By Daniel C. Conlon, Esquire – Contributing Writer for PRESENTE
A few months ago, I wrote about residential tenant rights. Hispanic business owners are also worried about their commercial leases and how to keep up on rent. It is no secret that the hospitality industry has suffered the most from to the COVID-19 pandemic and related government restrictions. If you are a restaurant owner with a commercial lease, chances are you are reading that document closer than ever before. Below are frequently asked questions to help business owners better understand their commercial lease.
Q. How are commercial leases different than residential leases?
A commercial lease is for a business and a residential lease is for housing. A commercial lease agreement typically offers more flexibility than a standard residential lease agreement. For example, buildouts of a premises to fit the tenant’s business are very common in a commercial lease. However, commercial leases are more expensive because they place more responsibility on the tenant for the maintenance and care of the premises, utilities, taxes, insurance etc.
Q. What happens if a tenant stops paying rent?
It depends on what your lease says. Generally, commercial leases have a “confession of judgement” clause that allows a landlord to circumvent normal court proceedings that take several steps and go straight to obtaining a money judgement against the tenant for rent owed. Nonpayment of rent could also result in an eviction. Neither the Trump Administration nor Governor Wolf’s Administration have declared a moratorium on commercial lease evictions.
Q. Is a tenant personally liable for rent due on a commercial lease?
Commercial leases often include a “personal guarantees” agreement that makes the tenant personally responsible for rent owed. Despite using an LLC or other legal entity to sign a commercial lease, a personal guarantee in a commercial lease has the effect of leaving the tenant personally on the hook for rent owed to the Landlord.
Q. Can I ask my landlord to reduce the rent on my commercial lease?
Yes. Basic rent forgiveness, basic rent reduction, a percentages lease, and rent deferments are only a few imaginable proposals a tenant can offer a landlord to help the tenant stay above water during these difficult times.
Q. Can a tenant cancel a commercial lease?
Most commercial leases include a “force majeure” clause that operates to either temporarily delay, or excuse, certain landlord and tenant obligations while a business is closed. However, many, if not most, “force majeure” clauses in commercial leases temporarily delay or excuse performance of obligations except for the tenant’s obligation to continue to make its rent payments. A “force majeure” clause in a lease is triggered when exceptional and/or unforeseen circumstances deemed beyond the control of the landlord and tenant prevent performance under the lease.
Another legal doctrine known as “impossibility or impracticability” may allow a tenant to be excused from a commercial lease where, after the lease is signed, a tenant’s performance is made impracticable without his/her fault by the occurrence of an event neither the landlord nor tenant anticipated.
Daniel C. Conlon, Esquire is a business attorney at Tucker Arensberg, P.C. in Pittsburgh, PA. He is a native Spanish speaker who grew up in San Miguel Allende, Guanajuato, Mexico, and serves a large Latino client base, focused on government, hospitality and business. He volunteers with many Latino community organizations, serving as Board Director of Pittsburgh Hispanic Development Corporation (PHDC) and Latino Community Center (LCC). He is also a member of the Pittsburgh Metropolitan Area Hispanic Chamber of Commerce (PMAHCC) and the Allegheny County Bar Association’s Hispanic Attorneys Committee (HAC). Daniel was the recipient of the 2019 PUMP and Pittsburgh Magazine 40 Under 40 award. Contact Daniel at 412-594-3951 or email@example.com.