Contract Enforcement During A Worldwide Pandemic   

By Scott Einiger Special Counsel

To NY Medical Society

Scott Einiger Esq of Einiger and Associates is Special Counsel to NY County Medical Society for 27 years and specializes in representing physicians in business contracting, licensure proceedings and insurance carrier audits.

The current pandemic is affecting our personal and business worlds in unprecedented ways.  Each of us now are dealing with unique challenges.

It goes without saying that the healthcare, social and business impact during this pandemic are numerous.  One such concern is how to deal with rent and lease obligations both in commercial and residential settings.   Many of our clients in NY have contacted us to seek guidance regarding their current leaseholds.

Most importantly, they have expressed concern about their ability to fulfill their financial obligations for the duration of the lease term which can range from several hundred thousand to millions of dollars remaining while revenues from their Practice has rapidly diminished since March.

So what is a Physician or other commercial tenant to do in these circumstances.  While a lease is a contract enforceable by law, each lease is written differently. In the current uncertain environment it is necessary to address your lease obligations in a proactive and practical way.  In NY, an executive order is currently in place putting a moratorium  (currently until June 20th) precluding eviction proceedings by landlords in both commercial and residential settings.

With this being said here is some guidance for you to consider as tenants.

1. First, a thorough review of your current lease should be undertaken.  This will assess potential business /corporate exposure as well as any personal liability you may have in default, notice requirements, late charges, penalty, escalation clauses, common charges and termination provisions.  As to personal liability, does the lease contain a personal guaranty or limited guaranty (“Good Guy” clause).   Is there a force majeure clause or act of god clause in the lease which in some cases may curtail obligations during the pandemic.

2. There is also the need to consider your long and short term business goals.  We have spoken to clients nearing retirement vs those with twenty or more years left in Practice. The opportunity to restructure, amend, extend or otherwise modify your existing lease may be available.  Landlords may want to be flexible as it is their best interests to keep their tenants in business.  In the short term this could include rent abatements, moratoriums, deferrals and the like.  The key is to be proactive and reach out to your landlord and not ignore the lease obligations depending on your situation.  This will engender good will which may lead to landlord flexibility and restructuring of your obligations.

If you want a review of your lease to assess your obligations first have specific goals in mind.  Are you looking to terminate your lease early or mitigate and reduce future rent payments? Are you closing your business or simply looking to restructure it? 

Please keep in mind that while there is currently a moratorium (until August 20th in NY ) preventing eviction proceedings from being commenced, that may be lifted or extended  in the coming months.  Therefore it is best to stay ahead of these issues and avoid conflict that could harm your Practice.