09 Dec Forbearance Agreement Commercial Lease
During negotiations, the parties should consider whether the tenant is or has already received relief from state aid on programs such as the CARES Act or the paycheck protection program. In these cases, the parties may decide to have the leniency agreement started after the loan deadline. In other cases, landlords may consider having their tenants pass on directly to the landlord any credit financing they receive directly to pay the rent. It is also reasonable to ask the tenant`s contractors to sign a personal guarantee for the lease if they have not already done so. When they personally guarantee commitment, mandatory collection efforts are often significantly supported, even if they are limited only to payments made under the leniency agreement. However, there are opportunities for both commercial landlords and tenants to consider during the pandemic. Often, it is in the interests of both commercial landlords and tenants to enter into an agreement that keeps their tenants going until normal economic activity resumes. There are different ways to facilitate this result, one of which is an indulgence agreement. If the rental agreement is guaranteed by a person or organization, the surety must adhere to the leniency contract to confirm that the guarantee remains fully in effect and to guarantee the tenant`s obligations under the leniency contract. The leniency contract benefits the tenant by giving them a temporary or permanent rent reduction, a temporary rent waiver or a partial deferral of the toy rent.
In addition, the lessor will decide not to seek the remedies he must seek under the tenancy agreement as long as the tenant meets all the conditions of the leniency contract. Consider whether the deferred rent should be increased by interest and, if so, at what interest rate. Many leases include a penalty interest on the amounts a tenant may owe while they are late in the tenancy agreement. This rate is generally higher than the market and may not be fair in the current situation. If interest is to be collected, you should consider that the interest rate (at least) reflects the cost of the funds at a market interest rate for the lessor, and that it applies from the date of the deferral until repayment. The leniency agreement should provide that if the tenant is late at some point after Demener`s contract, all deferred rents are automatically accelerated and payable immediately and interest-free (note that in this case the late interest rate is reasonable). This acceleration of rent deferrals allows the landlord, among other things, to obtain the greatest right in damages, especially when the tenant has declared bankruptcy. In such a case, a lessor may be limited to the claim for damages on the basis of the loss of rent for a specified period of time. The determination of acceleration gives the landlord at least the argument that the deferred rent should be included in this calculation (although there is no guarantee that a bankruptcy court would agree).