COVID-19: Governor DeWine Issues Order to Provide Temporary Relief to Commercial Landlords and Tenants

COVID-19
April 3, 2020
 

The COVID-19 relief legislation signed into law by Governor Mike DeWine on March 27, 2020 (Am. Sub. H.B. 197) suspended statutory deadlines for filing eviction actions, and an order issued by the Ohio Supreme Court on the same date suspended most other time requirements in Ohio courts through the end of the period of the COVID-19 emergency or July 30, 2020, whichever is earlier. The Ohio Supreme Court has advised trial courts determining whether to process eviction actions to take into consideration Am. Sub. H.B. 197, the potential application of the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the reason for the eviction, the orders of the Ohio Department of Health, and any other reason made known to the court.

In effect, the General Assembly and Ohio Supreme Court have created a strong presumption against deciding eviction actions during the emergency. However, one consequence of such a pause in eviction proceedings is that a tenant may be unable to pay rent (but cannot be evicted), which causes the landlord to be unable to pay its lender and thus, face foreclosure.

To address this situation, on April 1, 2020, Governor DeWine issued Executive Order 2020-08D (the Order), which is intended to provide temporary relief to commercial tenants and landlords, while preserving landlords’ and lenders’ ability to obtain payments required under their respective agreements after the COVID-19 emergency is over. In the Order, Governor DeWine directed that:

  • Landlords are requested to suspend, for a term of at least 90 consecutive days, rent payments for small business commercial tenants in the State of Ohio that are facing financial hardship due to the COVID-19 pandemic; and
  • Landlords are requested to provide for a moratorium of evictions of small business commercial tenants for a term of at least 90 consecutive days; and
  • Lenders are requested to provide commercial real estate borrowers with a commercial mortgage loan for a property located in the State of Ohio an opportunity for a forbearance of a term of at least 90 consecutive days for said mortgage as a result of a financial hardship due to the COVID-19 pandemic.

The Order does not negate the obligations of a small business commercial tenant to pay rent or restrict a landlord from recovering rent at a future time, nor does it negate the obligations of a commercial real estate borrower. The goal is to allow for a 90-day break in the commercial lending market to prevent evictions and foreclosures. As stated by Lt. Governor Husted, the Order creates “a 90-day pause in this process where we’re asking that, like most Ohio banks have done, to allow for this 90-day deferral to hopefully get the lenders to put that on the back end of the loan with their principal and interest and avoid those penalties.”

What does this mean for you?


Does the Order legally require landlords to forbear on rent payments or evictions and lenders to forbear on foreclosures?

No. Governor DeWine characterized the Order as “a plea to the lenders, and a plea to the landlords across Ohio to work with their small businesses and suspend payments for at least 90 days.” While the Order seeks to put the weight of the Governor’s Office behind suspension and forbearance, it is not legally enforceable. However, when considered with Am. Sub. H.B. 197 and the Ohio Supreme Court’s March 27th order, Ohio courts are likely to look with disfavor on actions taken contrary to the Governor and the Supreme Court.

Does the Order provide relief to a subtenant if the tenant is provided relief from the landlord, but the tenant does not pass this relief on to the subtenant? (In this situation, the tenant would still receive rent from the subtenant while the landlord forgoes rent from the tenant for up to 90 days.)

It is arguable (although not clear under the Order) that the tenant-subtenant relationship should be considered a landlord-tenant relationship and, thus, the tenant should suspend rent payments from the subtenant for the 90-day period. Parties should also look to the underlying agreement to understand what tenant is required to disclose, communicate or share about changes in its business dealings with landlord.

Are there any recommendations for landlords with multiple tenant relationships?

Landlords with multiple tenant relationships might give consideration to establishing a dedicated means of communicating directly, such as a separate email address or phone number, to facilitate conversations regarding issues of financial or other concerns specifically relating to the effects from the COVID-19 emergency.

As always in this uncharted territory, communication – early, often and honest – is key. And be sure to document in writing all agreements to suspend, delay or otherwise forbear on previously agreed-upon contractual obligations.

(Calfee's March 27, 2020 First Alert on COVID-19's Effect on Obligations Under Real Property Agreements also may be a helpful resource.)



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