In a recent post discussing strategies for commercial landlords to manage requests for rent relief during the COVID-19 pandemic, we highlighted the Seattle City Council’s resolution urging state and federal legislators to impose an immediate moratorium on commercial rent and mortgage payments. The Seattle City Council’s resolution came at the heels of state and municipal governments across the country issuing similar orders. Just yesterday, the State of Oregon fell in line when Governor Kate Brown issued Executive Order 20-13, which implements a 90-day moratorium on commercial evictions for non-payment.
Under Governor Brown’s order, landlords of non-residential properties in Oregon are prohibited from terminating any tenant’s lease or otherwise interfere with the tenant’s right to possession for reason of non-payment of rent, late charges, utility charges, or any other service charge or fee. To qualify, Tenants must, within 30 calendar days of unpaid rent being due, provide their landlord with evidence that such tenant’s inability to pay rent is “caused by, in whole or in part, directly or indirectly, the COVID-19 pandemic.”
Governor Brown’s order would appear to extend to all rent payments by commercial tenants—and not just the payment of fixed, minimum rent—leaving commercial landlords in a precarious financial position. Without a similar moratorium on the payment of real property taxes or utility charges, landlords must continue to meet these financial obligations on their own (in addition to costs and expenses incurred to keep their establishments secure and in good repair during the period in which businesses are ordered to be closed) without any current reimbursement from their tenants.
Further, it is unclear to what extent “non-payment” must be caused by the COVID-19 pandemic. While the order is clear that non-payment applies to “rent, late charges, utility charges, or any other service charge or fee,” is a total loss of business required? Must the COVID-19 pandemic be the direct or indirect cause of a tenant’s inability to make its entire rental payment, or is the inability to make one-half or some other portion of the rental payment sufficient? For tenants whose businesses are deemed non-essential, the connection to non-payment is easy to discern. On the other hand, for tenants whose businesses are deemed essential, or who are otherwise permitted to remain open on a limited basis (e.g., restaurants allowed to remain open for takeout or delivery), the line is blurred; these tenants are surely experiencing a decline in revenue, but are nonetheless able to operate on a limited basis in an effort to make the best of the current situation. Providing tenants with this level of relief may result in unintended hardships on landlords, particularly those landlords who, themselves, are small, family-owned businesses.
It is important to note that Executive Order 20-13 does not result in forgiveness of rent not paid, nor does it prohibit lease terminations for reasons other than non-payment of rent due to the pandemic.
We will continue to monitor this situation to see if any further guidance is issued on the practical effect of this order, and also to see if the State of Washington and others follow suit in imposing a similar moratorium on commercial evictions for non-payment.