Commercial Tenant Due Diligence of Landlord Financial Stability: Key Considerations, Lease Terms to Mitigate Risk | Strafford

Join Shipman partner Lisa Zana and other distinguished panelists for this Stafford webinar, as they discuss how to guide commercial tenants through conducting landlord due diligence before entering into or renewing a commercial lease, and how to protect tenant clients against landlord financial instability through key lease provisions.

In a volatile commercial real estate market where interest rates remain high and vacancy rates remain below their pre-pandemic levels, many commercial landlords are experiencing financial difficulties. When entering into a new lease or lease term extensions, commercial tenants take on numerous risks and liabilities that are compounded if a landlord is financially unstable. Tenants' counsel should be able to guide their clients through landlord due diligence and build tenant protections into the lease to mitigate risk for their clients.

Due diligence considerations include assessing landlord financial stability such as determining whether the landlord is in default under any financing secured by the building the tenant will occupy; or whether the building is fully occupied, and the tenants are paying rent to generate sufficient cash flow to fulfill any landlord obligations for building operations/maintenance.

If a landlord is in default or there is concern of future financial instability, the lease should include terms protecting tenant clients against those potential risks.