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WeWork tenants enlist legal help as billing for unused office space continues

WeWon'tPay

WeWork tenants enlist legal help as billing for unused office space continues

Under lockdown WeWork members feel they shouldn't be obligated to pay rent during the pandemic. But the co-working company is reportedly not offering much flexibility. (Eloise Ambursley/Unsplash)

Commercial real estate company WeWork, which has garnered headlines for its refusal to formally shutter locations during the coronavirus pandemic, is continuing to charge subtenants for full monthly rent despite the fact that many remain barred from accessing their workspaces due to state-enforced shelter-in-place orders for non-essential workers still instituted across the country. This includes New York City WeWork locations, many of which reported active outbreaks of the virus earlier this spring.

As recently reported by the New York Post, some of these incensed subtenants are now hiring legal representation to prevent WeWork from billing future rent during the pandemic (or as long as non-essential workers are legally obligated to work from home), and to also compel the troubled co-working behemoth to refund rent for now-redundant workspaces that has already been collected for April and May.

Per the Post, Manhattan-based law firm Walden, Macht & Haran is now representing “20 plus” companies based in New York, Los Angeles, and Washington who have been unsuccessful in their individual attempts to either secure refunds for their workspaces or have been denied attempts to have their rent frozen until it is deemed safe to return.

“As long as this pandemic prohibits our clients from using their WeWork office spaces, the purpose of their membership agreements is frustrated, thus excusing their obligation to pay membership fees,” read a statement from the firm. “It is hard to think of an event that more destroys the purpose of a WeWork membership agreement … than a deadly, highly communicable disease and resulting government order that prohibit use of the member’s office space.”

Managing partner Jim Walden explained to the Post that several clients even witnessed local police sweeping locations to ensure that non-essential workers were not present, and WeWork still refused to budge with regard to any sort of rent relief for its members.

“It’s funny how a crisis can reveal the true character of either a person or a company,” Walden said. “I think from my clients’ perspective the fault lines in WeWork’s business model have come to light and its commitment to its community has come under question.”

Meanwhile, WeWork has reportedly paid 80 percent of rent owed for April and May to the owners of buildings where the company leases (a slippery term) workspace to subtenants. Speaking to CNBC’s Squawk Box, newly instated WeWork CEO Sandeep Mathrani also noted that 70 percent of rent from subtenants had been collected in April and that the company is indeed “working with small, medium businesses in deferrals, freezing of rents and different aspects with them.”

“I do believe in the trickle-down economy, if I stop paying my rents, the landlords can’t make their mortgage payments and then it’s a domino effect,” said Mathrani of the company’s own obligations to pony up to building owners in the face of a global health crisis. He added: “We spent the entire month of April spending tens of millions of dollars getting our spaces ready for when people can get back to work.”

WeWork currently operates 739 office-share locations spread across 140 cities.

The job-shedding company, which has been particularly hard hit by the pandemic, is also, as reported by Bloomberg, looking into subleasing its corporate headquarters in Manhattan’s Chelsea neighborhood. It could potentially recruit new tenants to populate specific floors although subleasing the entire building also isn’t out of the question.