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Massachusetts Eviction Moratorium and Small Business

The Massachusetts legislature recently passed a moratorium on evictions during the COVID 19 emergency.  After much debate about whether this should be limited to residential tenants or also provide protection to commercial tenants, the ultimate compromise includes small businesses.  To a point.

For small business owners looking to find any way to control expenses during this time, the eviction moratorium may be welcome relief.  But it is important for you to understand the limits of this protection as it applies to your business, so you can make informed decisions about how to manage your rent expense during this time.

Eviction Moratorium: The Basics for Small Business

The moratorium as passed is active through August 18, 2020.  The Governor may extend it for 90 day periods, so long as it ends no later than 45 days after the end of the current State of Emergency.

Under the new law, all landlords are precluded from instituting court proceedings to evict tenants.  This applies to residential tenants and small businesses, so long as the business does not operate in multiple states or multiple countries, and has fewer than 150 employees.

Your landlord also may not impose late fees or report nonpayment to credit reporting agencies during the moratorium period, if you provide documentation that nonpayment was due to the impact of COVID 19.

There are other protections that are available for residential tenants but not for small businesses.  For example, a commercial landlord may still send a notice terminating the tenancy. 

Your landlord may also still pursue remedies for breaches of the lease that occurred before the COVID 19 emergency.  This would apply, for example, if you were already behind on your rent payments.

Commercial Evictions Under the Moratorium

In Massachusetts, a residential tenant cannot be evicted without a judicial proceeding known as summary process.  This means a landlord cannot remove a tenant’s belongings, lock a tenant out of premises, or issue a “no trespass” order without a court order.  For residential tenants, therefore, the freeze on filing eviction proceedings with the courts is an absolute protection against eviction.

In contrast, a commercial lease can include a provision that allows the landlord to effectively engage in “self-help” eviction.  If your lease does not have such a clause, the law requires the landlord to proceed through the courts and give you the right to cure any nonpayment or other breach.  Under this set of facts, the moratorium does protect your small business from eviction.

If your lease has a provision specifying the landlord’s rights on default or breach, whatever your lease says will control.  In the event that the lease allows your landlord to change the locks, take possession of the property on the premises, or otherwise exclude you, they will still be able to do that even under the moratorium.

Your First Step: Understanding Your Lease

If you think you may need help with your rental payments during the pandemic, the first place you should start is understanding the terms of your commercial lease.  This includes:

• Does your landlord have the right under the lease to evict you without going to court;
  
• Are there any provisions that might excuse your performance under the lease;
• Are there any things that the landlord promised to do that they have not done;
• What is the extent of your business’ liability if you breach the lease;
• Do you have a personal guarantee associated with the lease?

All of these will inform your strategy with respect to the landlord and how you manage rent.  An experienced business attorney can help you understand the provisions in your lease, as well as advise you about your negotiation strategy.

The Eviction Moratorium: Negotiating With Your Landlord

The eviction moratorium, even if it does affect your lease, does not relieve you of the obligation to pay rent.  At most it will allow you to remain on your premises during the state of emergency, but eventually the past due rent will have to be paid or your landlord will have the right to evict you.

This means it is important to have a discussion with your landlord rather than simply stopping rent payments if you believe you cannot sustain your regular payments during the pandemic.  They may be willing to accept a lesser payment in order to keep some revenue coming in the door.

Whether it is simply deferring payments or actually forgiving part of your monthly rent, there may be plenty of reasons for your landlord to be willing to negotiate with you even if the lease allows them to evict you without a court proceeding.  These include:

• Some revenue is usually better than no revenue, which means they may accept a lower payment that you can commit to making;
• They may have insurance that covers their losses in whole or in part; and
• They are in the same pandemic that you are.  This means their options for re-renting the space are likely limited if they have to terminate your tenancy.

Need Legal Advice About the COVID 19 Emergency?

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How Can We Help?

We can help answer your specific questions about managing this COVID-19 crisis.  We can help you evaluate your rights and obligations under your commercial lease.  We can also help you develop a negotiation strategy, and negotiate payment accommodations during this time. 

We routinely conduct consultations and meetings by phone or video-conference, so you can reach out without increasing your exposure to the virus.  You can use the button below to schedule a call back from a member of our team, give us a call at  781-784-2322, or fill out our web form  to let us know a little more about your situation.

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