Many commercial landlords are faced with the precarious task of seeking out a payment strategy with their commercial tenants. It may not be fun, but it is necessary to protect your business’s integrity in the long run.
Open Lines Of Communication
It’s cliché but true: communication is critical. Now more than ever, tenants and landlords must maintain honest communication to protect each other’s interests. Don’t wait until trouble rears its ugly head. Get in touch with your tenants to verify their rental payments. All lease discussions should be documented to avoid future disputes.
Verify Financial Hardship And Payment History
Ask your tenants to present proof of financial hardship and potential viability post-pandemic. Don’t be quick to judge current financials, though. A tenant – like a restaurant – may be stuck in a rut at the moment but can quickly recover for lost time by offering takeout or delivery.
Verify that tenants have applied for rent relief through the CARES Act or small business loans. Are they still paying their property taxes, maintenance costs, and insurance? These things may indicate good faith and should be taken into consideration.
Let’s Talk Payment
Before you consider rent deferrals, answer the following questions:
- What will it cost you to forego rent?
- What is the cost to your company should a tenant fail to pay a rent deferral?
- What is the likelihood of finding a new tenant should you choose to evict?
- Is it better to have lower rental payments than none at all?
Lowering monthly rent payments will allow you to rake in enough money to cover debt expenses while providing tenants with relief. Or sweeten the deal and offer rent deferrals/abatements in exchange for an extended lease agreement.
Clarify that all payment discussions are non-binding and confidential so you can protect your rights as a landlord under a lease. You also don’t want tenants to share information.
Meet With Your Lenders
Include your lenders in your rent relief discussions. Some lenders require immediate notification, while others would prefer to be included in the conversation. Verify your rent relief meets the obligations of your loan, and be transparent. Including your lender now will save you a serious headache later.
Have a wonderful weekend,