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Commercial leases: Life after the pandemic

by on General

For over a year, the economy has been reacting to a global pandemic. Governments ordered everyone to stay home, resulting in incredibly challenging times for businesses.

Often the business operates under a commercial lease in which the landlord and tenant have both been greatly impacted; the global pandemic has put a substantial strain on the commercial landlord/tenant relationship.

As the country recovers from the effects of Covid-19, commercial locations are more prevalent (due to businesses closing permanently) thereby creating more opportunities for negotiating the commercial lease.

Changes in flexibility

Subleasing and assigning a lease used to be terms that commercial landlords did not want to be flexible about. After all, they created an agreement with someone on purpose; making a change to the person accountable for occupying and paying for the lease was a risk.

During the pandemic, many businesses started to see dramatic declines in their business. While some tenants were able to utilize loans, reduce staffing or alter their business model, others could not adapt as easily. Soon, it became clear that could help landlords and tenants adjust to the changing economic landscape by allowing for a new tenant to take over the lease obligations.

In general, landlords are showing greater flexibility in many clauses in the commercial lease so they can attract new tenants for the spaces that were vacated by tenants that closed their doors.

Commercial leases of the future

Moving into commercial leases post-covid, there could be changes to how landlords negotiate with future tenants. Both parties will have concerns about the impact of clauses they may not have worried about pre-pandemic, such as:

  • Force majeure
  • Condemnation
  • Physical enhancements

Since many tenants had to deal with government shutdowns and other issues that were outside of their control, they now are looking at new ways to protect themselves against future government regulations, closures or mandates.

As commercial landlords and tenants look at future commercial leases, both parties will likely more carefully consider the impact these provisions can have on their respective businesses.