It Takes A Village – A Different Approach To The COVID-19 Crisis

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These days, unsurprisingly, there is no shortage of emails, blogs, and other communications about how the COVID-19 crisis impacts on legal rights and duties. We get dozens of such each day. Most focus on “Force Majeure”; some address the doctrines of impossibility and impracticability. Some concern themselves with “insurance,” something that will be of next to no help for this situation. There’s a lot of good thinking on the “legal” side of those issues, but (alas) facts also matter. And, the “facts” change by the minute. “Stay home” orders, mandated closings, moratoriums, ordered closings, etc. pop up each time we open our browsers. The “Shadow” may know what comes next, but Ruminations doesn’t.

We’ve written about force majeure, impossibility, and impracticality in the past. If interested, click HERE and HERE. They explain some concepts and describe some law. We don’t feel the need to update them because the law hasn’t changed (yet); only the specific type of problem has. Using our long-broken crystal ball, we predict that new law will be made in the form of result-oriented court decisions. Those decisions may help the survivors. They won’t help the fallen.

[For readers insisting on seeing an analysis of force majeure, impossibility, and impracticality, we suggest they click HERE and then HERE for a pretty good one from a first-class law firm. 

But today, by way of continuing our evolving thoughts expressed last week and the week before, we offer a different type of thinking.

Whether for altruistic reasons or self-preservation, we need to act as a community. Not every tenant or landlord who will fail (i.e., go out of business) will have needed to do so. Landlords can save some tenants, thus saving themselves when this crisis is behind us. Some landlords can be aided by secure tenants, thus preserving the stability of property management. Lenders shouldn’t make it an all or nothing game. But, the bottom line is that the only real revenue stream supporting leased property comes from tenants. And, if too few survive, the stool collapses (read last week’s blog posting HERE) – properties fail. When properties fail, surviving tenants fail, landlords fail, and lenders fail.

There is an expression: “Pigs get fat, hogs get slaughtered.” If the meaning isn’t obvious, here’s how one internet resource explains it: “This idiom is used to express being satisfied with enough, that being greedy or too ambitious will be your ruin.” Here is another expression: “It takes a village.” We, tenants, landlords, lenders, brokers, legal advisors, and property managers all live in that village. Not only is COVID-19 contagious, so is financial failure.

Our thinking is that each property should be “that kind of village” – the kind where everyone works together. Every village needs a coordinator. That’s not necessarily a leader, though it often is. The most obvious candidate is the property owner or property manager, if talented. It could be one of the tenants.

Two key goals should be cost reduction/sharing and shared marketing. In these times, tenants may not have the luxury of employing everyone on a full-time basis. Salespeople can be scheduled to work in shifts, but staff members who take in deliveries (by example only) need to be available at all times, even if not occupied at all times. Tenants can share a smaller number of employees and save some money while still being able, collectively, to provide some income to all of their employees. Also, this is an excellent time to “catch up” on repairs and other projects. Again, tenants can share projects or negotiate for better rates from idle service providers. This is also a time for bulk purchasing for higher volume discounts. Restaurants operating as take-out services can share cases of food. Shared disinfection or other services based on a larger project size might be an opportunity?

Coordinating store opening hours could be a good idea because doing so gives customers a shopping period target to finish all their errands. Consider coordinating shared delivery services, ones that could utilize tenants’ existing employees. On-line sellers can’t keep up. Though some promise two-day delivery, buyers are learning this means two days after shipping. Brick and mortar tenants can deliver same-day, even within hours. Supermarkets and drug stores that already provide same-day delivery can offer delivery of other tenant’s goods.

It’s not just tenants who might catch up on deferred maintenance. Most properties will also have a backlog of projects that had been deferred. Landlords, this is a time to get some of those done. Think about landscaping as we have just entered the spring season. Can you hire some of your tenant’s excess employees?

How about a coordinated curbside pick-up area? Make your shopping center the most convenient in the neighborhood. This could be a time for cross-marketing. For example, people will be coming to food stores. Is your bicycle store open? [Some say these provide essential services – the repair of bicycles]. Can your food stores and drug stores advertise the idea that this is an excellent time to get “that bicycle working again”? Instead of “bicycle stores,” not a ubiquitous merchant, think of “whatever tenants you have” and figure out how your destination tenants can help these satellite ones.

How about “loosing up”? Tenants and landlords, let’s let up on exclusive use rights. If a restaurant can get toilet paper supplies from its restaurant supplier, let it sell toilet paper to its pick-up customers. Let it sell food supplies. Supermarkets, you’ve got more than enough business. You can’t even keep up with restocking. When this crisis passes, you won’t want to be the last standing tenant at an otherwise empty property.

We confess that the handful of “ideas” expressed above are instinctual, not carefully considered, or grounded in decision tree analysis. Thus, they aren’t being suggested for adoption as presented. Ruminations only intends to spur you, our readers, to think broadly. Every property is unique in its challenges and opportunities. If our industry is to survive this crisis, we have to INVEST now for the future. Landlords who don’t REINVEST in their properties and in their tenants will have empty properties. They will be competing against landlords who helped their own tenants survive. Similarly, tenants need to support their neighbors. Otherwise, when this is done and over, they’ll be at orphaned properties.

As for lenders – we don’t have enough breath left other than to say that bankruptcies are not your friend. Even secured lenders will learn that collateral disappears quickly in a business collapse. Empty shopping centers, in a market when many will be empty, won’t cover the debt.



  1. Here is what I am telling my tenant clients.

    Please understand that I’m not a lawyer and all of my commentary below is from a non-legal perspective. However, having negotiated more than 2000 leases or 44 years, I have a pretty good sense of what you should expect. In the end, however, consult your lease lawyer before you decide to stop paying your rent.

    1. I have been inundated by dentists who want to know if they still have to pay their rent during this crisis. The short answer is probably.

    2. The landlord likely has obligations that it must fulfill to his lenders and stockholders, irrespective of any disruption in his business and in the rental stream fed by tenant rental payments. So, he is not likely to easily agree that you can just not pay for a while. Instead, he will almost surely say that you should look to your insurance carrier for protection under your “business interruption” insurance policy.

    3. The legal concept that most are inquiring about it is called “force majeure”. (“FM”) One short definition of FM is “unforeseeable circumstances that prevent someone from fulfilling a contract.” Unfortunately, however, irrespective of what any dictionary definition looks like, the exact wording in your lease likely establishes with far more clarity than that short definition exactly what rights and obligations the landlord and tenant, respectively, enjoy or are burdened by under that FM provision..

    4. Some may say that since the president has declared a “National Emergency”, that action and any resulting restrictions of movement or congregation constitute a FM event, giving them the right to invoke a FM provision (if such a provision appears in their lease) as a reason to stop paying rent. My sense is that there may be insufficient precedent in the law to clearly establish that without a lot of legal wrangling.

    5. Choosing to not pay your rent without agreement by your landlord might be a reckless action that you ultimately come to regret. Unless your lease gives you the specific right to withhold rent under specific circumstances, doing so leaves you in a precarious position, possibly in default of your lease. Consult your lease lawyer before you take this step.

    6. The legal community is scrambling right now to address this very issue and I’m sure that the legal opinions that ultimately emerge will be varied and divergent.

    7. Repeat: Consult your lease lawyer before you decide to withhold your rent, as there can be severe consequences for doing so without a sound legal basis.

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