05/04/2020

Corona Virus: Self-Storage and COVID-19 - May 2020 Continued Response

From: Richard Marmor 

Chair, Legal & Legislative Committee Arizona Self-Storage Association 

Self-Storage & Covid-19

May 2020 Continued Response

Previously

Recognizing that self-storage is just another division of the broader commercial real estate industry, we are reminded that at bottom we are landlords.

The Governor’s Executive Order 2020-14 issued on March 24, 2020 entitled “Postponement of Eviction Actions,”suspended all residential evictions for a period of 120 days (through July 22, 2020). The justification included in the order being stated as “those who must self-isolate or who are unable to work, may experience a decrease in income and thus their ability to pay for regular living expenses.” While this order is expressly limited to residential leases, it manifests the character of thinking being applied to the crisis.

On March 30, 2020, in asking for protection of small businesses and families from eviction and foreclosure, Governor Ducey stated, “We’ll need the continued partnership of Arizona’s banks and landlords to help those facing economic loss because of COVID-19.”

In response, Arizona self-storages stepped up and suspended all auctions through April 30, 2020, forestalled rent increases, and abated late fees.

Subsequently

On April 6, 2020, Executive Order 2020-21, “Prohibiting Small Business Evictions,” was issued, saying, inter alia:

As the state works to mitigate the effects of COVID-19, it is necessary to ensure that essential functions of the public and private sector are not interrupted to ensure the public health, safety and welfare of our citizens; and

Many commercial landlords have proactively taken action to ensure that there is no interruption to essential functions by informing commercial tenants that action will not be taken against them for the next sixty to ninety days if due to the effects of COVID-19, the commercial tenant is unable to pay rent as promised; and

During this public health emergency, commercial evictions and foreclosures destabilize local economies and threaten designated essential businesses and operations.

Therefore the Governor ordered that effective through May 31, 2020:

1. Unless a court determines on motion of one of the parties that it is contrary to the interest of justice, a commercial eviction action including lock out, notice to vacate, or any other attempt to inhibit the operations of a business shall be temporarily suspended for tenants unable to pay rent due to financial hardship caused by the COVID-19 pandemic. [emphasis added]
2. Commercial landlords shall consider deferring or adjusting rent payments for commercial tenants that are unable to pay rent due to financial hardship caused by the COVID-19 pandemic.

3. Commercial landlords are encouraged to work with tenants to waive late fees, penalties and interest associated with late rent payments and develop rent repayment plans for those tenants unable to pay rent due to financial hardship caused by the COVID-19 pandemic.

4. A commercial tenant that is suffering any of the above circumstances and seeks a delay in eviction, lock out, other inhibition of operations, or requests a reduction or deferral of rent payments shall notify the landlord or property owner in writing as soon as practicable with any available supporting documentation of their inability to pay rent due to temporary financial hardship and acknowledge that contractual terms of the lease remain in effect.

5. Any commercial tenant that receives financial assistance from public programs designed to assist businesses suffering hardships from COVID-19 shall apply a portion of eligible assistance to any past or currently due rents. Landlords may not require that commercial tenants apply specific percentages or amounts of financial assistance to commercial rent.

As commercial landlords, this order does apply to self-storage.

AZSA Recommended Policies Through May 31

Auctions: Although the executive order above applies specifically to self-storage’s treatment of commercial tenants, auctions of ALL tenants should continue to be suspended. People everywhere are suffering during the pandemic. Self-storage should not be adding to their pain by causing anyone to lose their possessions on top of it.

Over-Locking: Over-locking of a commercial tenant would inhibit the operation of a commercial tenant. Therefore, when over-locking, storage operators should implement some means for tenants to come forward and appeal the over-locking based upon the impact of the Covid lock-down.

Commercial Tenants - In the case of an over-lock appeal by a commercial tenant, the over-lock must be removed.

Non-Commercial Tenants - Although the executive order does not compel removal of over-locks for non-commercial tenants, it is strongly recommended that storage operators review each case be individually, and that an underlying policy of leniency be implemented to the extent reasonably possible.

Late Fees: Current late fees should not be charged as to ALL tenants, and it is recommended that operators consider waiving any previously accrued late fees on a case by case basis, again implementing a policy of leniency to the extent reasonably possible.

Rent-Increases: Rent increases as to all tenants should continue to be suspended.

After May 31, 2020

The public’s suffering due to the crisis will not simply stop on May 31, 2020 even if all lock-down restrictions will have been lifted. There will have to be some recovery time. It is possible therefore that some or all of these policies may have to be extended beyond that date. Please watch this website for further information.

Once again, when we are able to look back on this troubled time, we want to be proud of how our industry did its part to help the public.