COVID-19: New Developments Impacting Commercial Real Estate in Arizona
This public health crisis has created an unprecedented strain on Arizona’s economy. Governor Doug Ducey is working to keep Arizonans safe and healthy while slowing the spread of COVID-19. He has issued several executive orders. Some of them are aimed at helping to ease the economic burden on Arizona’s businesses and workers.
Executive Order Halting Commercial Evictions of Small Businesses
On April 6, 2020, Governor Doug Ducey issued an Executive Order halting evictions in Arizona for small businesses and nonprofits who can't pay rent due to financial hardship caused by the coronavirus crisis. Read the order here. The order also encourages commercial landlords to defer rent payments for small business tenants facing economic hardship due to COVID-19 and to consider waiving all fees and interest associated with late payments.
Under the new order, those evictions will be halted until May 31, 2020. The order will be of significant interest to individuals and businesses engaged in the commercial property industry including developers, owners, and landlords of commercial property. The Executive Order applies to commercial tenants that are eligible for the Federal Paycheck Protection Program, as well as lenders that have provided commercial real estate borrowers with a commercial mortgage loan.
The order advises that lenders consider working with commercial tenants to help provide options for deferring rent or mortgage payments and waiving late fees or penalties. Tenants that wish to delay eviction action or reduction or deferral of rent payments must submit notification to landlords in writing as soon as possible. Any tenant who receives aid through the PPP needs to apply a percentage of that assistance to any past or current rents due, but landlords cannot specify to tenants what that amount should be.
The order is clear in stating that tenants are not absolved from any money due. While attempts at evictions, lock outs and notices to vacate are suspended between March 11 and May 31, the order uses less definite terms in describing the ways that lenders and landlords interact with their tenants regarding those rent payments. Words like “encouraged,” and “shall consider” give some leeway to commercial landlords and lenders in what they waive or adjust. The order allows judges to make a determination on eviction action based on what is the best interest of justice.
In a similar order protecting residential tenants (Executive Order 20-14), Ducey suspended eviction enforcement, again unless necessary “in the interest of justice.”
- Unless a court determines on motion of one of the parties that it is contrary to the interest of justice, a commercial eviction action, including lock out, notice to vacate or any other attempt to inhibit the operations of a business, shall be temporarily suspended for tenants unable to pay rent due to financial hardship caused by the COVID-19 pandemic.
- Commercial landlords shall consider deferring or adjusting rent payments for commercial tenants that are unable to pay rent due to financial hardship caused by the COVID-19 pandemic.
- Commercial landlords are encouraged to work with tenants to waive late fees, penalties and interest associated with late rent payments and develop rent repayment plans for those tenants unable to pay rent due to financial hardship caused by the COVID-19 pandemic.
- A commercial tenant that is suffering any of the above circumstances and seeks a delay in eviction, lock out, other inhibition of operations or requests a reduction or deferral of rent payments shall notify the landlord or property owner in writing as soon as practicable with any available supporting documentation of their inability to pay rent due to temporary financial hardship and acknowledge that contractual terms of the lease remain in effect.
- Any commercial tenant that receives financial assistance from public programs designed to assist businesses suffering hardships from COVID-19 shall apply a portion of eligible assistance to any past or currently due rents. Landlords may not require that commercial tenants apply specific percentages or amounts of financial assistance to commercial rent.
- A commercial tenant is defined as any business type that is eligible for the Federal Paycheck Protection Program.
- Lenders that have provided commercial real estate borrowers with a commercial mortgage loan for a property in the state of Arizona shall consider providing an opportunity for a forbearance for any commercial real estate borrower that has suspended any action under the provisions described in this order.
- No provision contained in this Executive Order shall be construed as relieving any individual or business of the obligation to pay rent, or comply with any other obligation that a business may have under a lease or rental agreement.
- No provision contained in this order shall be construed to prohibit the continuation of any eviction action or proceeding predating the March 11, 2020 Public health State of Emergency.
- This order shall expire on May 31, 2020.
HERE TO HELP
We stand by ready to provide tailored support in helping your business navigate Executive Order 2020-21. Please do not hesitate to contact us. You may contact us for additional information by calling (480) 558-1700, or send us an email.