What Happens When You Can’t Pay Rent for Your Commercial Real Estate?


Rent Payments

The Covid-19 pandemic has introduced to 2020 a myriad of crises that continue to create a ripple effect of consequences that are impacting just about every aspect of society. This is seen anywhere from social interactions to business dealings. One of the consequences of the coronavirus pandemic is that many people are out of work. Restaurants and retail spaces shutting down for several months found many people out of work, and the financial impact of that period is just beginning on the larger economy. While there has been plenty of media attention regarding the issue of individuals out of work having difficulty paying rent, this severe drop in retail and restaurant patronage has created a massive drop in revenue for the retail and entertainment industries. This means there are a lot of commercial properties that are also having trouble making their rent payments.

Commercial leases are typically much longer and have larger financial commitments than a traditional private lease for an individual. However, outside of these two aspects, the basics of leasing property for commercial real estate operates on essentially the same principles. When a company is unable to make a payment, this is referred to as defaulting on the lease. The exact consequences of this happening depends on the specific term of the lease that is violated when the payment is not made on time. In some circumstances, companies can seek financial support to help with rent when times are hard, as they have been in 2020. In other instances, if the payment is not made, the company may be forced to vacate the property. This almost always means closing down the company for a certain amount of time or indefinitely.

Local laws and corporate connections can influence exactly what may happen when a lease is defaulted on in commercial real estate. Whenever there is an issue with the potential of a lease payment being missed, open discussions with the property manager is the best practice to help aid in finding a solution. If you have questions or need guidance, give us a call at Harkins Commercial (407)-323-9310 or contact us online today!

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