Among the many economic repercussions of the COVID-19 pandemic, are commercial tenants who are unable or unwilling to pay rent. Although no one knows how long the pandemic will last or what government action, if any, will be offered to assist property owners, commercial landlords should have a plan and strategies in place to limit their liability and financial risk. Landlords need to weigh the benefits of entering into lease modification agreements with struggling commercial tenants, while at the same time plan for potential legal action as a result of tenant defaults if no agreement can be reached.
In normal circumstances, when commercial tenants default in payment obligations required by a lease, commercial landlords generally serve predicate rent demands by process servers. If commercial tenants thereafter fail to tender payments and remain in possession, landlords commence summary nonpayment proceedings. Now however, while landlords may still serve rent demands, landlords are unable to commence litigation to enforce lease terms because emergency orders were issued in New York State restricting court access for only a small class of matters deemed to be urgent. The courts are not currently permitting the commencement of commercial nonpayment or holdover proceedings. Additionally, there is currently a moratorium in effect throughout New York State, staying all commercial evictions until further notice. It is currently unknown when these restrictions will be lifted or modified.
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