After COVID-19 began spreading, governments gave statewide orders to shut down, limit operational hours and establish safety protocols for employees. However, these steps haven’t always possible for some businesses. Many had temporarily shut down or permanently close. One of the biggest remaining challenges is managing to pay rent when revenue is at an all-time low, but there are some strategies business owners can use to get through this challenging time.
Read on to learn how to negotiate rent for your small business during COVID-19. Depending on which landlord owns your building and what your lease looks like, there may be a few tips that can help float your business while the world struggles to find a new normal:
1. Check Your Lease
Some people believe things are improving because the United States has slowed the coronavirus spread, but that isn’t always true. A recent Pulse Poll found 34% of small businesses couldn’t pay May’s rent in full, even with states beginning to reopen. Many entrepreneurs are looking to negotiate their rent so they don’t have to lay off more employees and close, which begins with checking the lease.
Depending on the type of lease, it could be easier or harder to work with. Some are straightforward and others include pass-through expenses which make utilities, repairs and maintenance the business owner’s additional responsibilities. Landlords might not be able to take on all the fees outlined in your lease, depending on what your monthly payments include.
2. Plan for the Near Future
Landlords use rent payments to pay their leases, property taxes and other fees they can’t put off, so delaying rent for months isn’t likely. Instead, they may be more open to discussing rent on a month-by-month basis so they can plan their own finances.
If they mention potentially evicting you, check the mortgage loans for your business. Under the Coronavirus Aid, Relief and Economic Security Act (CARES) Act, any federally backed loans fall under a 120-day eviction moratorium, so landlords can’t evict companies while they search for federal or state financial assistance.
3. Talk About Rent Abatement
Some commercial and even residential leases include rent abatement, which determines if or how a landlord can reduce or eliminate rental costs if the property is uninhabitable. Usually, this would only be applicable if a business suffered from a natural disaster, but it can also apply during state or federally forced property evacuations.
Figure out where negotiations can begin by finding out if your lease outlines rent abatement to see where your landlord stands on their predetermined financial considerations.
4. Determine Your Financial Capabilities
Certain small businesses may need to relocate if their landlord won’t cooperate. If you want to end your lease and move into a new location, use an online calculator to determine how much of a mortgage or loan you can currently afford. This is an especially vital resource for small businesses that may need to operate out of a house or historic home property, which could require a residential mortgage.
5. Remember Your Security Deposit
Landlords might be willing to use a previously paid security deposit as a credit towards next month’s rent, depending on the size of the deposit. They can do this if they haven’t used it yet for previous damages. If you agree to this, make sure you can pay the same amount again if repairs must occur after your lease ends.
6. Adjust Your Lease
Business owners may find success in negotiating for an adjusted lease. Doing this would require your landlord to make a monthly rental extension or a short-term lease with a lower monthly payment. Either way, get all official documents signed and save copies of them in case legal issues occur regarding these changes.
Determine Backup Plans
Your landlord may not be willing to agree to the first negotiation strategy you go with, so determine backup plans they may agree to. Short-term leases, rent abatement and even your security deposit are all strategies business owners can use to make it through the COVID-19 crisis.
Kacey Bradley is the blogger behind The Drifter Collective, an eclectic lifestyle blog that expresses various forms of style through the influence of culture and the world around us. Along with writing for her blog, she has written for sites like U.S. News, Hotel Online, SevenRooms, Point 2 Home and more!