The COVID-19 pandemic has wreaked havoc on industries across the globe. Emergency and shelter-in-place orders designed to slow or stop its spread have disrupted peoples’ lives and livelihoods. “Nonessential” businesses across the country have been forced to close. These restrictions have impacted every sector of the economy. The commercial leasing space is no exception. Despite almost nationwide moratoria on evictions and suspensions of police eviction enforcement activities, on April 1 approximately $81 billion in rent payments came due. Landlords can expect a surge in delinquent and defaulting tenants this month and in the months ahead. Indeed, recent national reporting indicates that Dick’s Sporting Goods Inc., Equinox Holdings Inc., Staples Inc. and other large companies have failed to make all or part of their April rent payments.

CARES Act

CARES provides various relief options to help small businesses navigate the next few months while avoiding layoffs. The Paycheck Protection Program (PPP) sets aside $350 billion in government-backed funds available for emergency loans that can be forgiven to the extent the proceeds are used to maintain payroll costs, pay mortgage interest, rent, utilities, and additional wages on tipped employees. CARES also expands funds available for the SBA’s Economic Injury Disaster Loans, provides tax benefits like an employee retention tax credit, offers delayed payroll tax payments, relaxes limitations on net operating losses and expands carry-back treatment, and accelerates Alternative Minimum Tax credits. It is important to note that if loan proceeds are used for anything other than a covered cost, those amounts will not be forgiven. The CARES application process for SBA-approved lenders opened for small business and sole proprietors on April 3, 2020 and opened on April 10, 2020 for those who are self-employed and independent contractors. Some qualifying tenants have expressed their intent to apply and use at least a portion of the proceeds to meet their rent obligations to their landlord. If you or your business could benefit from CARES, you should contact a qualified legal professional to assist you.

Lease Provisions to Know

  • Force Majeure