Leasing in the Time of Covid: Meeting the Challenges
August 14, 2020 • In the face of the sobering realities we’re confronting — a pandemic, shutdowns, governmental mandates, social distancing and shifting consumer behavior — how has your legal leasing process performed? Moreover, is it prepared to meet the challenges of a post-COVID world?
Adaptability Raises the Bar
The legal leasing process, which we’ve discussed in detail in our Black Box series of posts and white papers, transforms the handshake into a signed lease. It always had to be:
Effective: risks are reduced and the lease is signed time after time
Efficient: the use of resources, including time and cost, is minimized
But now, with local, national and global events rocking commercial real estate like aftershocks of an earthquake, the legal leasing process also must be:
Adaptable: the unexpected is seamlessly accommodated
The introduction of this third element will make the legal leasing process more resilient, but also more complicated. Every ingredient that goes into the black box and every part of the process, from the form lease that we start with to the final lease that is signed, must be reconsidered and potentially reconfigured to work in this unprecedented moment of time, and serve the parties over the life of the lease. Tradeoffs will likely be needed as you set goals for process effectiveness, efficiency and adaptability.
Real Time Examples
Lease Execution & Delivery, which are the last steps in the black box, have evolved from what was a centuries-old practice of exchanging hard copies of the lease with ‘wet’ signatures, to digital execution and delivery.
Leasehold Guarantees, which were routinely notarized in the past, are now being accepted without notarization by landlords who recognize that most signatories are working remotely.
Force Majeure provisions may have to be expanded to include pandemics and mandated shutdowns, and in some cases to trigger prospective rent deferrals and/or abatements.
Co-Tenancy Requirements in retail leases have been temporarily relaxed in some cases as a result of COVID, and during future pandemics, to give landlords a realistic period of time to backfill vacant premises.
Nontraditional Use Restrictions typically found in many retail leases are being reconsidered to permit landlords to activate vacant retail spaces with office, residential, industrial and hospitality uses.
Strategies to Facilitate Adaptability
It’s so easy to cling to what we’ve always done, and hope it will continue to work. To counteract this tendency and increase the odds that your black box process will be adaptable enough to withstand the repercussions of the post-COVID new normal and deliver effective and efficient outcomes, here are a few strategies to keep in mind:
Plan, Coach & Pivot: coach your team around constantly changing plans of action that respond in real time to new issues and realities
Communicate: keep everyone informed about the nuances and tenor of the negotiations every step of the way
Teamwork: take full advantage of good working relationships to ensure everyone is focused and in action
Speed: remember that time kills deals, especially now!
Is your legal leasing process ready to withstand the challenges of a post-COVID world?.