CRE Landlords Will Proceed to See Misplaced Income Via 2021

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Where Are Retail Rents Heading?

Landlords are likely to continue to struggle until next year. Apartment landlords in particular are exposed to loss of income, payment delays and leasing problems. Currently, an eviction moratorium, in effect until the end of the year, has exacerbated problems for landlords who have few options in the face of non-payment. While the court system will help rebalance the dynamics between landlords and tenants, it will not solve all landlords' problems. Once the moratorium is lifted, landlords are likely to see a surge in eviction disputes and continued payment problems and lost revenue through 2021.

"Unfortunately, landlords will have to contend with significant delays, lost revenue and additional expenses well into 2021, even if the current eviction bans are not extended." Sean Gaffney, a partner with Crosbie Gliner Schiffman Southard & Swansontells GlobeSt.com.

Owners have a few options. Some solutions could be encouraging tenants to vacate the property or working with tenants to come up with a solution and mitigate a controversial relationship if one exists. “Prudent homeowners should consider takeovers and other incentives that will allow struggling tenants to return to their homes more quickly. As far as the financing situation of a landlord allows, lease extensions and rent reductions / deferrals should be considered, which lead to income until the immediate backlog in new eviction cases is resolved, ”says Gaffney.

Expect a long process for landlords seeking an eviction. Initially, the courts will be flooded with litigation, but in addition to litigation, the courts will also see an increase in other types of litigation that have been suspended during the pandemic. Overall, this will generally delay the judicial process. "I anticipate a wave of new labor disputes with claims from key workers and retail employees related to allegations of inadequate safety at work, when public health contracts are suspended or changed and consumer-facing inpatient businesses reopen and expand their services," said Gaffney.

Additionally, Gaffney says lender liability claims could populate the court system as well. "I also expect a surge in lender liability claims, which typically occur after every recession and should recur in 2021 as smaller borrowers and franchisees default in payments in heavily impacted industries," he added.

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