Rent Forbearance Agreement

Landlords prefer indulgenceFor owners, an indulgence agreement is often more advantageous than a lease amendment. Forbearance agreements do not excuse breaches, but postpone performance until the forbearance period. During the period of forbearance, certain conditions must be met, often stricter than those of the underlying lease. After the expiry of the indulgence period, the rent must be reimbursed in whole or in part (if applicable with a premium and/or subject to the insurance of an additional guarantee). If, as part of an indulgence agreement, a tenant does not make an indulgence agreement, the offence “awakens” the loss of rent from the date of the first non-payment. The lessor may also insist that the duration of the lease be extended to take into account the period of indulgence. Although an leniency agreement is not referred to as a modification of the lease agreement, it should be considered a modification that may require the agreement of a lender (see below) and may also affect a leasing guarantee. It is also useful to ask the tenant`s principals to sign a personal guarantee for the lease if they have not already done so. If they personally guarantee the commitment, this will often significantly support recovery efforts, even if they are only limited to payments under the forbearance agreement. 5.

Confidentiality – The lessor may wish to include in the ease of tenancy document a provision prohibiting the tenant from discussing with other tenants of the property or market area the terms of his agreement with the owner. While this is difficult to enforce and/or prove an offense, it`s worth asking for it and trying to impose it. Before entering into a leniency contract, the landlord should request sufficient documentation of the tenant`s current financial situation, such as cash reserves and profit and loss accounts. The tenant should be required to regularly update this information during the term of the Forbearance contract, or even for the rest of the rental period. Homeowners should check their own mortgage documents if their lender`s agreement is required to enter into this type of contract. If the modification of the lease agreement requires an agreement, approval of the Forbearance contract is required. Finally, if the tenant follows or obtains a loan under the CARES Act`s paycheck protection program (“PPP”) it may be preferable to have the Forbearance contract started at the end of the loan period or, alternatively, the lessor may make the forbearance agreement conditional on the tenant`s application for PPP benefits (if any) and may continue to require: that obtaining PPP financing for rent immediately to the landlord. . . .

This entry was posted in Uncategorized. Bookmark the permalink.