Read the original NAIOP blog, here.

The COVID-19 pandemic has shut down much of the U.S. economy, which is creating serious problems for both commercial real estate tenants and landlords. Attorney George Pincus of Stearns Weaver Miller, P.A., in Fort Lauderdale, Florida, presented a NAIOP Advantage Series: CRE Response to COVID-1 webinar this week. Here are highlights from the question-and-answer session.

Q: Regarding tenants that were delinquent on their rent prior to COVID-19, do you think landlords have a right to evict during this time?

A: Of course you have the legal right to evict. That being said, how will you sue them? The court system is being shut down. Work with legal counsel to properly document everything that is going on. It’s important that you do not take any action or fail to take any action while the courts are on hiatus that will waive your rights.

Q: What legal position will landlords have in tenant bankruptcies for unpaid rents?

A: You’re going to have the same position you have under the bankruptcy code [as it exists now]. Looking into the future, who knows how bankruptcy laws will be affected by COVID-19?

Q: Do you expect any federal aid to become available to directly address the commercial real estate industry?

A: I think most of the relief you’ll see for commercial real estate will come in the capital markets.

Q: If a landlord is proposing deferring rent but not extending the terms, should a lease amendment still be completed?

A: Yes.

Q: Would you recommend that a landlord create a general policy to cover rent deferment or should each tenant be handled on a case-by-case basis?

A: You have to do this on a case-by-case basis.

Q: Is there any liability to keeping buildings open regardless of government closure?

A: Yes, there is. Do not do it! Close it down; comply with the law.

Q: My ownership is deferring rent and encouraging tenants to help themselves with loans and insurance coverage. When this is all over and the tenant says he cannot pay, how do we protect ourselves?

A: These are all things that you should be covering in detail in your defer-and-extend amendment. If you are going to work with the tenant as he applies for an SBA loan or some other government aid, there has to be an agreement that when the money comes in, he will share that with you to pay part of his rent. This is a good time to get a personal guarantee from the tenant.

QWhat do you think of a broad and simplified stop-the-clock policy on both the base rent and debt side?

A:  I am skeptical as to any type of across-the-board grant of government-mandated forbearance. I think too much of real estate debt in America is tied up in our capital markets, which are not going to stand for it.

Q: If the tenant does not pay rent on April 1, does the landlord need to put the tenant in default to protect his rights in the future?

A: Yes, absolutely. Everything you do needs to be documented, and everything you do must have a no-waiver provision in it.

Q: Are you advising your clients about any standard deferral or extension terms for leases?

A: Yes, I say, “Let’s give them three months.” We can always come back and revisit [another extension] if we need it. That is not an industry standard; it is something I have advised on a number of occasions in the last five days.

In part 1 of this blog post, Pincus offered advice to landlords on how to deal with tenants that cannot pay rent.

The webinar recording is available here. Visit the NAIOP Response: COVID-19 page for critical resources and knowledge to support you now.

Content and strategies shared on NAIOP webinars and blog posts are intended to provide information and insights to industry practitioners and do not constitute advice or recommendations. NAIOP and its presenters disclaim any liability for actions taken as a result of these webinars and blog posts.

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