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Commercial landlords offer ‘pandemic clauses’

| Dec 7, 2020 | Real Estate |

The COVID-19 pandemic has harmed commercial property owners in Ohio and across the country as retail tenants fall further behind in rent payments due to significantly reduced sales.

Recent news over vaccines being available in the weeks or months to come is promising, but many landlords remain in a precarious situation because of unpaid rent and increasing vacancies.

Some landlords consider a new lease option

While many owners are experiencing short-term setbacks, they are taking a creative approach to guard against long-term financial losses. The result is a very 2020 solution – adding pandemic clauses to leases for current and future tenants. These clauses include language that:

  • Defers some or all rent payments if widespread business shutdowns occur
  • Allows tenants to make smaller rent payments without penalties
  • Encourages tenants to renew leases to lock in future protections

Many business owners say this flexible arrangement benefits both parties during a challenging time. It gives tenants some leeway to survive in case they have to shut down or operate at a reduced capacity. Landlords benefit by seeing at least some money coming in so they can meet their own obligations.

Will pandemic clauses become standard agreements?

Once the virus is under control, no one is sure whether pandemic clauses will become a permanent fixture in commercial leases. Some may decide to return to standard rental language. However, others say they plan to use them to attract more tenants, and some may even charge more in rent by offering this extra level of protection.

 

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