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16 Hartford Business Journal • June 1, 2020 • www.HartfordBusiness.com EXPERTS CORNER How commercial landlords, tenants can reach COVID-19 compromises By Geoffrey F. Fay and Jonathan A. Kaplan T hough businesses are begin- ning to reopen, many compa- nies haven't seen their rev- enues return to pre-pandemic levels and are struggling to pay rent. Commercial landlords rely on payments from tenants to cover debt service and other expenses. Both parties will be in a better position if they can reach an agreement that is accept- able to the land- lord's lender. Tips for tenants Many distressed businesses are interested in the concept of force majeure — extreme circumstances that may release one party from failing to uphold its contract obliga- tions if prevented from doing so for specified reasons beyond its control. Tenants need to check the exact language in their lease. If the lease con- tains a force majeure clause (many do not), it's possible, but unlikely, force ma- jeure could excuse a tenant's rent pay- ment. In general, force majeure clauses exclude financial inability to pay. They simply weren't drafted with pandemics in mind. Without force ma- jeure, negotiation is a tenant's best tool. First, tenants should demonstrate to the landlord exactly how the pandemic has reduced their income and that they are not merely taking advantage of a bad situation. Next, prepare a business plan show- ing how the com- pany will survive this crisis. If a tenant comes to the landlord and says, "I can't pay the rent and I don't know how I'll survive," that will not incentiv- ize the landlord to compromise, nor gain lender consent. Avoid stating, "I will not pay the rent until the state reopens," or something similar, because that could constitute an anticipatory repudiation or an anticipatory breach of the lease. Landlords are unlikely to work with tenants making ultimatums. Instead, offer a potential solution. Landlords are generally not willing to forgive rent, but the strategy we are seeing most often is rent deferral either in whole or in part for three or four months, and then repayment later this year or early next year over a period of time that is feasible. Other options include converting some or all fixed rent to percentage rent (based on the tenant's revenue) or converting deferred rent to a loan from the landlord if there is ad- equate security or collateral. Of course, tenants advocating percentage rent in lieu of fixed rent must convince landlords and their lenders this makes sense for them. Lessons for landlords Before commencing negotiations, the tenant should sign a pre-negoti- ation letter specifying, among other things, that negotiations do not waive lease obligations, are not, in and of themselves, binding and are not ad- missible in litigation. Negotiations and resolutions must remain confidential and thus specific to the tenant at hand, not all other tenants in the building or shopping center. Also, rent relief should not benefit a future assignee or sublessee with a different revenue model. Landlords should be mindful that courts have limited operations for the foreseeable future, prioritizing other matters such as criminal cases. Landlords will be delayed in taking back a property, making working things out with tenants more attractive. If eviction becomes unavoidable, commercial landlords may want to start the process now. Residential evictions are barred until July 1, 2020, and there may be a deluge of filings after that date. Landlords can prepare for the possibility of eviction even while continuing negotiations. Start by identifying steps that would need to be taken if negotiations fail. For instance, does the tenant have to be notified in writing? Does the lease specify a cure period, or a cer- tain amount of time allowed to the tenant to resolve missed payments? Be aware of these details and docu- ment actions now to avoid waiting periods later. Finally, consider including expe- dited-dispute-resolution procedures in the rent forbearance agreement, such as providing for a mandatory, expedited arbitration or mediation by a single mediator. If both parties realize that disputes will be resolved very quickly, they're more likely to live up to the bargain. Geoffrey F. Fay and Jonathan A. Kaplan are attorneys at Pullman & Comley. Geoffrey F. Fay Jonathan A. Kaplan THE LIST Largest Connecticut health insurance companies Ranked by Connecticut enrollment as of March 2020 Sources: Each insurer via survey and State Department of Insurance. Note: N/A = Not available or not applicable. (a) Oxford health insurance is a brand under the UnitedHealthcare umbrella. (b) Figure from 2019 survey. (c) Figure from Consumer Report Card on Health Insurance Carriers in Conn., published Oct. 2019; data from 2018. (d) Acquired pharmacy benefits manager Express Scripts for $67 billion on Dec. 20, 2018. — Compiled by Heide Martin. Largest Connecticut health insurance companies (Ranked by Connecticut enrollment as of March 2020) Rank Insurer Total Conn. enrollment Conn. physicians in network/ Hospitals in network/ Conn. pharmacies Conn. enrollment in dental plan(s) Conn. dental providers/ Top local executive(s)/ Year licensed in Conn. 1 Anthem Blue Cross and Blue Shield 108 Leigus Road Wallingford, CT 06492 800-922-4670 www.anthem.com 1,270,000 30,000 28 684 346,404 N/A Jill Rubin Hummel 1936 2 UnitedHealthcare (a) 185 Asylum St. Hartford, CT 06103 800-899-7658 www.uhc.com 641,328 23,088 142 N/A N/A N/A Stephen Farrell Mary Snyder 1993 3 ConnectiCare Inc. 175 Scott Swamp Road Farmington, CT 06032 860-674-5757 www.connecticare.com 546,279 25,396 28 716 3,453 6,103 Eric Galvin 1981 4 Aetna Inc., a CVS Health business 151 Farmington Ave. Hartford, CT 06156 860-273-0123 www.aetna.com 382,385 (b) 25,239 (b) 28 (c) 710 (b) 169,070 (b) N/A Karen Lynch 1853 5 Cigna Corp. (d) 900 Cottage Grove Road Bloomfield, CT 06002 860-226-6000 www.cigna.com 345,264 (c) 17,035 (c) 28 (c) 707 (c) N/A N/A David M. Cordani 1792 6 Harvard Pilgrim Health Care (e) 185 Asylum St. Hartford, CT 06103 860-757-6860 www.harvardpilgrim.org 27,236 20,541 28 1,111 N/A N/A Paul Bartosic 2014 Sources: Each insurer via survey and State Department of Insurance. Note: N/A = Not available or not applicable. (a) Oxford health insurance is a brand under the UnitedHealthcare umbrella. (b) Figure from 2019 survey. (c) Figure from Consumer Report Card on Health Insurance Carriers in Conn., published Oct. 2019; data from 2018. (d) Acquired pharmacy benefits manager Express Scripts for $67 billion on Dec. 20, 2018. (e) Announced plans to merge with Boston, Mass.-based Tufts Health Plan in August, pending regulatory approvals. —Compiled by Heide Martin.