Laurie Lee and Chris Hand
May 7, 2020
Hand Law (www.hand.law) is providing updates on government responses to COVID-19. This article, co-authored with Laurie Lee of The Legal Department, focuses on small businesses struggling to pay commercial rent and suggests ways to help tenants and landlords resolve challenges together.
COVID-19 PUBLIC HEALTH UPDATE
The latest State of Florida report (Thursday, 5/7 at 11:30 AM) shows 38,002 total cases. Please track statewide data and county information.
WHEN SMALL BUSINESSES CAN’T PAY RENT
Many small businesses have experienced sharp COVID-related revenue declines and are hard-pressed to make commercial rent payments. Though some companies have applied for Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) loans, logistical and funding challenges with these federal programs have prevented potential recipients from obtaining financial assistance that could help satisfy their lease obligations.
Current economic challenges will worsen if businesses lose physical locations and the ability to restore operations. Some landlords have recognized that reality and are working with tenants. For example, property owners like Publix[1] and Sleiman Enterprises[2] have offered rent abatement. Of course, not all landlords are able to abate or defer rent. In some cases, commercial landlords face their own urgent financial challenges and lack flexibility. But some landlords that could be flexible are choosing confrontation over cooperation.
Nobody wins if the re-opening of the court system heralds a rush of commercial evictions – not the landlords which incur legal fees and property vacancy costs, not the tenants that lose more revenue, not the judges who already face docket backlogs, and not the Florida economy. While government should not impose solutions to lease disputes, public officials can encourage landlords and tenants to find mutually agreeable resolutions.
STATE OF FLORIDA, LOCALITIES CAN MOTIVATE SOLUTIONS
(Many thanks to Jeff Wilkins of the Property Management Law Group for his insights.)
Support Financial Flexibility. Some commercial property owners face serious COVID-19 losses. The Task Force to Re-Open Florida and similar county panels should consider government cost mitigation strategies for landlords that work collaboratively with tenants instead of filing lawsuits. Possible tools could include sales and property taxes as well as development, concurrency, inspection, permit and other fees.
Encourage Pre-Suit Mediation. While it is always hoped that commercial landlords and tenants can directly resolve disputes, certified mediators can often help bridge differences if the parties cannot do so on their own. With their reliance on property tax revenues, local governments have special interests in promoting stability in the commercial real estate market. Counties and cities with fiscal capacity should consider engaging trained and skilled mediators to help business property owners and tenants avoid the expensive litigation process.
Mandate Early Mediation if Eviction Litigation is Filed. During the Great Recession, Florida courts used administrative powers to require mediations in residential foreclosure cases.[3] The judicial branch should consider ordering telephonic or on-line mediations following service of commercial eviction complaints. The State of Florida could encourage resolution at mediation by temporarily suspending Fla. Stat. §83.232(5), which allows eviction without hearing unless a tenant deposits unpaid rents into the court registry.