Rent Relief: How to Seek Financial Respite from Your Landlord

Healthcare providers are on the front lines of defending against the coronavirus disease (COVID-19) pandemic. Yet, since the executive order No. GA-09 issued by Governor Greg Abbott on March 22, 2020, many of our Texas healthcare professionals are sidelined—and struggling—due to temporarily closed offices and canceled surgeries and procedures.

As you’re evaluating laying off or furloughing employees, trimming overhead, and/or waiting on aid from the CARES Act, we can provide guidance to practice owners who are cash-strapped during this crisis.

First, put yourself in your landlord’s shoes.

As you’re feeling the weight of your financial obligations, your landlord is likely feeling the same burden by their lender. When you approach your landlord with a request for rent relief, it’s best to express empathy and understanding of both of your situations.

Ask how you can partner together to find a mutual solution, such as paying the landlord’s operating expenses instead of your rent or adding time onto the back end of your lease. If you approach your landlord without humility or a strategy, your probability of achieving the results you want—like free rent—are low.

In the case of one of our clients, she wants to be a good tenant, but doesn’t have the capital for rent for the next few months. With our help, she requested rent deferment from her landlord who saw the long-term benefit of partnering with her now.

“Once again, I would like to brag on Scott Womack and thank Xite Realty for accomplishing rent deferment for my office during this challenging COVID-19 environment. Xite worked diligently on my behalf to find a creative way to endure this pandemic and subsequent closing of my clinic under the Executive Order of Governor Greg Abbott. This rent deferment is significant, and I truly appreciate it from the bottom of my heart!” – Client in New Braunfels, Texas

Devise a strategy that creates leverage—or at least the illusion of it

Not all landlords are in a position or are willing to grant rent relief immediately, so you’ll need a strategy for what you’re asking for and why. If we draw on the past, the real estate market may experience a more aggressive drop-off, as compared to the 2008 subprime crisis, due to the shutdown and shelter-in-place requirements.

Landlords will likely lean on the lessons learned and seek to cover at least their operating expenses, such as common area maintenance, taxes, and insurance. However, landlords with optimal real estate may exhibit more confidence to backfill their vacancies if they have strong anchor tenants, such as national grocers.

That’s why we recommend that you seek guidance from someone who:

  • Knows the market in which your practice is located

  • Formulates real-time comparable properties to create the illusion of moving your office

  • Develops creative deals structures to build leverage

Negotiate your lease renewal now

If you have fewer than three years left on your lease and you want to remain in your office space long term, now may be an ideal time to negotiate your lease renewal. You may be able to accomplish free rent now and a lower rental rate if you extend the term of your lease and make the commitment to your landlord today.

Current practice owners can rest assured that during this uncertain time, Xite Realty is working diligently to equip our clients with the information and leverage they need as well as negotiate the most aggressive terms for our clients. We’d appreciate the opportunity to listen to your practices’ needs and discuss all possible deal structures with you.

Note: This information is subject to change as developments occur surrounding COVID-19. Check back for more and/or updated information on Xite Realty’s resources page.