Rent Deferral Agreements for Defaulted Commercial Leases: Pre-Negotiation, Risk of Insolvency, Landlord Due Diligence

Recording of a 90-minute premium CLE video webinar with Q&A


Conducted on Thursday, August 12, 2021

Recorded event now available

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Course Materials

This CLE course will discuss factors to consider when negotiating a commercial tenant rent relief agreement for landlord and tenant counsel. When beginning the process of potential rent relief, landlords will want to consider their cash flow and financing arrangements and whether third-party consent is necessary, and whether rent relief would affect the landlord's ability to pursue insurance claims or governmental bailout and other relief. Likewise, tenants must work closely with landlords and counsel to structure deals in a way tied to the tenant's current and anticipated financial reality.

Description

As the economy continues to struggle, commercial landlords and tenants are left to save their leases while mitigating pandemic-related harm. A well-crafted rent relief agreement requires balancing potential liabilities for both sides to provide tenants with leverage to remain in their spaces and landlords with assurances that tenants will eventually be able to pay rent.

Counsel's pre-negotiations often start with the tenant's written request for rent relief, clarity about the landlord's expectations of information from the tenant, the potential amount and period of rent relief, and provisions for a finalized rent relief agreement.

The landlord must develop its due diligence plan to evaluate and determine whether, how much, and how long to provide rent relief. The landlord should thoroughly review the tenant's financials and assess the risk of default or insolvency. Landlords can balance these considerations against their potential cash flow and responsibilities to any applicable lenders and investors.

Tenants will have to weigh the options in a landlord's rent relief offer and the probability that the tenant's business will survive. In these negotiations, tenants and their counsel must compare the risk of accepting a landlord's offer with the potential additional obligations the landlord will often package with it, such as demands for personal guaranties or relinquishment of security deposits.

Listen as our expert panel provides the advantages and risks to landlord and tenant counsel when entering a rent deferral agreement and best practices to develop a plan and lease modification that all parties would consider successful.

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Outline

  1. Rent deferral agreements and rent relief generally
  2. Landlord concerns
    1. Tenant written request
    2. Pre-negotiation agreement
    3. Landlord cash flow/financial situation
  3. Tenant concerns
    1. Security deposit release
    2. Personal guaranty
  4. Best practices and tips

Benefits

The panel will review these and other key issues:

  • What should be included in a pre-negotiation agreement after a rent relief request is received?
  • What data is most useful for a landlord in evaluating the risk of future default or insolvency before agreeing to a deferral?
  • When should a tenant consider releasing a security deposit or providing a personal guaranty?
  • What is the legal framework the landlord and tenant may be required to negotiate under, such as eviction moratoriums and other COVID-19 related law?

Faculty

Motamedi, Kent
Kent Motamedi
Attorney at Law
Motamedi Law

Mr. Motamedi handles a variety of commercial and residential leases from draft work up to commercial litigation. His...  |  Read More

Strayer, Matthew
Matthew L. Strayer

Attorney
Bricker & Eckler

Mr. Strayer represents buyers, sellers, owners, developers, and lending institutions on real estate projects involving...  |  Read More

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