When a business model does not prove to be profitable, everyone who invested in or relies on the company may suffer. Business owners may sustain direct economic losses. Workers are at risk of facing reduced hours or job elimination.
Landlords may suffer when tenants do not pay their rent in full and on time. Business tenants might assume that a commercial landlord should willingly accommodate them as they seek to modify their business model to make the company more profitable. However, landlords sometimes interfere in attempts to rebrand and pivot a company, leaving business tenants scrambling for solutions.
Does a lease include a use clause?
Landlords sometimes require that commercial tenants disclose the specific function the company performs. In scenarios where the lease describes the type of business, it may also require the tenant to adhere to that specific business model in a use clause.
Commercial leases may require renegotiation in cases where tenants intend to perform different functions than the business concept outlined in the lease. In some cases, landlords may not cooperate with that process. Their adherence to the lease as written may leave tenants unable to adjust business functions and at risk of continued insolvency.
Understanding how commercial leases might affect business operations and limit attempts to rebrand can help those who seek to rebuild a business or may help tenants avoid signing unfavorably restrictive leases in the first place. Business tenants can benefit from legal guidance in reviewing a lease, negotiating with a landlord or finding ways to pivot company operations that do not violate a lease’s use clause.