good faith with their landlords.
Landlords and tenants should be proactively communicating with each other and coordinating efforts to mitigate against potential impact from the COVID-19 pandemic.
If a landlord or tenant is in doubt over what it may not do (or be able to do), communicate.
*This publication does not constitute legal advice. You are encouraged to consult with legal counsel on any legal question or issue you have.