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Texas Trinity Team is being proactive regarding the current situation with COVID19. Here is the latest advice from Texas Association of Realtors (TAR) as well as from CCIM Institute. Of course, our blog is not meant to interpret law. We encourage you to speak to your risk advisors or attorneys on these matters related to COVID-19.

Current Federal and State mandates have prohibited any foreclosures or evictions for two months. It is important to review all Federal, State and Local orders in regards to how missed rent payments or late payments are to be handled. We need to be mindful that these new regulatory orders may supersede language within lease agreements. 

TAR recommends the following: 

• Landlords should consult the CDC website for recommendations to create written protocols and procedures that include how to deal with an outbreak and prevent the spread of the virus in the building, as well as recommended communications to tenants.

• If you are notified that a tenant has received a positive diagnosis, you should communicate with the tenant to ascertain what prevention measures that tenant is taking and whether additional communications to other tenants are necessary. Keep all communications confidential to make sure you are complying with your health-related confidentiality obligations (such as the ADA)

Source: www.texasrealestate.com/about-us/newsroom/coronavirus-faqs/coronavirus-faqs-leasing-property-mangement/

Insurance May Not Cover Tenants

In addition, Landlords and Tenants need to check their insurance policies. Tenants may not be covered for business interruption and here is why: business interruption insurance policy should list or describe the types of events it covers. Some policies require business interruption to last for a certain time period before being entitled to any policy benefits. The concern is that business interruption coverage typically can only be triggered if you have property loss that leads to the business interruption. At this time, tenants have not experienced property loss. All parties need to consult with their insurance providers.

Source: www.dfs.ny.gov/consumers/coronavirus/business_interruption_insurance_faqs

How Landlords Can Respond

The CCIM Institute states “it is only a matter of time before tenant’s approach landlords about negotiating rents. When a business closes suddenly, even if it's temporarily, there are no winners in this situation. Here are some viable alternatives to mitigate this issue:

• Rent Reduction. The landlord can reduce the tenant's rent for a portion or all of the term left on the lease. The usual forms of rent reduction are to reduce the base rent, operating expenses, or both. In regard to retail, it is possible to convert base rent to percentage rent. 
• Rent Deferral. In this case, the landlord can defer a portion of the tenant's rent but would require them to repay the rent deferred at a later time, either in a lump sum or by increasing subsequent payments. A variation of rent deferral could be to cap or set a base year to operating expenses for a short or extended period of time.
• Rent Abatement. If a tenant is significantly past due on rent payments, a landlord may agree to forgive a certain amount of the past due rent if the tenant remains current thereafter.
• Loan Conversion. Rather than abating past due rent, a landlord may agree to convert the past due rent into a loan payable over time. The tenant would, however, continue to pay the current rent. The loan is then evidenced by a promissory note that is cross-defaulted with the lease.
• Application of Deposit. If the landlord holds a deposit, this amount could be credited against the tenant's current obligations.
• Subletting. Bringing in a new tenant (for part of or all of the rented space) could reduce or eliminate the rent obligations while replacing revenue for the landlord.

Source: www.ccim.com/cre-tenant-landlord-guidance/?gmSsoPc=1

There are additional recommendations that can be offered to tenant. We want to assure you that we are working hard to assist you at this time. Reminder! To Stay Home, Stay Safe. Let's help Flatten the Curve. Let’s find some time to visit real soon. Virtually, that is. 

Miki McCarthy, REALTOR®, GRI 

Texas Trinity Team | Designated Supervisor

C 956-249-9454 | www.MikiMcCarthy.com  

Texas Premier Realty | Broker Daryl Zipp 

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