By Joseph M. Hallahan, Esq.
Super Typhoon Sinlaku did not just damage property. It also put many CNMI businesses and property owners in difficult positions under their leases. Some businesses are trying to reopen while still dealing with reduced traffic, delayed supplies, unstable utilities, or damage to the premises. In that setting, physical cleanup is only part of the problem. Rent, defaults, and temporary arrangements can quickly become just as important.
For tenants: do not rely on assumptions or verbal understandings
If you are a tenant and rent has become hard to pay, the worst move is often to say nothing and hope things improve before the next due date. The second-worst move is relying on casual statements like, “Don’t worry about it for now,” especially if that arrangement has not been reduced to writing.
A tenant in distress should start with the lease itself. What does it say about damage to the premises, notice requirements, and whether any temporary arrangement must be documented to be effective? A distressed tenant should also document whether the underlying issue is physical damage to space, changed business conditions, or both. If rent is being deferred, the tenant should understand when it will be repaid and on what terms. And if the business cannot recover, the more important question may no longer be how to get through the next month, but whether to stay, renegotiate, or terminate the lease.
A tenant trying to survive a disrupted reopening should not make promises that cannot be kept. It is usually better to make a realistic, documented proposal than an optimistic one that collapses soon thereafter.
For landlords: do not confuse firmness with clarity
Landlords have their own risk. A property owner may be dealing with damage, repair costs, delayed contractors, and uncertainty about which tenants will be able to continue meeting their rent obligations. In that situation, a landlord is often trying to balance two competing concerns: preserving legal rights while also keeping a viable tenant in place. That usually requires more than simply saying, “Pay in full,” or “You are in default.”
Before reacting too quickly, a landlord should look closely at what the lease requires before a default is declared, including any notice and cure provisions. The landlord should also consider whether storm-related damage to the property affects the tenant’s position under the lease. If temporary relief is being offered, the terms should be documented clearly so there is no confusion about whether the arrangement is a deferral, a partial abatement, a short-term payment plan, or only a proposal still under discussion.
A landlord trying to preserve options should be careful not to create ambiguity by making concessions informally or without clearly reserving rights where appropriate. A poorly drafted temporary arrangement can create more problems than it solves.
What both sides should do before things get worse
Whether you are the landlord or the tenant, a few steps can help early.
Pull the actual lease and read the relevant provisions closely. Not the summary. Not what someone remembers. The actual signed lease, along with any amendments, addenda, assignments, guaranties, and notices.
Identify whether the problem is physical damage to the premises, interruption of business operations, inability to pay, or some combination of all three. Those are not the same problem, and they do not always lead to the same solution.
Document the facts. If the business was partially closed, operating on reduced hours, affected by utility instability, or impacted by supply delays, that context matters. If the property itself was damaged or access was limited, that context matters too.
If a temporary arrangement is being discussed, reduce it to writing. A short written agreement is usually better than a hopeful misunderstanding.
And if the situation is moving toward default, exit, or a serious disagreement about lease rights, get advice before the communications harden into a dispute.
When someone should actually call a lawyer
Lease disputes after a typhoon do not arise in a vacuum. They arise while businesses are still coping with damage, delayed supplies, reduced traffic, and uncertain reopening conditions. A tenant may be short on revenue. A landlord may be managing repairs and multiple distressed tenants at once.
The issue usually stops being a business problem and becomes a legal one when the parties are no longer simply trying to work through a temporary disruption, but are instead dealing with missed rent, default notices, proposed written agreements, or serious uncertainty about what the lease permits.
For a tenant, that usually happens when a default notice arrives, full rent is being demanded and the business cannot realistically pay, the landlord is offering a document to sign, the business is considering leaving the space, or the tenant is no longer sure whether the lease leaves any real room to negotiate.
For a landlord, it usually happens when rent is not being paid, the tenant is asking for a deferral or other informal accommodation, storm-related conditions are complicating lease performance, the landlord wants to preserve options without escalating too quickly, or the landlord is being asked to sign a temporary arrangement that may affect later rights.
Super Typhoon Sinlaku created many obvious problems. Lease distress is one of the less visible ones, but for many businesses and property owners, it may become one of the most consequential.
This article is for general informational purposes only and is not legal advice. Every lease and every property situation is different.
Joseph M. Hallahan is an attorney with Hallahan Law LLC in Saipan. He advises CNMI businesses and property owners on commercial lease issues, business disputes, and other business law matters.
