Landlords Feel the Financial Squeeze During COVID-19 Shutdowns

Landlords Feel the Financ…

The news has been full of reports of how the novel Coronavirus, COVID-19 has been affecting consumers. That includes tenants who are unable to pay their rent because the COVID-19 shutdowns have cost them their jobs. But while consumers are receiving help, landlords are feeling the financial pressure when rent goes unpaid and eviction isn’t an option.

Connecticut COVID-19 Orders Shut Down Evictions as Tenants Lose Work

On March 23, 2020, Connecticut Governor Ned Lamont signed a “Stay Safe, Stay Home” order closing all non-essential businesses and telling residents to stay home except for essential travel. On April 10, that order was extended through May 20. That same order put limits on what remedies are available to landlords when their tenants fall behind on rent. The executive order shields residential renters by:

  • Prohibiting landlords from issuing a notice to quit or starting eviction proceedings except in cases of serious nuisance until July 1, 2020.
  • Granting an automatic across-the-board 60-day grace period on all rent due in April 2020.
  • Requiring landlords to grant a 60-day grace period for rent due in May 2020 if a residential tenant tells the landlord that they have lost a job, hours, or revenue, or are facing significantly higher expenses because of COVID-19.
  • Allow tenants to apply some security deposits to unpaid April, May, or June rent if they have lost a job, hours, or revenue, or are facing significantly higher expenses because of COVID-19.

The Governor has also announced an agreement with 50 banks and credit unions to offer mortgage relief to Connecticut residents and businesses. This agreement will offer many homeowners grace periods for mortgage payments, relief from late fees and credit changes, and a hold on foreclosures.

Nationwide Tenants Unable To Pay Rent While Landlords’ Costs Continue

The National Multifamily Housing Council says that only 69% of Americans paid their rent by April 5, 2020. That’s compared to 81% in March 2020 and 82% in April 2019. One survey showed that 54% of respondents had already lost their jobs due to COVID-19. Of those people, only 34% planned to pay their April rent.

When tenants rent from large real estate companies, those losses may hurt the bottom line and threaten profits. However, for small business landlords, the idea of nearly half their tenants taking advantage of Connecticut’s 60-day grace period may be financially devastating.

That’s because for many landlords, their own expenses continue even while the government mandates that they hold off on collecting from their customers. Depending on their mortgage holder, landlords may be able to take advantage of the Governor’s mortgage forbearance agreement, or federal forbearance programs through Fannie Mae and Freddie Mac. But other expenses including utilities, maintenance, and property taxes continue. At the same time, janitorial services and cleaning supplies are in high demand, increasing the financial strain on landlords already operating on tight margins.

Small Business Paycheck Protection Program and Economic Injury Disaster Loans Have Run Out of Money

Landlords were among the small businesses the federal government hoped to help with its Paycheck Protection Program. This action assigned $349 billion to the Small Business Association to issue loans to small businesses with the goal of keeping employees on staff and rent, mortgage, and utility costs paid. The PPP loan applications were available starting April 3, 2020, and the SBA promised the program would be available through June 30, 2020.

Similarly, many landlords would qualify to apply for the SBA’s Economic Injury Disaster Loan (EIDL). This program allows small businesses with less than 500 employees to receive funds to overcome temporary revenue losses due to the pandemic. However, by April 16, 2020, the entire bailout had been loaned out. The SBA announced it was unable to accept new applications for either program without more funding.

Options Available to Small Business Landlords

By extending the “Stay Safe, Stay Home” order, Governor Lamont indicated that the COVID-19 shut downs aren’t going away anytime soon. With May due dates looming, landlords may feel trapped. But there are options available.

The good news for the PPP and the EIDL is that federal lawmakers have just approved additional funds to support small businesses. Even though applications are currently closed, landlords can prepare now to apply when the next round of funding becomes available.

Landlords may also qualify for a Main Street Loan through the Fed. While interest rates are higher than the PPP and there is no loan forgiveness available, these loans can provide millions of dollars to landlords to cover business expenses during the COVID-19 shutdown. Landlords with mortgages may also qualify for forbearance under the federal program, or may be able to obtain business credit or alternative payment options by negotiating now, rather than waiting until their financial situations become dire.

At The Lebedevitch Law Firm, we understand how landlords are hurting during this pandemic. We can help you assess your options and know what to do next to protect your claims for unpaid rent. We can help you negotiate with your bank and creditors so you can weather the storm. Contact The Lebedevitch Law Firm today to schedule your free consultation.

Categories: Landlord Tenant