The various state and federal eviction moratoriums have been confusing to say the least. From the Federal CARES Act to various Arizona Executive Orders governing commercial and residential evictions to the CDC Eviction Moratorium, a number of protections were put in place specific to commercial and residential tenants in Arizona. Absent a lease provision to the contrary, Arizona landlords have the authority, in general, to take back possession of commercial property if the tenant is more than five days delinquent on rent. Since May 31, 2020, no federal or state orders have been in effect protecting commercial tenants, leaving commercial tenants in a vulnerable position.
Here’s what commercial tenants and landlords need to know about the current state of the law.
Executive Order 2020-21: Prohibiting Small Business Evictions in Arizona
Governor Ducey signed Executive Order 2020-21 into law in April 2020 putting into place a ban on commercial evictions for small businesses in the state. The order applied to businesses with less than 500 employees in the state. The order was only in place until May 31, 2020, but did provide some guidance to landlords and tenants for resolutions to past due rental payments.
The order prevented commercial landlords from locking out tenants or engaging in any other type of eviction activity for the duration of the order The order did not provide any debt forgiveness to commercial tenants, but did provide suggestions and recommendations to commercial landlords, including restructuring past due amounts to assist the tenant in getting up to date on payments. The order also encouraged, but did not require, landlords to forgive late fees and penalties for past due rental payments.
The CDC Eviction Moratorium only applies to Residential Tenants
The CDC’s extended eviction moratorium only applies to residential tenants and did not include additional protections for commercial tenants. Arizona law provides multiple paths for a commercial landlord to take back possession of a property when rent is delinquent or pursue eviction. Arizona landlords would be wise to work with an experienced real estate attorney before pursuing either path with past due rent. While an Arizona commercial landlord can take back possession, they need to make sure they have made a concerted effort to review the lease in its entirety to confirm a lock out is an appropriate remedy at law.
Arizona landlords can also pursue an eviction lawsuit through the court system. This is typically the preferred path for a landlord when there is a significant amount owed from the tenant and they would like to obtain a financial judgment, or, if the lease prohibits a lock out remedy.
However, a business that cannot pay rent is unlikely to be solvent and the ability to collect any of that judgment would not likely be feasible. It is best to review your options with an Arizona real estate attorney before proceeding. There are many cases where the available options will be limited by the lease agreement, the status of the tenant’s business, and whether you have a guarantor included in the lease.
Arizona landlords should also consider the true costs of finding a new tenant for their building. The best option for many situations might be pursuing a restructured or new agreement with the tenant that gets the tenant back to paying rent and operating their business successfully again. If a business operated out of that location for many years with no issues, landlords that work with their existing tenants to find a fair resolution can help Arizona small business owners and likely gain a trusted tenant for the life of their business.
Find an Experienced Real Estate Attorney in Arizona
Whether you are a commercial tenant or landlord, the pandemic has presented many challenges to running your business. That has been complicated even more by the array of state and federal programs designed to help struggling tenants, while often neglecting real challenges for landlords. M&G has a team of real estate legal experts to help overcome those challenges and pursue resolutions to these commercial real estate issues. Ask us about our “eviction consultations” by contacting us today at 602-726-2229 or making an appointment online here.