Even when business stops, the rent goes on.
But with the unprecedented restrictions caused by the coronavirus, building tenants and their landlords are scrambling to deal with the new reality.
Retail and commercial building tenants who have been forced to shut down are seeking relief from rent payments that still come due even when their doors are shut.
“It’s not just restaurants — there are a lot of businesses that aren’t prepared to go two months without income,” said Tom Lynn, chairman of Dallas commercial property firm NAI Robert Lynn Co. “The companies that haven’t been able to access their properties and run their businesses are calling us to see if they can get some relief.”
Even a landlord willing to cut his tenants some slack faces obstacles, Lynn said.
His loan agreements may preclude free rent.
Plus, some leases in retail buildings can be voided if a large percentage of the tenants in the project close down or pull out.
“The lender has to be involved and insurance is involved,” Lynn said. “It’s new territory, and every case is different.
“I had a longtime client email me yesterday,” he said. “They weren’t doing great prior to this and they said they were going to go ahead and file bankruptcy.”
Shopping center operators and owners have been particularly hard hit by the business shutdowns and are trying to work with their tenants.
“We have received a lot of requests for rent relief or letters informing us we won’t be receiving April rent,” said Terry Montesi, founder and CEO of Fort Worth-based shopping center firm Trademark Property Co. “Most landlords are comfortable deferring rent for locals or franchisees, assuming the franchisor has waived franchise fees.
“Landlords are communicating and also watching what the government will do for our tenants and us and our lenders.”
Commercial property firms expect that the push for rent relief is just starting.
“Our counterparts in California and New York have seen their fair share of this,” said Grant Pruitt, president of Whitebox Real Estate. “In D-FW we have not seen as much of it yet, but it is coming.
“We are starting to field some questions from a few of our clients given that they are unable to use the space due to shelter in place protocol, etc.”
Apartment renters are already getting forbearance by both government mandate and industry recommendation.
The Texas Supreme Court has ordered a halt to all tenant evictions until late next month.
And the Federal Housing Finance Agency is offering apartment owners mortgage forbearance on the condition that they suspend all evictions for renters unable to pay rent due to the impact of coronavirus.
“Renters should not have to worry about being evicted from their home, and property owners should not have to worry about losing their building, due to the coronavirus,” FHA director Mark Calabria said in a statement. “The multifamily forbearance and eviction suspension offered by the enterprises should bring peace of mind to millions of families during this uncertain and difficult time.”
The National Multifamily Housing Council, a trade group made up of nationwide apartment builders and owners, is telling its members to ease off on renters struggling to cope with the economic halt.
The organization is asking apartment landlords across the country to halt evictions for 90 days, avoid rent increases and create payment plans for residents who are unable to pay their rent because of the pandemic.
“Make no mistake: Leniency amidst a backdrop of health and economic concerns is the right thing to do,” Jay Parsons, an economist with Richardson-based apartment industry firm RealPage, writes. “At the same time, all would agree this is a short-term fix for a problem that could persist long term.
“The big long-term question: What can property owners do to protect themselves and protect the most vulnerable renters?” he said. “It’s a massive challenge — balancing the public good with individual good.”
