Relief for Commercial Tenants in the Midst of the Covid-19 Pandemic

Catherine Gorman & Jen Patsy

Help may be on the way for businesses struggling to pay rent as a result of the COVID-19 pandemic. On March 18, 2020, President Trump announced that the Department of Housing and Urban Development (“HUD”) would temporarily suspend all foreclosures and evictions.  Following the President’s announcement, some states and municipalities have enacted legislation providing not only for residential eviction moratoriums, but for commercial eviction moratoriums as well.

 

While the legislation with respect to commercial evictions varies, much of the legislation contains similar protections, including halting evictions due to non-payment of rent, halting foreclosures due to non-payment of rent, and even allowing businesses a period of time to catch up on back rent payments.  Among the states that have enacted legislation providing for commercial eviction moratoriums are the following:

 

California

On March 16, 2020, Governor Newsom signed an Executive Order that:

• Suspends any provision of state law that would restrict a local government’s ability to impose limitations on evictions under specific circumstances (e.g. when the basis for the eviction is nonpayment of rent).
• Suspends the statutory cause of action for judicial foreclosure (Code of Civil Procedure section 725a et seq.), the statutory cause of action for unlawful detainer (Code of Civil Procedure section 1161 et seq.), and any other statutory cause of action that could be used to evict or otherwise eject a commercial tenant after foreclosure, to the extent the same apply to any limitations imposed by the local government on such tenancy to the extent of such limitation.
• Requests that financial institutions holding commercial mortgages implement an immediate moratorium on foreclosures and related evictions when the foreclosure or foreclosure-related eviction arises out of a substantial decrease in household or business income, or substantial out-of-pocket medical expenses, which were caused by the COVID-19 pandemic, or by any local, state, or federal government response to COVID-19.

 

The above protections are in effect through May 31, 2020 and some municipalities in California, like Fresno and San Francisco, have already imposed limitations on commercial evictions in accordance with this Executive Order. It is important to note that tenants are still obligated to pay rent and landlords still have the ability to collect rent that is due.

 

New York

On March 20, 2020, Governor Cuomo issued an Executive Order that provides that there shall be no enforcement of either an eviction of any commercial tenant or a foreclosure of any commercial property for a period of 90 days. 

Iowa

On March 22, 2020, Governor Reynolds signed a new proclamation suspending all foreclosures on commercial real property for the duration of the proclamation.

Kansas

On March 17, 2020, Governor Kelly signed an Executive Order ordering all financial institutions operating in Kansas to temporarily suspend the initiation of any mortgage foreclosure efforts or judicial proceedings and any commercial eviction efforts or judicial proceedings until May 1, 2020.

Some cities, such as Fresno, San Francisco and Santa Fe have also taken the initiative to halt commercial evictions.

Although Ohio, Indiana and Kentucky have yet to enact legislation providing for commercial eviction moratoriums, it is possible that they will follow suit.

 

The Graydon real estate team is monitoring this closely. If you have any questions regarding what benefits may be available to you as a commercial tenant, please give us a call. We are here to help your business during this challenging time.