Reneg lease vs call personal guarantee

[Tim Morris]

My commercial tenant is months behind on rent due to covid closures with 1 yr remaining on the lease and came to me the other day asking for the debt to be forgiven and rent to be reduced to 10% of revenue going forward. I asked to see some of their financial statements but they refused saying they worry it will be used against them, which now has me wary. They have a personal guarantee and some assets (a ~100k house outright) although I don't know their complete situation so it's hard to say how reliable it would be to call it and, who knows, a judge could strike it down for whatever reason. But a lawyer friend has looked it over and told me the contracts are solid.

Reasons to negotiate: space would be slow to fill, unknown legal expense to recover debt, feels better morally

Reasons to stay firm: their proposal is likely well below even the current reduced market rates and requires me to forgo collecting the 20k of debt, possible they are playing games by not sharing finances

Anyone have any experience with this situation? How do you respond to a lowball proposal like this? If I stay firm, how do I protect my rights as a creditor and ensure my case stays strong if it goes to bankruptcy court?

[Cason Acor]

They expected you to just blindly accept changing the rate to 10% of revenue without looking at what that revenue actually is? Sounds very suspect to me.

As is, it’s costing you money for them to remain in the space. I say cut your losses and start eviction if you can. 

And what if they do start paying again after you renegotiate the lease? That means they’ve had money to pay this whole time and deliberately haven’t. Even paying partial rent is better than no rent and goes a long way with maintaining goodwill between a tenant and landlord.