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Commercial landlords and tenants may revisit their contract

Few would argue this is the best of times for many commercial property owners and their tenants.

Some Texas tenants unable to pay on time might suddenly get locked out of their shop. But then again, many tenants with a strong online presence are starting to wonder why they needed a landlord in the first place.

So, for those who can, it may be a valuable time to take it easy, talk to each other, and put your mutual decisions into well-drafted legal agreements.

It is often best to agree outside the courtroom

The landlord-tenant relationship is always a certain type of partnership. The tenant’s business model includes a landlord, but the landlord’s business model is unthinkable without tenants. This might not be the time for hardball, and some property owners and tenants are sitting down together to figure out what to do.

In one way, this is nothing unusual. Contract renegotiation, whether between married couples or multinational corporations, routinely uses mediation, arbitration or other types of “alternative dispute resolution.”

As examples, tenants and property owners might consider changes to rents, how long the lease lasts, or who pays for maintenance, “build-outs,” insurance or taxes. Is it possible for more than one business to share the same space? One, two or a mix of a few of these areas might work for everyone.

The first step is to dig out the contract and read it

Most people could stand to be more familiar with the contracts by which they live.  In a fast-changing commercial real estate market, now would be the time for everyone to revisit their contracts and refresh their memories.

There may now be surprises. Some text that, on the first read-through, sounded like formalities that would never matter and that now take on fresh meaning.

Only one of many examples could be a “force majeure,” or so-called act of God clause, that addresses one party to the contract being unable to fulfill their duties due to forces nobody could control or foresee.

These clauses rarely need to go into effect. When they do, it is not enough that a force majeure happened, it must also actually make it impossible for one or both of the parties to fulfill the contract. The clause may also specify what counts as a force majeure.