PERILS OF A PANDEMIC LEASE

Once upon a time, at the height of the pandemic, when the world seemed to grind to a halt, a commercial space became available for lease. It was a grim time for the property sector—lockdowns were in full swing, businesses had abandoned their offices in favor of work-from-home setups, and vacancy rates were soaring.

But this property had a rare edge: an open parking lot that could accommodate 20 cars—a prized feature for any tenant looking for accessibility and flexibility during uncertain times. It wasn’t long before a promising tenant emerged: a fast-rising startup operating in an industry that, on paper, stood to benefit from pandemic-driven shifts. They were ambitious—setting up 3 operational sites simultaneously, fueled by investor capital and big dreams. The lease was signed, and construction began at a breakneck pace.

Then the cracks began to show.

One day, a post-dated rent check bounced. The tenant immediately covered it in cash, brushing it off as a clerical error. But soon, another check bounced. And then another.

Behind the scenes, disaster had struck: a major investor had pulled out after internal disputes. The company faltered, unable to sustain its rent or complete its build-out. The lessor was left to clean up the mess. The cost of restoring the property to its original condition fell squarely on the landlord’s shoulders, as the tenant disappeared without fulfilling their obligations.

Lessons

1.⁠ ⁠Startups can be exciting, but they often depend entirely on investor funding rather than proven cashflow. If you’re leasing to a startup, don’t just take their word for it — require proof of available funds, not just projections or letters of intent from investors.

2.⁠ ⁠If your tenant plans to renovate or build, insist on a construction bond or security deposit specifically earmarked for restoring the premises. Without it, you could be left footing a costly bill if things go south.

3.⁠ ⁠In tough times, it’s tempting to welcome any tenant who shows interest. But remember: a vacant space is sometimes safer than one occupied by a tenant who can’t pay. Prioritize financial stability over grand visions.