On April 29, 2020, Prince Lobel’s Real Estate Team hosted a roundtable and panel discussion via video conference on issues in the real estate industry resulting from the COVID-19 Pandemic. Robert Schlein, Joseph Sano, and Ashley Tan discussed the Massachusetts temporary moratorium on evictions and foreclosures, force majeure, issues relating to insurance coverage and relevant commercial lease provisions.
This Alert is a summary of the temporary moratorium on evictions in Massachusetts as it pertains to commercial landlords.
On April 20, Massachusetts Governor Charlie Baker signed into law emergency legislation imposing a temporary moratorium on non-essential evictions of residential and small business tenants during the COVID-19 state of emergency, as well as a temporary moratorium on residential foreclosures (the “Act”).
The moratorium period extends from April 20 until the earlier of August 18, 2020 or 45 days after Governor Baker’s COVID-19 emergency declaration is lifted, and may be further extended. During the moratorium, landlords may not commence a non-essential eviction action in state court against a tenant of a residential dwelling unit or a tenant of small business premises unit. For the purposes of the Act, a “small business premises unit” is defined as a premises occupied by a tenant for commercial purposes, where the tenant or controlling party: (i) does not operate multi-state; (ii) does not operate multi-nationally; (iii) is not publicly traded; and (iv) does not have more than 150 full-time equivalent employees.
A “Non-essential eviction” under this Act is an eviction: (i) for non-payment of rent; (ii) resulting from a foreclosure; (iii) for no fault or no cause; or (iv) for cause that is not related to a criminal activity or violation of the lease that may impact the health or safety of other residents, health care workers, emergency personnel, or the general public. The Act specifies that non-essential evictions shall not include evictions for small business premises units if the expiration of a lease term or default of the tenant occurred prior to Governor Baker’s declaration of the COVID-19 emergency.
The Act states that during the moratorium period, landlords of small business premises units may not impose late fees for non-payment of rent or notify a credit reporting agency of the missed payment, if the tenant provides a notice and documentation to the landlord within 30 days of the missed payment that the reason for non-payment of rent was caused by financial impacts resulting from the COVID-19 pandemic. The Commonwealth’s Executive Office of Housing and Economic Development has produced notice forms and recommended supporting documentation that tenants should provide to landlords.
The Act does not relieve tenants of small business premises units from their obligations to pay rent, nor does it restrict landlords from recovering unpaid rent. In addition, while this Act prohibits residential landlords from terminating tenancies and sending Notices to Quit, this Act does not prohibit the same for commercial landlords. Landlords should proactively determine whether their tenants fall under the definition of tenants in a small business premises unit as defined in the Act, so as to avoid improperly imposing late fee charges or proceeding with eviction under this Act.
If you have any questions regarding the information presented here, have specific questions as to how this Act affects landlords or operators of multifamily residential properties, or would like to discuss any other matters relating to the COVID-19 pandemic’s effects on real estate, please contact Ashley Tan atan@princelobel.com, the author of this Alert, or Robert Schlein, rschlein@princelobel.com, the Chair of the Prince Lobel Real Estate Practice Group.