COVID-19 has caused governments to take unprecedented action. Last week saw the passage of the Coronavirus Aid, Relief, and Economic Security Act, a sweeping bipartisan bill that aims to prop up families and businesses by providing forgivable loans, direct cash to workers, and many other tools and resources.
Despite the flow of cash injected into the economy through the CARES Act, both landlords and tenants are feeling the squeeze. While CARES Act funds may (partially) be used for rent obligations, the liquidity crisis caused by COVID-19 is not likely to let up for some time, even as CARES Act loans are starting to be processed on Friday, April 3rd.
To that end, in an extraordinary act not seen in modern times, local and state governments are restricting non-residential evictions. Here is what you need to know:
Oregon – Executive Order 20-13
On April 1, 2020, Governor Brown issued Executive Order 20-13. Under Order 20-13, not only are evictions and other actions to terminate residential rentals under a temporary moratorium of 90 days, but non-residential tenancies are also similarly restricted.
For the reason of nonpayment of rent, late charges, utility charges, or other service fees or charges, landlords may not move to terminate any tenant’s lease or take “any action, judicial or otherwise” relating to a non-residential eviction. Order 20-13 also goes further and restricts a landlord from “filing, serving, delivering or acting on any notice” or “otherwise interfer[ing] with [a] tenant’s rights to possession of the leased premises.”
Here is what Order 20-13 does not do: it does not relieve a tenant’s responsibilities to pay rent or other charges owed (except late fees). It also does not prevent a landlord from terminating a lease if a tenant is otherwise in default and does not prevent landlords from utilizing security deposits, letters of credit, and other lease security to cover unpaid rent. It only restricts terminations in the event of nonpayment.
City of Seattle – Emergency Order
On March 17, 2020, the City of Seattle issued an Emergency Order that instituted a moratorium on evictions and lease terminations for any small business. “Small business” is defined to include most types of entities, including sole proprietorships that have 50 or fewer employees. Nonprofit corporations are also included, although they are not subject to employee restrictions.
Under the City’s order, landlords “shall endeavor to enter into a payment plan” for nonpayment of rent. Owners are also restricted from charging late fees, interest, or other charges during the moratorium.
What Is Next?
We expect these measures to continue for some time. Depending on how quickly CARES Act funding can be deployed, it can be expected that other jurisdictions will move to restrict non-residential evictions and terminations.
Tenants and landlord alike should carefully review their leases to ensure that additional defaults do not exist. Whether you are a landlord or a tenant, taking proactive measures to negotiate reasonable deferrals, extensions, or other similar measures may be the best course to prevent more dire results for your business and others who support your business once the crisis ends.
Schwabe, Williamson & Wyatt is here to help. Please visit our COVID-19 page for additional resources.
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