There’s no question that commercial space is moving more slowly in the Covid era. There’s also an uptick in lease delinquencies. Amidst these challenges, commercial landlords have a rare advantage: Covid is allowing landlords to reap increased rents due to lease acceleration.
Lease acceleration occurs when a tenant breaches a lease and the lease’s term has months or even years remaining. Lease acceleration existed before Covid and will exist after Covid. But Covid has significantly increased the amount landlords can collect on a lease’s remaining term.
Case in point, I recently evicted and sued a commercial tenant who had decided to consolidate two offices into one, leaving my landlord client with vacant space and no rent. I accelerated rent on the lease’s remaining fourteen months. During the ensuing arbitration, my expert property manager testified that Covid prevented the landlord from renting the office for the remaining fourteen-month term.
Based on this Covid evidence, the arbitrator awarded my landlord client all rent due and owing over the next fourteen months. In effect, my client can now collect on advance rents.
As tenants continue to take advantage of Covid and make decisions that benefit them, I urge commercial landlords to do the same. Landlords should strategically assess their portfolios and calculate the value in evicting and suing delinquent tenants for the full lease term. This exercise will not only allow landlords to prune difficult tenants but also permit lease collections well in advance of normal monthly rents.