March 28, 2020
April 1, 2020, will undoubtedly be a historic commercial rent payment deadline, as all non-essential businesses have been shut down by the Covid-19 pandemic and the Ontario state of emergency. “Social distancing” has become the new norm.
Commercial tenants have shut their doors and very few tenants have adequate cash flow reserves to fund their rent obligations.
The vast majority of commercial leases do not adequately address what should occur in the event of a social distancing pandemic such as Covid-19 (an “Act of God/Force Majeure) and do not provide rent relief under such circumstances. If landlords take the hard-line, declare an event of default and enforce their remedies, this will likely result in a vacant unit until a reasonable period after the pandemic (including any “second wave”) is eradicated.
This is unprecedented and certainly not “business as usual”.
Commercial landlords and tenants (including their real estate advisors and lawyers) need to communicate with each other and think creatively to find a mutual solution. The following article addresses some “blend and extend” strategies that can be used to provide temporary rent relief to tenants and also provide landlords with extended lease value:
