Alert
Alert
04.14.20
As the COVID-19 pandemic continues to halt daily life across the United States, orders limiting various real estate remedies have been issued by leaders at every level of government. Some governors, such as California Governor Gavin Newsom and New York Governor Andrew Cuomo, have ordered statewide moratoriums on certain evictions for the pendency of the state of emergency. Other states’ courts, such as Texas and South Carolina, have halted any judicial foreclosure and eviction proceedings statewide. These orders vary in which types of tenants are protected, from covering residential, commercial and industrial tenants, to only residential tenants whose non-payment of rent is due to lost income resulting from the COVID-19 pandemic. Many counties and cities have also issued their own moratoriums, adding to the uncertainty of what protections there are in place fortenants and borrowers. Finally, many of these moratoriums are operating on uncertain timelines, expiring in 30 days or lasting the pendency of a separate state of emergency declaration.
The situation is continually evolving and each restriction varies in numerous ways. Specifically, they raise the following:
Regardless of the remedies that are prohibited and the parties hat they are intended to protect, it is crucial to note that no known restrictions absolve the party from obligations to comply; neither rent nor mortgage payments are simply permanently forgiven.
California—Statewide Residential Protections, but Could a Blanket Commercial Stay Be on the Way?
California has a patchwork of eviction protections throughout the state, including a statewide residential eviction protection. Gov. Newsom issued a moratorium prohibiting residential evictions statewide, so long as tenants notify landlords that they are unable to pay rent due to reasons related to COVID-19. This eviction prohibition does not, however, prevent landlords from utilizing other remedies such as drawing on security deposits for unpaid rent. That moratorium is in addition to numerous city and county-level moratoriums issued since mid-March, when the governor permitted local jurisdictions to institute their own commercial and residential eviction moratoriums. The California legislature is considering expanding the eviction moratorium to cover commercial properties statewide, without the requirement of a showing of COVID-19 financial impact, through proposed Senate Bill 939.
Gov. Newsom also worked with major lenders in the state to institute a 90-day grace period for all mortgage payments, as well as to give relief from foreclosure sales. This program is not a state mandate, but has the participation of some of the nation’s largest banks, including Citigroup, JP Morgan Chase, U.S. Bank and Wells Fargo, and nearly 200 state-chartered banks, credit unions and lenders.
In Silicon Valley’s Santa Clara County, officials have banned evictions for non-payment of rent for both residential tenants and any small-scale commercial tenants. Other counties, such as Marin and Los Angeles, have banned evictions for commercial tenants, small and large businesses alike, along with residential tenants. San Francisco’s mayor extended eviction protections from residential tenants to include commercial tenants with no more than $25 million in gross receipts for 2019, and San Diego County’s moratorium is stated to apply to small businesses only.
Maryland
On April 3, 2020, Governor Larry Hogan of Maryland amended and restated his March 15, 2020, order temporarily prohibiting residential evictions to also prohibit COVID-19 commercial evictions and repossessions, stay any initiation of residential mortgage foreclosures, and lift lending limits. For more information on the Maryland order, see here.
New York
On March 20, 2020, Governor Andrew Cuomo issued an executive order continuing New York’s disaster emergency, expanding the statewide moratorium on all evictions, both residential and commercial. This ban on evictions is not restricted to only COVID-19 related non-payment, and shall continue for ninety days. The state legislature is also currently considering the “Tenant Safe Harbor Act,” which would further prohibit the eviction of tenants for non-payment for six months after the emergency’s end. This bill would allow landlords to still seek money judgements for unpaid rent at the end of the emergency. Gov. Cuomo also directed New York’s Department of Financial Services to promulgate emergency regulations allowing for forbearance on mortgages for homeowners affected by the pandemic. This comes in addition to the closure of all state courts to nonessential matters, including foreclosures, effectively blocking foreclosures statewide for the duration of the COVID-19 outbreak.
Federal
The Coronavirus Aid, Relief and Economic Security (CARES) Act, signed into law on March 27, also provides for eviction protections for all residential tenants living in federally assisted housing and in single-family and multifamily properties with federally backed mortgages. For more information on the CARES Act, see here. The CARES prohibition comes in addition to the U.S. Department of Housing and Urban Development’s (HUD) March 18, 2020, suspension of all evictions and foreclosures for any HUD-insured mortgages.
The foregoing are a few examples of the many varying moratorium orders and restrictions across the country, which are changing daily. In a well-meaning effort to address the effects of the pandemic and “shelter in place” orders on tenants’ and debtors’ income and ability to pay rent, states, counties and municipalities acted quickly, often without time or consideration given to conflicting orders and restrictions. As a result, the patchwork of rules needs to be followed carefully in each location in order to ensure compliance and to determine the availability of other landlord and creditor remedies.
For more information, please reach out to your regular Pillsbury contact or the authors of this client alert.
Pillsbury’s experienced multi-disciplinary COVID-19 Task Force is closely monitoring the global threat of COVID-19 and providing real-time advice across industry sectors, drawing on the firm’s capabilities in crisis management, employment law, insurance recovery, real estate, supply chain management, cybersecurity, corporate and contracts law and other areas to provide critical guidance to clients in an urgent and quickly evolving situation. For more thought leadership on this rapidly developing topic, please visit our COVID-19 (Coronavirus) Resource Center.