USE CLAUSE MODIFICATION DUE TO CORONAVIRUS ~ SHOULD A LANDLORD ALLOW IT?
Peter Morris and I discuss a number of commercial lease issues, including whether or not a landlord should modify a tenant’s use clause during the Coronavirus pandemic. This was a flash live stream that followed my webinars on March 26th and April 2nd. To watch the March 26, 2020 webinar or listen to the audio only podcast.
The example that we talk about is a real life situation in which a Canadian restaurant chain, unable to seat patrons in their restaurants have resorted to online orders for grocery deliveries. In this example, the chain is not only doing online delivery and curbside pick-up of prepared meals, but sales of the ingredients that they purchase wholesale from their normal vendors.
We discuss typical USE clauses that we see in restaurant leases.
Peter, while representing landlords, often writes a restaurant use clauses that might limit the type of cuisine. He further states that he “always tries to add the menu”, whether it will offer sit-down service and depending upon the operation, take-out and delivery.
Peter states that he never contemplated that it would be selling it’s ingredient items. Our approach during the conversation was that a landlord should be flexible and allow its tenants to be equally creative and flexible, so long as the landlord is not allowing the tenant to:
Cause damage to the property or the premises,
violate any law, or
violate a provision of a lease of another tenant on the property.
Most of our discussion relates to #3 in which we discuss how a modification of a tenant’s use clause may cause a violation of another tenant’s “exclusive rights”. We take into consideration how a restaurant in a grocery anchored shopping center might violate the grocery anchor’s lease that likely includes a provision that says that the landlord will not lease to or permit the sale of grocery items in the center.
We also discuss Eminent Domain Clauses that, not only might be triggered in the event of a government ordered shutdown of the tenant’s business due to the Coronavirus but the consequences of an Eminent Domain Clause that “requires” the termination of the lease in the event of eminent domain.
LANDLORD NOTICE OF FORCE MAJUERE
Finally, we debate why a landlord would send a Notice of Force Majuere and the benefits and possible negative consequences of such notice.
ABOUT THE PANELISTS:
Howard F. Kline, Esq. | LinkedIn
Howard has been focusing much of his 43 year, legal career on landlord tenant relations, whether negotiating leases or litigating disputes. Howard is the founder and host of CRE Radio & TV and has published hundreds of blog posts and podcasts on a wide array of commercial real estate topics. Howard has been published in numerous legal periodicals, including the National Law Journal, LA Daily Journal and other business.
Peter Morris: | LinkedIn
Peter D. Morris is the CEO of the Greenstead Group, based out of Vancouver, Canada. He is a highly credentialed real estate executive with almost 40 years of global experience including all of North America, South America, South East Asia, China and the Middle East; as well as covering most asset classes from both the owner and occupier perspective to provide a true 3600 advantage for his clients. He is widely recognized as an industry leader, commentator, author and educator.