Managing commercial property assets and tenants through COVID-19

Many commercial property landlords and tenants are struggling as a result of the impacts of COVID-19. There are pressures from both sides; enforcing the compliance of leases versus an unprecedented downturn in trade due to workplace changes and lockdown rules.  This is not anything we’ve seen or lived through before, and there is no handbook that shows commercial property managers or landlords how to best manage a global pandemic.  A win-win solution is something that needs to be taken seriously – to reach this objective it’s critical to keep an open dialogue so both the landlord and the tenant can work out a rent payment plan that accommodates both sides.

It’s in the best interest of both landlords and tenants to preserve their relationship and ensure that when life goes back to ‘normal’ both parties are in the best position to move forward.

For landlords, evicting tenants is not always a viable solution because this action is likely to result in empty rental space.  And for tenants, deferring full rent payments will only add to the anxiety facing business owners, many of whom are taking similar action in relation to tax obligations and the payment of suppliers.

The current situation requires that tenants and landlords are open with each other, sharing information to understand where the hardship lies, and essentially becoming partners.  The positive aspect of redefining the landlord and tenant relationship as a partnership is that:

• partners are transparent with each other, and
• they share both the pain and benefits of business, in good times and bad.

Regular, open and respectful communication allows both parties to focus on mutually beneficial solutions and proactively mitigates losses for each party.  There are a range of negotiation options available to landlords and tenants, for example, both parties could agree to a reduced percentage of rent during the lockdown and up to 12 months after, with provision to pay the balance over a period of two to five years, thus allowing tenants the opportunity to manage cash flow in recovery.  Negotiating future rent freezes is another potential win-win solution.

Although it has almost become a cliché, the truth is that everyone is in this together.  COVID-19 highlights how much we are all interconnected and interdependent, both in our commercial and private lives.

Landlords and tenants both want the same thing – a stable income and a good relationship.  By becoming partners and helping each other to work through this difficult time, everyone wins.

Ray White Commercial Bayside have a very experienced team who can help guide landlords and tenants through these uncertain times with the aim of reaching the best possible outcome for all parties.