Things are a little tense right now between many retail tenants and landlords in Los Angeles. 🔐
As the coronavirus has forced essentially all retail operations to close, at least those that do not trade to some extent in grocery, many businesses have stopped paying rent — from small and independent stores to large and national ones. This has left landlords in L.A., home to famed retail streets like Melrose Avenue, Robertson Boulevard and Rodeo Drive, along with a number of major malls, to try different tactics in how they will collect rent.
He brought up the notion of “force majeure,” a standard contract clause that generally frees a party on either side of liability should an “act of God” prevent them from operating in the normal course, suggesting that it applied under the coronavirus pandemic. Landlords and brokers so far seem to disagree.
Most tenants don’t see it as a great offer, as it’s in reality an expectation that they will at some point in the near future be expected to pay double rent. An expectation that will more than likely come amid a full blown recession. “We’re really pushing for it,”Samek said. “This isn’t an end-of-the-world moment for us, but we’re looking at how to set ourselves up for the next 12 to 24 months, and pushing back leases just isn’t enough.”
Conversations between tenants and landlords that start with a hard line aren’t going so well. Luchs said tenants who have taken the time to show a landlord that they’re having a truly hard time but are willing to negotiate have had better outcomes. He recently was mediating talks between a major retail tenant and a landlord, and the tenant explained they were expecting revenue to fall by up to 80 percent in the coming months but committed to paying half rent for the rest of the year.
As it stands, that is not the situation in California, or any other state for that matter. Conversations around rent relief are said by tenants and landlords to be happening at the local level in L.A., but far from being agreed upon. “Force majeure does not apply, it’s a tactic,” Caruso said. “Of course, there are opportunists out there that are trying to take advantage of the situation.”
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