COVID-19 Impact on Commercial Leases
San Francisco, CA (March 26, 2020). On March 19, 2020, California Governor Gavin Newsom issued Executive Order N-33-20 (the “Order”), requiring that all individuals in California stay at home, with certain exceptions for essential business and to maintain critical infrastructure. The Order is in effect until ‘further notice.’ Other states and cities have enacted similar measures.
As a result of the Order and other local mandates, office buildings, warehouses, R&D facilities, retail stores, and other commercial properties are now sitting vacant, and it is not clear when tenants will be able to re-occupy. Understandably, tenants leasing these properties want to know what impact the COVID-19 pandemic and the Order may have on their lease obligations and how they may secure rent relief during this crisis. This is a critical question to tenants, many of whom are facing substantial economic losses due to the impact the pandemic has had on the market. Landlords are also deeply concerned about the pandemic and want to understand how to best respond to tenants who request rent relief, as many landlords rely on rents collected to pay loans secured by the property.
While this is a very fact-driven analysis and will depend on the express language in the lease, we prepared this summary to outline issues that should be considered by landlords and tenants as they evaluate the impact the COVID-19 pandemic will have on their leases.
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