COVID-19 Recommendations for Real Estate
By: Lori Pittman Haas, Jodi Rich, Kristin W. Boose and William D. Edwards
UPDATED MARCH 26, 2020 – State and federal laws are changing every day with respect to the novel coronavirus called COVID-19. As of Wednesday, March 25, 16 states have or will have implemented stay at home orders affecting more than 40% of the population. As the laws related to your business change, we will continually keep you updated. Here are some guidelines to follow as we await specific legislation related to owners, tenants, property managers, and occupants of real estate and prospective sellers and purchasers of real estate.
General Guidelines
If an individual residential tenant or employee of a commercial tenant is diagnosed with COVID-19, the identity of the patient should not be disclosed. It is acceptable to share that a positive diagnosis has occurred within the building and encourage other tenants to take appropriate precautions. If you are a property manager or landlord, take all possible steps to ensure that common areas in your buildings, such as lobbies, security areas, and elevators, are regularly cleaned with solutions that will kill the COVID-19 virus. Consider temporarily closing discretionary social gathering areas, such as exercise rooms, pools, and party rooms, where the spread of COVID-19 is more likely. Follow guidelines from the CDC. The CDC’s website has excellent, up-to-date information about precautionary measures to take to help reduce the spread of COVID-19.
Be aware that even if a contract appears clear, a court may not enforce a contractual obligation that was impossible to fulfill due to governmental ordered closures or that would risk the health and safety of tenants, their employees, or customers. What a court may have done before COVID-19 may not be what a court will do in the current climate of COVID-19.
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How the Ohio, Kentucky, and Illinois Shelter in Place Orders Affect the Real Estate Industry
By Bradley D. Kaplan
March 24, 2020 – As of Monday, March 23, 2020, Illinois, Ohio, and Kentucky have issued executive orders for the purpose of limiting person-to-person contact to avoid the transmission of the COVID-19 virus. This article summarizes how each of these three states are defining “essential businesses” and “essential services.”
Illinois
Governor J.B. Pritzker issued Executive Order 2020-10 on March 20, 2020. Section 9 of the order includes in the definition of “Essential Infrastructure” in part the following activities that apply to real estate and construction: construction of food production/distribution facilities; health care facilities; public works facilities; building management; building maintenance; construction and repair of highways, railroads, and other means of transportation; waste and recycling removal; and telecommunications facilities and infrastructure. The order specifically states that it should be interpreted as broadly as possible.
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COVID-19’s Impact on Commercial Real Estate Lending – Initial Observations
By Kristin W. Boose
March 23, 2020 – On March 20, 2020, the CRE Finance Council hosted a great conference call entitled, “The Impact of COVID-19 on the Commercial and Multifamily Real Estate Property & Finance Markets.” Like many of us in the commercial real estate world, I’m anxious to get my arms around what impact, both short and long term, the COVID-19 pandemic will have on our real estate markets, including real estate finance, a focus of my practice. Spoiler alert – we don’t truly know. These experts provided us with their thoughts and observations, discussing both the lending and debt markets, including macroeconomic and microeconomic aspects. Here are important takeaways I learned concerning COVID-19’s impact on lending and the various real estate sectors:
- Commercial real estate loans substantially on their way to closing are likely to get done, unless of course the property or portfolio of properties that is the subject to finance is in an especially hard-hit area (e.g., hospitality) or the closing of the loan becomes administratively difficult (e.g., closing of recording offices). The speakers representing the bank lending side of the call indicated that they’d continue to scout lending opportunities, however, it seemed clear to me there’s a good chance pencils are down or are being slowed on new borrowings until the smoke clears on the COVID-19 crisis.
- April 1 will be the lending market’s first true dose of reality. Why? Because monthly loan payments are often due by borrowers on the first of the month or soon thereafter, and this will be the first payment date since COVID-19 really gripped our nation and economy. Part and parcel of those debt payments is whether tenants for tenanted properties (think multifamily, office, retail) can make, delay, or withhold their monthly rental payments. Rental payments are the life blood of these asset classes.
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