CRE Landlords Will Continue to Lose Revenue Through 2021

Landlords will likely continue to see hardship through next year. Apartment landlords in particular are exposed to lost revenue, payment delays and leasing issues. Currently, an eviction moratorium—now in place through 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 to rebalance the dynamic between landlords and tenants, it won’t solve all of landlords’ problems. Once the moratorium is lifted, landlords will likely see a surge in eviction litigation, continued payment issues and lost revenue through 2021.

“Unfortunately, landlords will still be dealing with substantial 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 & Swanson, tells GlobeSt.com.

Owners do have some options. Some solutions include encouraging tenants to vacate the property, working with tenants directly to find a solution and alleviating an adversarial relationship, if one exists. “Prudent owners would do well to consider buyouts and other incentives that will allow for the quicker recovery of possession of attractive properties from struggling tenants; to the extent a landlord’s financing situation permits, consideration should be given to lease extensions and rent reductions/deferrals that provide for some income pending a resolution of the immediate backlog of new eviction cases,” says Gaffney.

Landlords seeking an eviction should expect a long litigation process. To start, the courts will be flooded with litigation requests once the ban is lifted, but in addition to evictions, courts will also see an increase in other types of litigation that have been on hold during the pandemic. In all, this will delay court proceedings in general. “I expect a wave of new employment litigation involving claims by essential workers and retail employees  related to allegations of inadequate workplace safety measures as public health orders are lifted or modified and consumer-focused brick and mortar businesses reopen and expand their services,” says Gaffney.

Landlords won’t be the only entity filing litigation proceedings. Lender liability claims could also populate the court system. “I also expect to see an increase in lender liability claims, which typically occur after every recession and should happen again in 2021—as smaller borrower-operators and franchisees in severely affected industry sectors are driven into default,” Gaffney adds.