The economic disruptions of the coronavirus pandemic have arrived in Alabama, and they will not be going away anytime soon.  Whether you are a barber, an orthodontist, a restaurant owner, or a member of almost any other profession, your business has probably taken a major financial hit in the last few months, if it is even operating at all.  Now is the time to have uncomfortable conversations with almost everyone with whom you have economic dealings, from employees to vendors to clients to business partners.  Force majeure clauses, which protect you from liability if you are unable to fulfill your contractual obligations because of an “act of God,” can come to your aid like a deus ex machina.  The bad news is that many rental contracts contain clauses saying that force majeure events (such as natural disasters and major economic disruptions such as wars and nationwide financial crises) cannot get you out of your obligations to pay rent.  If you are a business owner struggling to pay rent on the property where your business operates, you should contact an Alabama business law attorney.

Beg, Borrow, or Negotiate?

  • Beg- You have nothing to lose by asking the landlord of the building where you rent a space for your business for a rent abatement, in which you get extra time to pay your rent without having to worry about eviction or paying additional penalties.  Residential tenants in many places are protected from eviction for the duration of the COVID-19 pandemic, and the landlords of commercial properties have little to gain from pressuring commercial tenants to pay.
  • Borrow- Business loans are a major component of the federal stimulus program to protect workers and small business owners from the economic effects of the coronavirus pandemic, but the Paycheck Protection Program, in which small business can borrow enough money to cover ten weeks of payroll, is not meant to cover any expenses other than your employees’ salaries and the taxes associated with them.  If you have access to other small business loans or lines of credit, you can rely on those to cover your rent and other overhead over the next few months and resolve to pay them off when business improves.
  • Negotiate- If it seems unprofessional to ask your landlord if you can go without paying your rent, you can always try to negotiate a modified payment schedule.  For example, you can pay 50 percent per month of the contractually agreed amount.  Then, once the ban on social gatherings has lifted, you can pay back the late amount in installments by adding a certain amount to the sticker price of your rent until the late amount is paid off.  It is best to formalize this agreement in writing, in case any disputes arise from it.

Let Us Help You Today

The coronavirus pandemic has affected businesses in ways that no contracting parties could have anticipated; it is time to come up with temporary solutions for this emergency situation.  Contact a Alabama business & corporate litigation attorney at Cloud Willis & Ellis for help.