Commercial Tenants Withholding Rent During and After the COVID-19 Pandemic

Written by: Matthew Haan, Esq.

For nearly one month, Georgia was under a shelter-in-place order that only allowed “essential businesses” to remain open during the COVID-19 pandemic. When the shelter-in-place order expired at the end of April, many businesses were excited to re-open. However, in the time since Georgia began to slowly re-open its economy, many businesses have found the re-opening process difficult. Factors such as public skepticism and uncertainty surrounding the state’s re-opening, as well as businesses finding it more difficult than anticipated to meet the safety standards allowing them to re-open their doors, have presented challenges to businesses seeking to find some form of revenue stream since the statewide shutdown ended.

As discussed in an earlier blog post, the federal CARES Act contained provisions relating to the landlord-tenant relationship for certain residential leases only. However, many commercial tenants (especially those whose businesses were not considered essential under the order) may find it difficult to meet monthly rent obligations due to the decrease (or lack of increase) in business. Does the law allow commercial tenants in these situations the option to withhold rent? The answer is likely no. Georgia law does not allow a tenant to withhold rent and remain in the premises. Some commercial leases contain force majeure clauses that may excuse the nonpayment of rent, but those clauses vary significantly. Perhaps unsurprisingly, Georgia courts have not offered any guidance that is helpful in answering questions stemming from the circumstances encountered in these unprecedented times. As the state of affairs continues to evolve, Georgia courts and other courts across the nation will likely be faced with many questions whose answers will impact the commercial landlord-tenant relationship. Commercial landlords should be mindful of the potential claims and arguments that their tenants will present due to the COVID-19 pandemic.