Law360 (July 9, 2020, 6:15 PM EDT) —
There have been many articles regarding the future of the office. Pundits are speculating about its new form and whether the office will even survive the coronavirus pandemic. We suspect the office will survive in an improved form, but these passing concerns may be missing the forest for the trees.
The real revolution that may be taking place is in the relationship between landlords and tenants. Virtually all of the legal commentators have opined that the tenants who have been unable to use their offices for months due to the pandemic are still liable for the rent under those leases.
Consider the absurdity of the present situation. In what other commercial transaction are people required to pay for services that are impossible due to government order or at the very least dangerous to use? Good luck getting paid in any other business for goods and services that are not provided. Accordingly, tenants are understandably enraged.
Landlords, faced with their own ongoing costs of operations, employees, taxes and debt service obligations are understandably worried and defensive. And as commercial and residential rent payments are missed, the risk to the banks and the collateralized mortgage-backed securities market will rise if present trends continue.
You have may have noticed a recent New York Times article, which discussed a regional office leasing broker who was roundly criticized in the industry for offering assistance to tenants and attempting to renegotiate their leases.