Landlords, Leases & Restaurants: Why rent could be the difference between survival and bankruptcy

Bars, restaurants, distilleries and breweries are still feeling the financial pains of COVID-19. While we are away from our favorite watering hole, the hospitality industry – which already has thin margins (YES, THEY DO!) – is taking in less and less revenue. 


Simultaneously, operating costs like water bills, electricity bills and rent have stayed constant. Debts are piling up, and customers are staying home. 


As a result, bars, restaurants, distilleries, and breweries are facing an unprecedented risk of being evicted due to missing rent payments. Thankfully, eviction is not inevitable. To help tenants and landlords reach mutually beneficial deals, here’s a quick guide to navigating the COVID-19 rent crisis. 



What’s Happening with Rent? 


The coronavirus rent crisis is well-recognized. Countries like Italy have suspended rental payments during the outbreak of the pandemic. Cities like New Orleans introduced new legal protections to help home-renters avoid eviction. 


In the hospitality industry, rent is typically one of a business’s highest expense. Even large companies are struggling to pay rent right now. For instance, the Cheesecake Factory announced that it could not pay rent for the month of April. Company chairman and CEO David Overton pleaded with the public, writing, “Due to these extraordinary events, I am asking for your patience, and frankly, your help.” 


If multi-million dollar companies are struggling to stay open, how will independent small businesses make it to the other side of this pandemic? How do landlords’ interests factor into the equation? 


Striking A Deal for Landlords & Tenants 


The relationship between landlords and tenants is often adversarial, and it doesn’t need to be that way. Right now, cooperation might be the best available option for both landlords and tenants.


To help renters and landlords have a more stable future, here are a few tips on revising a lease during coronavirus. 


1. Take Eviction Off The Table. If tenants and landlords are going to find a mutually beneficial deal, eviction needs to be off the table. Eviction is a knee-jerk response to missing rent payments. A landlord might jump to eviction at the first sign of financial trouble. 


Under normal circumstances, eviction might be the right move. But right now, tenants aren’t the only people who have a rational incentive to avoid eviction. After all, where are landlords going to find new renters in the current economy? 


For both parties sake, start by agreeing that eviction is a worst-case scenario.


2. Think Long-Term. This pandemic will end. Just this week, researchers in the UK announced that they are on track to produce a coronavirus vaccine as early as September. 


Strike a deal that compensates short-term rent breaks with long term financial rewards. Add a year to your lease in exchange for a few months discount on rent.  Preserve the relationship you have with a valuable business partner. 


3. Know Your Rights. You have rights and you have options. This is true for both landlords and tenants; understanding the laws that govern both parties is key to starting a productive negotiation. If you are at risk of eviction, there are resources to help you. 


Join us to review this topic and more for our upcoming virtual event on August 11 at 8 AM CST. KEG Consulting is hosting an online interview with Troy Hutchinson, Founding Partner, Rock Hutchinson PLLP. Together, we are hoping to help independent small businesses understand their legal rights. RSVP today to save your spot. 


Salute amici!



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