Structuring Office Leases in the Economic Recovery: Increased Work From Home, Office Sharing

Description

The increased transition to work-from-home has led to renewed renegotiations of office leases. Companies large and small face concerns as to obligations under their commercial leases. There are several potential solutions for both landlords and tenants.

Some businesses may consider whether office sharing or hoteling is the solution to reducing their footprint in office space. Still, co-tenants have to consider an agreement that addresses the ownership of assets and repairs of the leased property.

The parties must determine whether a proper contractual resolution is possible. Tenants positioned for a true resurgence may want to look at abatements or deferrals. Tenants subject to a true contraction may consider subleasing or assigning portions of the space or term of the lease to a new tenant.

Outside of contract, there are common law solutions if either party identifies grounds to pursue (or defend) a claim regarding the doctrines of impossibility, impracticality of purpose, or frustration of purpose.

Finally, the stakeholders must consider the context of the overarching situation when attempting negotiations. What is the current occupancy level of an office development and how will that impact negotiations? What is the financial condition of the tenant? Is bankruptcy more or less a certainty such that a deferral is simply moving a few months down the calendar?

Tenants negotiating new leases should consider language that will address rent relief if and when there is another pandemic or other health emergency that results in closures or reduced business hours or restricted occupancies.

Listen as our expert panel discusses the possibilities to negotiate and resolve lease issues landlords and tenants face in light of the current economic trends and addresses the contractual, common law, and contextual issues that come into play when trying to meet each parties' needs.