On May 13, 2020, proposed California Senate Bill No. 939 was amended to not only prohibit landlords from evicting commercial tenants during the pendency of the COVID-19 state of emergency, but to extend protections to certain qualifying tenants permitting express rent reduction negotiation rights and lease termination rights. In “Proposed California Bill Would Ban Commercial Evictions During the State of Emergency and Grant Lease Termination Rights to Qualifying Tenants,” special counsel Carmela D. Nicholas explores how California Senate Bill 939 goes beyond the COVID-19 eviction moratorium imposed in most cities and counties across the state.
On Friday, May 15, New York began reopening businesses after widespread closures in response to the coronavirus pandemic. New York Forward, the New York plan to reopen the state, divides the state into ten (10) regions. Each region may reopen in a four-phased process as it satisfies certain metrics. In “COVID-19: New York and New Jersey Announce Phased Reopening of Businesses,” colleagues Cassie Lentchner, Adam R. Poliner and Simone A. Wood discuss the steps reopening businesses must take to protect employees and customers.
Building on existing New York State protections, the New York City Council has passed a bill providing protections for individuals who have guaranteed leases for premises affected by COVID-19. In “New York City Council Proposes Extensive Protections for Commercial Lease Guarantors,” colleagues Andrew J. Weiner and Adam J. Weaver discuss that the proposed legislation would make personal guaranties temporarily unenforceable if certain conditions related to the COVID-19 pandemic are satisfied, but the scope of the relief is not clearly defined.
On May 13, 2020, one day before the expiration of the relevant “safe harbor” deadline, the Small Business Administration (SBA) issued new guidance to borrowers who have been considering whether to return their CARES Act Paycheck Protection Program (PPP) loans in the event that the borrowers failed to consider their access to alternative sources of liquidity before certifying the “necessity” of the PPP loans. In “SBA Issues Critical New Guidance on PPP Borrowers’ Certification of Necessity,” colleagues Alexander B. Ginsberg, John E. Jensen, David B. Dixon, Elizabeth Vella Moeller and Matthew Oresman discuss how this new guidance purports to reduce significantly the risk to borrowers arising from a later determination by SBA that the borrower lacked an adequate basis for its certification.
On Thursday, May 7, California rolled out a modified stay-home order and issued guidance to move into “Stage 2” of reopening certain sectors of the economy. In “California Allows Localities to Reopen Certain Businesses Consistent with State Guidance,” colleagues Robert A. James, Callie A. Bjurstrom, Michelle A. Herrera and Stacie O. Kinser discuss how this new statewide order, and the county-level reactions to it, create another layer in the patchwork of compliance requirements, but provide a pathway for certain industries to open doors sooner than others.
In the wake of COVID-19, default rates for commercial real estate loans, including those supported by personal guaranties, will likely accelerate. Inevitably, borrowers will consider seeking bankruptcy protection to implement a restructuring of debt or a sale of real property collateral, and lenders should not assume that personal guaranties will prevent borrower bankruptcies. In “Personal Guaranties May Not Deter Property Owner Bankruptcies,” colleagues Patrick J. Potter, Joshua D. Morse, Deborah B. Baum and Dania Slim discuss that lenders should plan for real estate owner bankruptcies despite having a non-recourse carveout guaranty triggered by the owner’s bankruptcy filing.
Boston Mayor Martin J. Walsh first limited construction in the City of Boston to essential work on March 17. This pause in non-essential construction has been extended indefinitely by order of the Boston Public Health Commission on April 24. On April 27, Mayor Walsh confirmed that he will not re-open the City on May 4, the date the Commonwealth is scheduled to re-open (Massachusetts Governor Charlie Baker extended his stay-at-home order on April 28 to May 18). In “City of Boston, Massachusetts Extends Construction Moratorium,” partner Paul Shapses discusses how non-essential construction is not presently permitted in Boston, but draft best practice guidelines and an associated contractor certificate identify the way forward for owners and contractors.
With many struggling to make housing payments due to COVID-19, dues owed to multifamily condominium associations are likely to go unpaid—especially if homeowners feel deprived of the use of common areas, such as pools, gyms and playgrounds. In “How Chapter 11 Solved One Multifamily Condo Regime’s Dual Challenges of Mounting Liabilities and Unpaid Dues,” colleagues Patrick J. Potter, David L. Miller and Dania Slim discuss how multifamily condominium regimes with mounting liabilities and unpaid dues during COVID-19 may find answers in bankruptcy to the obstacles posed by individually titled units.
In the wake of government-ordered moratoriums on commercial tenant evictions, how does a California commercial tenant’s security deposit come into play as an available landlord remedy for a lease default? In “California Commercial Tenant Security Deposits in a COVID-19 World,” partner Eric A. Kremer addresses this question by exploring how commercial lease tenant security deposits are subject to provisions under California law that may restrict a landlord’s use. However, such provisions can be waived by tenants.