Hidden Benefits of the Paycheck Protection Program for Landlords and TenantsMarch 31, 2020 | Scott L. Feuer | Marie A. Landsman | Amy L. Silver |
With “stay at home” orders in effect throughout the United States, business has come to a virtual standstill in many markets, resulting in the closure of stores and offices, layoffs and furloughs of employees and other actions. As a result, nearly every commercial landlord and tenant is facing unprecedented challenges. Landlords and tenants alike are having tremendous anxiety about paying their upcoming bills. Tenants who have been forced to close their businesses or are at risk of doing so, face serious cash flow shortfalls and are inundating landlords with phone calls and emails asking for a reduction or total abatement of rent. Landlords, in order to continue to keep a building running, need rental income to pay their bills including mortgage payments, taxes, utilities, insurance, maintenance, cleaning, etc.
Now more than ever, landlords and tenants must understand the assistance available to them and work cooperatively to maximize all available benefits.
The federal government has stepped in and is providing loans of up to $10 million to small businesses/tenants, which will enable them to meet their rental obligations and thereby help landlords pay real estate taxes and other building operating expenses. Subject to eligibility requirements, landlords may also qualify for a loan pursuant to this new program.
The Paycheck Protection Program (also known as the Coronavirus Aid, Relief, and Economic Security Act or CARES) contains important economic benefits including loan forgiveness for payroll expenses incurred by small businesses/tenants who borrow funds under this program. Although the name of the program seems to limit benefits to payroll expenses, loan forgiveness also applies to other expenses such as rental payments on lease agreements, payment of utilities and mortgage interest payments, all designed to keep businesses operational as they navigate the COVID-19 landscape and the resulting economic challenges.
For additional information on the Paycheck Protection Program, click here.
Additionally, tenants who are facing cash flow problems should contact their insurance carriers to determine whether their business interruption insurance policy will pay claims for lost income arising from the inability to operate due to the forced closure of their business by governmental authorities or other covered risks. If tenants are able to pay rent from business interruption insurance proceeds, these funds will, in turn, enable landlords to pay building operating costs to ensure that properties will be maintained and ready for tenants to resume business operations when the current restrictions are lifted.
This is a brief summary of the Paycheck Protection Program as it pertains to landlords and tenants and does not include all of the terms and specific requirements of this program. Information concerning the Paycheck Protection Program continues to evolve in real time and Rivkin Radler’s attorneys are available to assist landlords and tenants in navigating their eligibility for the Paycheck Protection Program.
- Scott L. Feuer
- Marie A. Landsman
- Amy L. Silver