Baker McKenzie Eyes Covid-19 Related Lease Restructuring Spike

Baker McKenzie has launched a new practice group to represent tenants and landlords in lease negotiations and disputes as the coronavirus pandemic continues to disrupt the commercial real estate landscape.

The firm’s lease litigation and restructuring group is led by Los Angeles-based securities litigation partner Perrie Weiner and Miami-based bankruptcy partner Paul Keenan. The cross-practice group also includes lawyers specializing in employment, insurance, litigation, real estate, and tax issues.

Weiner said Baker McKenzie formed the new practice area after hearing from clients across industries and geographies that they were struggling with their real estate bills.

“A lot of clients need rent relief,” Weiner said. “Some clients have retail locations in 250 shopping centers in the US, others are hedge funds in New York.”

The pandemic has taken a particularly hard toll on retail and commercial office districts, as stay-at-home orders have closed shops and kept many American white collar workers at home.

Gap Inc. and subsidiaries including Old Navy and Banana Republic have been embroiled in litigation with mall operators Simon Property Group LP and Brookfield Properties over the retailer’s missed rent payments, which it argues were out of its control.

Cozen O’Connor formed a similar group at the beginning of the Covid-19 pandemic.

“Everyone’s need for space has changed,” Weiner said. “Some tenants want to get rid of some locations entirely, others want to reduce their rent obligation.”

‘Evolving’ Situation

The firm is seeing demand from across the United States, with clients in cities as well as suburban areas, Weiner said.

“Obviously in the bigger cities the rent amounts are higher, so the need is greater and the level of the dispute is higher,” he said.

The new Baker McKenzie practice group will also advise clients on related matters like financing transactions and business interruption coverage. It will also help clients prepare to re-enter offices and retail spaces while adhering to Covid-19-related health and safety ordinances.

Baker McKenzie primarily represents commercial tenants, although it does represent some landlords, Weiner said. He said he hopes that many landlords will be understanding of their tenants’ rent burdens and find ways to resolve disputes quickly.

“It’s a situation that is constantly evolving,” Weiner said. “What we’ve seen so far is really just the tip of the iceberg. If landlords aren’t reasonable we’ll see a tsunami of tenant litigation.”