Retailers plan to stop paying rent to offset coronavirus closures

Major U.S. retail and restaurant chains, including Mattress Firm and Subway, are telling landlords they will withhold or slash rent in coming months after closing stores to slow the coronavirus. In a brewing fight, chains are calling for rent reductions through lease amendments and other measures starting in April. These moves mark the next phase in virus fallout: What happens to billions in rent owed for businesses that have been closed? And if retailers do withhold payments, there would be a ripple effect: Landlords can’t afford to stop collecting rent for long, with many property owners sitting on loads of debt.

The U.S. relief packages being considered don’t directly address rents, but recent Federal Reserve actions may give banks leeway to defer mortgage payments, allowing property owners to delay rent. It’s also unclear if retailers can declare a so-called “force majeure,” a contract clause that covers highly unusual events, and if landlords could then make the same case to insurers.