Over the past week, many of our clients have been asking us if their lease and obligations to pay rent will apply through the ongoing COVID-19 crisis in light of either mandated or recommended shut-downs. The following are provisions of the typical commercial lease and factors of the landlord-tenant relationship which should be considered, given the current circumstances:
- Although every lease is different, the likelihood is that the obligation to pay rent through the ongoing crisis will remain in force.
- While insurance policies may differ, most business interruption insurance will not protect tenants against the event of a pandemic. We suggest that you reach out to your insurance broker for confirmation prior to filing any claims for business interruption as a result of COVID-19.
- For tenants potentially waiting on new space to be delivered, attention should be given to the provisions relating to ‘force majeure’ or ‘unavoidable delay’, which may allow completion of a newly constructed premises to be delayed for a period of time as a result of an unavoidable occurrence (i.e. COVID-19). Our recommendation for tenants who are planning on moving from one space to another in the coming months is to monitor construction progress very closely and ensure appropriate measures are taken to secure a short term extension to the lease (if necessary) on any space they may be vacating as part of a relocation.
- For tenants who have temporarily closed their offices and are working virtually, we recommend notifying your landlord of the closure of the office to avoid default as per the non-occupancy provisions of your lease. Tenants should also contact their insurers to notify them of decreased occupancy and ensure coverage will still be in place for offices that are empty. Depending on the size of your office we also recommend organizing a site-monitoring committee to ensure infrastructure such as security systems and server-rooms are functioning properly.
Please don’t hesitate to reach out if you have questions or concerns regarding your rights as a tenant and/or would like to discuss strategies for mitigating risk during this difficult time.