COVID-19's Impact On Landlords and Tenants Still UnfoldingPosted September 26, 2020 by Articles & Publications, BizLaw 101 Blog in
COVID-19 has significantly impacted both landlords and tenants alike, and the full effects are still not yet known.
For many commercial tenants, even if their business is able to operate, they may be doing so remotely. Other business owners may have limited operations or even none. This means that rent is being paid for space that is not being used at all or to its fullest extent. Even if income has dropped dramatically for commercial tenants, and use of the premises has dramatically decreased, rent is still due and payable.
Many commercial leases contain a force majeure clause that excuses performance of a lease obligation when unforeseeable circumstances outside the reasonable control of a party prevent performance. How the clause is written and whether it will excuse the obligation to pay rent is a matter of interpretation and dependent on the specific facts in question. Many tenants are looking for ways to excuse their rent obligations, but there is no “one-size-fits-all” answer. It is best for the lease to be reviewed by a lawyer.
In addition, many tenants (and landlords) may be surprised to find out that if they make a claim under a business interruption insurance policy it will be declined because many policies require physical damage to have occurred in order to support a business interruption claim. Again, it may be helpful for the insurance policy to be reviewed by a lawyer prior to filing a claim. This is because each policy is unique and must be read in light of the facts and circumstances applicable to each policy holder.
To ease the pressure on tenants, differing jurisdictions have enacted emergency relief laws that, for example, require landlords to offer their tenants payments plans and delay the institution of legal proceedings arising from a tenant’s non-payment of rent. Many landlords have recognized the realities of Covid-19 and have voluntarily entered into payment plans, temporary rent deferrals, or rent abatements.
Landlords are not immune to the impact of Covid-19. Landlords must make mortgage, utility, and insurance payments, even when their tenants are not paying rent. While some jurisdictions have enacted laws that impede a foreclosure of a mortgage for non-payment of debt-service, and some utility companies have agreed not to terminate service for non-payment, the legal protections afforded landlords is nowhere near as broad as those offered to tenants. Some lenders, utility companies, and insurers have been receptive to deferment plans.
Whether you are a landlord or tenant, Press, Dozier & Hamelburg can help explore your options and pursue negotiated settlements, and if needed, to pursue judicial remedies.
Press, Dozier & Hamelburg partners with businesses to achieve their goals, and represents families and individuals, often when they are most vulnerable. Our attorneys deliver valuable insight and counsel in the areas of business law, employment law, litigation, commercial real estate, estate planning and administration, and business succession planning. We provide all of our clients with personal service, emphasizing responsiveness, sensitivity, and respect. We are located in Bethesda and serve Maryland, Virginia and Washington, DC. You can reach our attorneys at (301) 913-5200 and firstname.lastname@example.org.