• Peter Lamont, Esq.

COVID-19 and Your Business Lease



As the COVID-19 pandemic continues, more and more businesses are being adversely affected. In particular, many small businesses are struggling with paying their monthly rent. Depending on the size of your office, lease payments can be a large chunk of your monthly overhead. Many small business owners are questioning if they should stop paying rent since many non-essential businesses are not utilizing their offices and are working from home. Others are running out of money to pay rent while continuing to do business. So, what should you do as a business owner if you find yourself struggling with your lease payments, and is there any hope? The answer is, "Yes." 


The Havoc Created by COVID-19 

There is not much left to say about COVID-19. It is on every news channel and news website 24/7. We know it is wreaking havoc on the U.S. economy, with small businesses hit the hardest. For the most part, we are all in the same boat. While the fear of the unknown and the uncertainty concerning when things will go back to "normal" is daunting, we all must accept the current state of affairs and focus on the future of our businesses. Easier said than done, I know, but you have put too much into your business to let COVID-19 take it all away. As difficult as it may be, you need to focus on the positive and believe that you will get through this. You need to have a clear, focused, and positive mindset to deal effectively with the difficulties of making your monthly lease payment. 


Above All Else Communicate

The best and most important piece of advice I can give you is to communicate with your landlord. I know that many people tend to prefer avoidance over communication, but in this instance, communication can mean the difference between working out an arrangement and being sued. 


At the first sign of difficulty, you should reach out to your landlord and advise him of your situation. Explain that you want to make the lease payments but that COVID-19 is creating financial issues for you. 


Negotiate

Assuming that you are communicating openly with your landlord as you should be, you can negotiate a variety of repayment options that keep the landlord happy and your lease intact. Don't be afraid to ask for a temporary reduction in lease payments or suggest an alternative solution. For example, ask for a 2-month forbearance period and offer to make up the missed payments by dividing them over the remaining months. While some landlord may be unwilling to work with you, your chances of reaching an agreement are 100% better by communicating than if you duck him. 


Reduce Overhead 

It may be common sense, but now is the time to look at your company's spending. Where can you cut costs? Do you need a water delivery service or a cleaning service? Do you need to buy the most expensive office supplies, or will cheaper ones suffice? If you sit down and look at what you pay for each month, I can almost say with certainty that you can find places to cut costs. Doing so ay make paying you lease easier. 


Prioritize Bills

While everyone wants to pay their bills on time, we are facing an unprecedented event. While it is certainly not optimal, you may need to prioritize which bills get paid first or if certain bills just can't be paid. If your commercial lease is critical to your business, you will need to prioritize your bill payments to make sure that your lease is a priority. 


N.J. Commercial Lease Laws

Many people are under the belief that commercial tenants have the same broad protections provided to residential tenants. Unfortunately, this is not true. New Jersey commercial-landlord tenant relationships are controlled by N.J.S.A. 2A:18-53, not the Anti-Eviction Act, N.J.S.A. 2A:18-61.1 which protects only residential tenants. In general, N.J.S.A. 2A:18-53 provides for eviction when (a) a tenant holds over after the expiration of the lease term; (b) non-payment of rent; (c) disorderly conduct; (d) damage to the premises; (e) violation of the landlord's rules and regulations and (f) breach of the lease.


Based on the statute, if a business stops paying rent, they can be evicted and sued for breach of contract. Most commercial lease lawsuits demand payment for the entire lease period, including future payments, or at least until the landlord can find a new tenant. So, don't just stop paying rent. Instead, communicate, negotiate, and find ways to save money and make the rent payments. 


Conclusion

The world we are living in right now is nuts. I know. Its something out of a movie. However, we cannot allow ourselves to focus on fear. We need to pick ourselves up, dust ourselves off, and charge forward. Be proactive and talk to your landlord about your current situation, and don't be afraid to ask for help. Keep in mind your landlord is not likely to find a new tenant right now. He would rather negotiate a payment plan with you than lose you altogether and have no rental income. 



If you would like more information about this post or if you want to discuss your legal matter, please contact me at pl@pjlesq.com or at (201) 904-2211. Don't forget to check out and subscribe to our podcast and YouTube channel. We have hundreds of podcasts and videos concerning a variety of business and legal topics. I look forward to answering any questions that you might have.


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