Are Ohio’s Commercial Landlords and Lenders Now Required to Give a 90-day Reprieve?
April 2, 2020
- Governor DeWine issued an executive order requesting landlords to suspend commercial rent payments for at least 90 days.
- The Order also urges lenders to offer a similar reprieve to their landlord borrowers.
- The Order is not legally binding, though more forceful language could potentially be forthcoming.
Since the COVID-19 crisis began, we’ve been fielding calls and e-mails from clients on both sides of the commercial landlord-tenant relationship.
Tenants negatively affected by the crisis want some sort of relief from their landlords in terms of a rent abatement or forbearance, and landlords are receiving a crippling volume of these requests from their tenants.
Typically, there is no legal ground to require a landlord to grant an abatement or deferral request, but from a practical standpoint, it still may make sense for them to work with commercial tenants if the alternative is for those tenants to permanently close their doors. At the same time, it’s also important to recognize that landlords may be caught between a rock and hard place. Most are still required to make mortgage payments and pay taxes, common area maintenance costs and other expenses, without receiving rent from their commercial tenants.
Each side may also put the responsibility on the other to attempt to obtain relief from federal sources, including the SBA’s Economic Injury Disaster Loan program and the Paycheck Protection Program provision of the recently passed CARES Act.
To date, however, there hasn’t been an across-the-board standard or a one-size-fits-all approach for negotiations between commercial landlords and tenants dealing with the effects of COVID-19.
Governor DeWine Opines with an Executive Order
In an attempt to provide some relief for both sides, Governor Mike DeWine issued Executive Order 2020-08D on April 1, urging Ohio landlords to suspend rent payments and evictions for at least 90 days for small-business tenants experiencing “financial hardship due to the COVID-19 pandemic.”
Accordingly, to assist those landlords who would then be at risk of defaulting on their own mortgages, the Order also requests that lenders agree to a minimum 90-day forbearance and refrain from enforcing default penalties or initiating foreclosures during that period. The Order specifies, however, that the governor is not requesting a rent abatement under the leases, nor forgiveness of mortgage payments, just a delay in collections instead.
Interpretation: Request or Requirement?
While the language may not be entirely clear, our interpretation of this Order is that it is a request, not a requirement , and that landlords and lenders alike are not currently legally obligated to comply. However, we think it’s unlikely that a court in Ohio is going to take up a foreclosure action at this time.
Given the rapidly evolving pace of change right now, it’s certainly possible for Governor DeWine to sign a more forceful Order before this situation is over. Regardless, this Order may provide a new baseline for negotiations between landlords and tenants as they navigate through the COVID-19 crisis.
Michael Schottenstein is an associate attorney in Kegler Brown’s Real Estate + Finance practice. He represents both commercial landlords and tenants in the drafting and negotiation of leases, amendments and works with clients in the context of their more general business operations.
Michael can be reached at [email protected] or (614) 462-5451.