September 2009


WELCOME

We are pleased to present our first issue of Becker Gurian Property Lines. Our goal is to provide you with useful and timely information, in a concise format. We welcome your suggestions on topics of interest to you, so please contact us with any issues you would like us to explore. After all, this newsletter is for you, our valued friends and clients, and we hope that you will find it to be a helpful resource.

We thank you for your business and your trust in us, and we aspire to continue to earn both.

Becker Gurian is a boutique law firm rich in qualified, senior-level attorneys that provides skillful, economical legal support services to both entrepreneurial and institutional commercial real estate developers,
owners and managers.
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A SIGN OF THE TIMES: HOW TO RESPOND TO REQUESTS FOR RENT RELIEF

In today's market, retail landlords may find themselves fielding rent relief requests from distressed tenants.  Landlords faced with these requests may determine that short-term rent reductions are preferable to losing tenants who may recover their financial footing in the future.   If rent relief is a viable option, we recommend that landlords insist upon the following provisions as a condition to granting the request:

  • Rent Relief Personal to Tenant.  If the tenant assigns its interest in the lease, the rent returns to the originally stated rate.  Tenants should not consider rent relief as a business opportunity to assign the lease to a third party for profit.
  • Landlord Termination Right.  If the landlord finds a tenant willing to pay higher rent than the rent relief rate, the landlord should have the option to terminate the lease, unless the original tenant agrees to pay the higher rate and demonstrates its ability to do so.
  • No Refunds to Tenant.  The tenant should agree to forfeit any monies that the landlord may owe the tenant, such as tax and CAM overpayments.  Additionally, the landlord should be entitled to immediate possession of the tenant's security deposit.
  • Release of Landlord.  The tenant should acknowledge that no landlord defaults exist and release the landlord from all claims up to the date of the rent relief amendment.
  • Clawback for Tenant Defaults.  The landlord is granting rent relief to help the tenant continue to operate.  If the tenant goes dark, declares bankruptcy, or otherwise defaults under the lease, then the rent relief should no longer apply and the tenant should be obligated to pay the originally stated rent retroactive to the beginning of the rent relief period.
  • Restriction on Distributions and Other Investments.  The landlord should consider restricting the tenant's ability to make distributions to its equity holders or investing in other store locations during the rent relief period, in order to prevent the tenant from distributing needed operating capital.
  • Confidentiality.  The landlord should require the tenant to keep the rent relief agreement confidential.
Careful drafting of these provisions in a lease amendment will go a long way in protecting your interests.  If you want to know more, please email us or give us a call. 

Circular 230 Disclaimer: This message and any attachments hereto cannot be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We would be pleased to provide you with legal counsel. Call us at 847-433-2442 to discuss your specific needs.

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