Executive Order 2020-21 – Prohibiting Small Business Evictions – Posted on 4/8/2020

Executive Order 2020-21 – Prohibiting Small Business Evictions – Posted on 4/8/2020

Summary

On Monday, April 6, 2020, Governor Ducey issued an order (EO 2020-21) suspending eviction actions against small businesses through May 31, 2020. This order applies to commercial landlords and tenants in Arizona and is designed to provide temporary relief to small businesses and non-profits who are unable to pay rent due to temporary financial hardship caused by the COVID-19 pandemic.

Who qualifies for relief

Commercial tenants who are eligible for the federal Paycheck Protection Program, which are businesses with fewer than 500 employees, such as:

  • Sole proprietors
  • Partnerships
  • C-Corporations
  • S-Corporations
  • Limited liability companies
  • Independent contractors
  • Self-employed individuals
  • Non-profit organizations
  • Tribal businesses

What it means for commercial tenants

Small businesses who cannot meet their rent payment obligations due to financial hardship caused by COVID-19 cannot be evicted if they comply with the following requirements:

  • Provide written notice to Landlord or property owner as soon as practicable with any available supporting documentation of their inability to pay rent due to COVID-19;
  • Acknowledge in the written notice that contractual terms of the lease remain in effect;
  • Seek delay in eviction, lockout, other inhibition of operations, or request a reduction or deferral of rent payments;
  • If the tenant receives financial assistance from public programs (eg. a PPP loan) the tenant must apply a portion of the eligible assistance to rent payments, however, no specific amount or percentage of the financial assistance is required.

Note: The order provides only temporary relief from eviction actions though May 31, 2020, but does not relieve commercial tenants from their obligations under any applicable lease. Importantly, payment of rent is not forgiven. Rather, commercial tenants will have to negotiate rent reductions or deferral of rent payments with their landlords. Finally, the order does not apply to eviction actions or proceedings initiated prior to March 11, 2020.

What it means for commercial landlords

Commercial landlords who receive written notifications from their tenants that comply with the requirements above must suspend any eviction actions against the tenant. “Eviction action” is broadly defined to include: lock out, notice to vacate, or any other attempt to inhibit the operations of a business.

Commercial landlords are encouraged, but not required, to do the following:

  • Defer or adjust rent payments;
  • Work with tenants to waive late fees, penalties and interest associated with late rent payments and develop rent repayment plans.

Commercial landlords cannot require tenants who receive financial assistance from public programs (such as the PPP) to apply a specific portion or percentage of that assistance to payment of rent, though a portion of eligible assistance must be applied to such payments.

Miscellaneous provision for commercial lenders and borrowers

Commercial landlords who suspended evictions of their commercial tenants as required by this order may seek forbearance of mortgage payments from their real estate commercial lenders and such lenders must consider the request, though they are not required to grant it. This provision applies only to mortgages on commercial property located in the State of Arizona.

The full text of the order can be found here: https://azgovernor.gov/sites/default/files/eo_2020-21_prohibiting_small_business_evictions.pdf

Can AWD LAW help me?

AWD LAW is here to answer your questions. This summary is intended to serve as general information for interested persons, but it is not legal advice for any specific situation. AWD LAW attorneys are available to answer fact-specific questions for our clients. Our number is (928) 774-1478.

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