Protecting landlords during coronavirus
The coronavirus has created challenges for people in all aspects of life and business, and while there is a great deal of attention rightly paid to the plight of tenants, landlords are not immune to the financial turmoil of the moment. Just like renters – whether residential or commercial, the landlords, in turn, have their own creditors to pay, in addition to trying to manage the welfare of their renters during a pandemic. Landlords face the same uncertainty about whether there will be enough money come the first of the month and the same questions about how the new rules and regulations affect their business. And while the situation is changing from day to day, there is some clarity to be found for the most pressing questions for landlords.
Frequently asked landlord questions during coronavirus:
- Moratoriums
- Landlord request requirements
- Coronavirus outbreaks
- Force majeure
- Building operations
- Loan document review
- RENTAL NEGOTIATIONS
- BUSINESS INSURANCE
Moratoriums
What can I do if tenants don’t pay rent?
Tenants may be facing a strain on their budgets, but many landlords are similarly constrained.
While moratoriums on evictions in cities and states across the country are helping many stay in their homes, some landlords may access temporary relief themselves. To stem the fallout from the COVID-19 crisis, Fannie Mae and Freddie Mac are offering mortgage forbearance to owners of multifamily properties provided that they don’t evict tenants during this period. The measure only applies to mortgages backed by those two companies, however; for those not backed by those mortgage giants, there is the possibility of lost rental income at a time when their mortgage payments come due.
How does a moratorium on evictions affect me and my leases?
While the coronavirus has shut down much of public life, time marches on, and that means that millions of people are running up against the end of their apartment leases. For those reasonably secure in continued employment, it’s a simple matter of renewing their leases, but for those worried about keeping their jobs, there’s an understandable reluctance to commit to a lease you might not be able to afford. An eviction moratorium may help keep a tenant in the property for the time being if they can’t pay their rent, and a shelter-in-place order may preclude the possibility of moving. You can discuss the possibility of a month-to-month arrangement with your tenant to see if they can make a partial payment if they are unable to pay the full amount.
Can I evict someone right now?
Depending on where you live, you may still be able to evict your tenant. There’s a growing list of cities and states with eviction freezes or moratoriums. That said, it’s worth considering whether you want to process an eviction in the current climate. Given the economic and social realities of the moment, there might not be much of a market for leasing given that most people are being told to stay in their homes to the greatest extent possible. It might be more advantageous to explore deferred rent or partial payment for the duration of the crisis, should your financial situation allow. You should discuss your rights and options with your LegalShield Provider Attorney.
Landlord request requirements
What requests am I required / not required to respond to as a landlord?
As a landlord, your responsibility to your tenants is defined by the terms of the lease with your tenant as well as any local or state laws and ordinances. Broadly speaking, tenants are entitled to a safe, habitable living or working space with functional utilities and landlords are expected to make any repairs that are needed around the apartment, within reason.
Within the current crisis, both landlords and tenants have to be smart about what they can reasonably do and expect. It would be inadvisable to have maintenance people in and out of apartments with all the attendant risks that would bring, so repairs should be limited to essential items during the outbreak.
However, with respect to the common areas such as lobbies in residential buildings, extra cleaning is advisable and also ensure that you follow local ordinances with respect to closures of a gym or other recreation facility.
Coronavirus outbreaks
If my business ends up being shut down, how do I pay this back?
If you have a coronavirus case within your complex or community, the most important thing a landlord can do is prevent the spread of panic along with the disease. Be proactive and stress the importance of following CDC guidelines as well as local directives about hygiene, sanitation and avoiding contact in their daily lives. Seek consultation and assistance related to your obligations and duties as a landlord from your LegalShield Provider Attorney and local authorities.
If you haven’t done so already, you should take steps to limit the potential spread of the disease in your rental properties by closing common areas to the greatest extent possible. Areas that can’t be closed should be cleaned thoroughly and professionally on a regular basis. And again, communication is key. Inform your tenants what you’re doing to prevent the spread, and what they can do to protect themselves.
Force majeure
Does coronavirus constitute force majeure under my particular leases?
Force majeure is a contract clause protecting each party if they are unable to meet the terms of their contract due to unforeseeable circumstances, but the term itself can be broadly defined. Depending on the terms of a particular contract or lease, a global pandemic may meet the standard of force majeure for non-performance. However, depending on the language used, force majeure may not provide the basis for non-payment of rent or costs even if you are unable to operate your business under the current circumstances. It’s best to consult a LegalShield Provider Attorney to review your leases as part of a small business plan.
Business operations
Can I close the building or suspend services?
Many non-essential businesses and services are being ordered to shut down by state and local governments, so it may be the case that you have no choice if you lease space to one of those businesses.
If there are no such edicts in place, it’s at your discretion as to whether or not you close your doors. It can be a difficult decision — weighing your precarious financial position against the health and safety of your workforce and customers — but one you have to make with the greatest good in mind. You should discuss if with your LegalShield Provider Attorney who can advise you of your rights and obligations.
Loan document review
Can I get help reviewing loan documents?
Tenants aren’t the only ones bound by signed agreements. Most landlords have their creditors to worry about, and the loans taken out on their property may if difficult for you to accept partial payments, as much as you may wish to accommodate your tenants. Landlords should seek advice from their LegalShield Provider Attorney concerning any mortgage relief or other options and benefits that may be available to them.
For those looking to apply for a Small Business Administration (SBA) Disaster Relief loan, it may be difficult to parse through the terms and conditions to know what’s expected and what you’re signing up for exactly. Talking through the paperwork with an attorney can put your mind at ease, and LegalShield can help small business owners gain access to legal advice at a fraction of the typical cost. Learn more about our Small Business Legal Plans.
Rental negotiations
Am I bound to statements made during rental negotiations?
Whatever may have been agreed upon between a landlord and prospective tenant should be made part of the written lease agreement. Any promises and agreements beyond what’s in a standard lease should be added as an addendum and signed by both parties. Again, this addendum is a legal document and should be done or reviewed by an attorney.
Business insurance
Can I use business interruption insurance or rent loss insurance?
While COVID-19 has unquestionably interrupted the normal course of business for countless companies across the country, it’s less certain that business interruption insurance would cover the financial losses suffered to date. Business interruption insurance as designed is intended to address the loss caused due to physical damages suffered or a shutdown prompted by governmental action. While many businesses are shut down by order of government authorities, others are suffering simply due to broad guidance to stay at home and only shop as needed. Indeed, many insurers took the step of excluding contagions from their policies after earlier outbreaks. It will be important to confirm what these insurance policies provide. You should seek advice, document review to include the applicable policies and additional assistance as needed from your LegalShield Provider Attorney.
Tenant notices
What notices am I required to send to tenants?
As a landlord, it’s incumbent upon you to provide notifications to tenants of the things that may materially affect their living conditions and tenancy, not all of them pleasant. Some of the notifications for tenants that may violate the terms of the lease, the law or government orders are listed below and should be reviewed with a lawyer:
- Pay Rent or Quit Notice.
As the name suggests, should your tenant fail to pay their rent on time you can give them a Pay Rent or Quit notice, whereby they can either pay the amount due or vacate the unit, within a set period of time. - Cure or Quit Notice.
If a tenant has violated one of the terms or conditions of their lease, you can use a Cure or Quit notice to inform the tenant of the violation and the timeframe in which they have to correct the violation or face eviction. - Unconditional Quit Notice.
For tenants that have repeatedly run afoul of the terms of their lease, you may be able to serve them with an Unconditional Quit notice, which informs the tenant that they are to move out, with no opportunity to pay rent or correct transgressions.
What critical lease deadlines should I be thinking about?
Landlords are also required to give due notice to tenants of:
- Intent to enter their apartment or business
- Any repairs to the property and resultant outages
- Rent increases
- Lease renewal offers
- Decisions to not renew their lease
- Sale or transfer of the property
Landlords should also keep tenants informed of what measures they’re undertaking to stop the spread of the coronavirus as well as informing them of any cases within the complex.
For lease renewals, landlords can continue to offer notice to tenants to renew their leases, although for those unable to pay at the moment a renewal presents a particular challenge.
The coronavirus has forced landlords to look through every lease and every law to see what they can and cannot do in the case of evictions and non-payments. Talk with a LegalShield Provider Attorney to understand where landlord-tenant laws are in the midst of constant changes.
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