Staying Afloat: Temporary Relief for Landlords in the Face of COVID-19

By: Sheena Johnson

Although nearly everyone has been impacted in some way by the public health crisis and the economic disruptions of the coronavirus (COVID-19) pandemic, landlords are especially disadvantaged. Landlords are faced with a difficult economic and moral dilemma: how to stay afloat given their own liabilities when their tenants are unable to make rent payments. Luckily, various forms of relief are available to landlords.

Financial Support for Landlords during the Pandemic

While protections like rent suspension are offered to tenants, landlords do have options that can help relieve some of their financial burden when tenants cannot pay rent.

First, contact your lender to ask about loan forbearance, deferment, or other hardship assistance. Many landlords use the properties they own as collateral for loans. If your loan is secured by the leased property and you rely on rental income to make payments, then a tenant’s failure to pay rent may put the leased premises at risk. Fortunately, under the Coronavirus Aid, Relief and Economic Security (CARES) Act, many landlords can request loan forbearance or deferral, which temporarily suspend loan payments for up to one year.

With loan forbearance, missed payments are due in one lump sum at the end of the temporary relief period, while deferred loans payments are typically added to the end of the loan term. Loan terms may vary for commercial loans. Both forms of relief will not negatively impact your credit score. Landlords are responsible for contacting their lenders to discuss hardship and other lender assistance available, and the terms of that assistance.

Second, communicate with your tenants to gauge their ability to pay rent and determine how to move forward. On the federal and state levels, orders preventing eviction, even in the case of rent non-payment, have been issued to protect tenants. Therefore, landlords must rely on temporary options that can relieve their financial strain. Such options include:

• Offering short-term rent deferral
• Reducing the rental amount
• Accepting partial payments of rent
• Drawing on security deposits or first/last month’s rent
• Waiving late fees
• Renegotiating, amending, or waiving lease termination rules
• Where applicable, removing purchase options or limitations to purchase

Landlords must note that the viability of each option depends on their financial security. As such, these are temporary options that should be revisited on a regular basis as public health and economic conditions change.

Additionally, landlords can apply these options on a case-by-case basis. While one tenant may be able to afford partial payments, another may need total deferment, so regular communication with tenants is key. Finally, because many of these adjusted terms may contradict lease terms, all temporary changes should be memorialized by the landlord and tenant in the form of payment plans, agreements, waivers, or other documentation.

Conclusion

Before moving forward with any of the above options for financial relief, landlords must refer to federal and state orders or mandates which may suspend or limit landlord rights during the state of emergency. Please contact your trusted Chugh, LLP attorney or email us at info@chugh.com to learn how best we can support you during this pandemic.