Operations

Need to renegotiate your lease? Expert weighs in

The restaurant industry continues to face significant challenges as states and regions continue with restrictions to address the coronavirus pandemic. In light of these pressures, many restaurants need to renegotiate their leases with property managers.

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September 20, 2021

The restaurant industry continues to face significant challenges as states and regions continue with restrictions to address the coronavirus pandemic.

Even though many restaurants are open for business, guests and employees in many regions are required to wear masks while many former employees are reluctant to return to work.

In light of these pressures, many restaurants need to renegotiate their leases with property managers.

Amy Eskola, a partner in the Messner Reeves law firm who specializes in real estate transactions, contract negotiations and corporate governance, addressed this critical topic during a podcast, "Restaurant Recovery Through Contract Renegotiation."

Eskola said many restaurants have been able to renegotiate terms with landlords during the pandemic.

"For the most part we are seeing people generally successful, all across the board in terms of how much money they're saving or what kind of negotiations they are seeing," she said. "Tenants today still do have some sort of renegotiation power."

Due to the pandemic, landlords are anxious to keep viable tenants in business.

She encouraged restaurants to approach landlords to renegotiate.

"It's better to work proactively than reactively," she said.

She also suggested tenants be reasonable with landlords.

"At the end of the day, it's up to landlords to decide to grant you concessions that you're asking for," she said.

It is possible to renegotiate the rent amount, she added, but it will help to have a good reason for doing this. She suggested talking to a commercial broker who understands the local rent trends.

Another option is rent abatement, having rent forgiven for a certain time period. Rent deferment is another option, meaning paying what you owe at a later date, on top of existing rent. It is also possible to pay rent based on your sales.

These were just some of the options covered in the podcast.

Small restaurants are suffering more due to the pandemic than large chains, she said.