Today the national cabinet will discuss commercial rental relief. here's what you should be thinking about while this happens...

COVID-19 is more than a health crisis.
 
The speed has caught everyone off-guard. An already strained economy, suddenly finds itself panicked and grinding to a halt, with companies, small and large, collectively staring into an abyss. For those businesses holding a commercial lease, serious concerns have been raised in the past few days, regarding obligations, provisions and the next step.
 
So should you speak to your landlord? After today, yes. ​

Here are some points to think about before that discussion:
 
1. Start thinking of options – Some businesses, particularly in the retail sector, will be suffering from unexpected cash flow issues. Now is the time to draw up a strategy to help you gain immediate rental relief. See some of our suggestions below this list.

2. Start a dialogue – don’t go quiet on your landlord. Instead, paint a picture of your current situation. Have you moved the team out of the office to begin work from home? Have you let staff go over the last few days? Keeping your landlord informed will set you up for what you’re going to propose to them.

3.Make a reasonable offer – Tenants and landlords have never looked out for each other. Now, for the first time in history, they have an opportunity to work together as they both stare into the unknown. Ensure your offer is as fair as possible to both parties. Your relationship with your landlord is paramount in normal circumstances. Now it matters more.

4.You can’t simply stop paying rent – Despite the legislation working in the tenant’s favour, the worst thing right now would be to stop paying altogether. This will only fracture the existing relationship and may cause future negotiations to be jeopardised.

5.Understand your landlord’s position – It’s not in any landlord’s interest to lose a tenant in the current market and while it seems to be tipping in the tenant’s favour, it is necessary to know what advantages your landlord will have leading into negotiations.
 
We’ve put together some ideas for immediate rental relief options:

• A 90 day rental freeze with the additional unpaid rent apportioned over the remaining life of the lease
• A reduced short term rental (maybe 50% discount for 3 months) to ensure the business viability
• Extending the lease by 12 months with a 25%/3 month incentive to be taken as an upfront contribution for April or May. This will ensure the long term viability of the business and the tenants ability to sustain the lease obligation until the expiry date.

 
The above are short term options only. If the economy remains flat for a while, there will be more room to sub-lease, assign or terminate the lease.
 
This is not a time for landlords and tenants to engage in gamesmanship or try to gain advantage over one another. This is a time for both parties to be proactive and communicate fairly, honestly and responsibly.

​If you are a tenant or landlord and you are in doubt over your position, BRM is available to answer your questions. We’re happy to take a phone call to run through your options.
 

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