Legal Battles Over Office Rent Concessions

Landlords Face Legal Battles Over Office Rent Concessions

USA – Months after law offices across the country became deserted due to the COVID-19 outbreak, there are signs that the property sector catering to law firms is showing green sprouts of life. But as some law firms sign new leases or renew their rental contracts, others are still embroiled in legal tussles over their landlords over rent law firms insist on not paying, reported Thomson Reuters’ subsidiary Westlaw on Wednesday (9 December).

On 2 December, Crowell & Moring filed a lawsuit seeking rent abatement due to the health crisis
against its San Francisco lessor, weeks after Simpson Thacher & Bartlett withdrew a similar case. At least, 2 other major law firms – Schulte Roth & Zabel, as well as Jenner & Block – are still fighting their landlord in court over similar matters.

Spokespersons for Simpson Thacher refused to comment. Its office property owner didn’t reply when asked why the prestigious law firm dropped its lawsuit that was filed in Manhattan state court in July.

The legal battles over office rent continue amidst the pandemic, which has severely impacted both the legal and property sectors. Generally, property owners are becoming more open to granting the requests of their tenants as the health crisis pushes vacancy levels up in some cities, noted Cushman & Wakefield’s Executive Managing Director Sherry Cushman, who advises law firms.

Some lessors are temporarily waiving the monthly office rents of law firms, while others are allowing their tenants to revamp their office premises, so they can reduce their office footprint but can still remain in the building.

For big law firms with lease ending in five years “virtually any landlord, certainly any rational landlord, would be more than willing to discuss an extension of that tenant’s lease… coupled with either concessions today, which almost all of them would grant, as well as an ability to shed space earlier,” explained CBRE’s Vice Chairman Lewis Miller.

While some are slashing their office footprint, some law firms are securing more office space. Based on a New York Business Journal report on Friday, two small law firms – Florio Leahy and Kudman Trachten Aloe – leased new office premises in Manhattan.

Florio Leahy announced on Monday that it inked a lease for 641 Lexington Avenue despite the ongoing health crisis as it “needed more space” and it saw a “unique opportunity to secure long-term space in the best city in the world at comparatively reasonable rates.”

Since November, at least 4 other law firms have also inked new leases or renewed their existing rental contract by the name of Williams Mullen, Goodwin Procter, Cohen & Gresser, plus Reitler Kailas & Rosenblatt.

According to CoStar Portfolio Strategy’s Managing Consultant Nancy Muscatello, office leasing activity by law firms in the United States have slightly improved since spring.

From April to May 2020, the number of law firms signing new leases or renewed plunged 75 percent compared to the average number from 2016 to 2019. Then from July to October, the fall diminished to 65 percent.

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