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How Pandemic-Related Executive Orders Impact Real Estate

06/02/2021

In 2020 and 2021, Gov. Jared Polis issued 17 executive orders that impact commercial real estate landlords and tenants. Some of these orders delayed commercial evictions, while others prevented landlords from charging late fees and interest when a tenant failed to pay rent on time. The numerous rules imposed by the executive orders are not easy to track. Over the last year, landlords, tenants, lawyers and judges have struggled to define when a commercial landlord could evict a tenant or assess late charges and interest for late payments. Below are answers to the most frequent questions raised by the various executive orders.

Is there a moratorium on commercial evictions? No. There is a federal moratorium on residential evictions that was extended through June 30, but that moratorium is the subject of multiple legal challenges. Gov. Polis’ most recent executive order on evictions provides additional time for residential tenants to cure defaults. However, neither rule applies to commercial tenants. There currently are no restrictions on commercial evictions, and a commercial tenant that does not pay rent on time is subject to eviction.

Do the executive orders currently impact the commercial eviction process? No. For approximately three months in late 2020, the executive orders required landlords to provide tenants with 30-days’ notice of a default for nonpayment of rent before commencing an eviction suit. Normally, a commercial landlord is required to provide a tenant with three-days’ notice of a default for nonpayment of rent before commencing an eviction. During this three-month period, landlords also had to provide their tenants with 30 days to cure a default for nonpayment. These restrictions are no longer in effect, and the commercial eviction process has returned to normal.

Can commercial landlords charge late fees and interest? Yes. The suspension of a landlord’s contractual right to charge late fees and interest expired April 27. As of April 28, landlords can charge late fees and interest when a tenant fails to timely pay its rent.

While it is clear that landlords now can charge late fees and interest, the rules for charging late fees and interest over the last year depend upon the date when a tenant failed to pay rent.

The executive orders prohibited landlords from charging late fees and interest between May 1, 2020, and June 13, 2020, and between Oct. 15, 2020, and April 27, 2021. Although courts have not decided whether landlords could charge late fees and interest for defaults that took place between June 14, 2020, and Oct. 14, 2020, it does not appear that the executive orders were intended to suspend the assessment of late fees and interest between that time frame. There are two primary executive orders that addressed the assessment of late fees and interest.

Section II.C of Executive Order D 2020 101 states, “Landlords and lenders are prohibited from charging any late fees or penalties for any breach of the terms of a lease or rental agreement due to nonpayment that were incurred from May 1, 2020, until June 13, 2020.” This executive order confirmed the effect of Executive Orders D 2020 51 and D 2020 88 and the suspension of the assessment and accumulation of late fees and interest that accrued between May 1, 2020, and June 13, 2020.

In August 2020, Gov. Polis established a Special Eviction Task Force to assist in responding to the economic impacts of the pandemic. The Special Eviction Task Force issued a report of its findings Oct. 9, 2020. Executive Order D 2020 223, which went into effect Oct. 15, 2020, implemented a number of these findings. This executive order addressed both residential and commercial evictions and included one section, Section II.C, which prevented landlords from charging late fees and interest when a tenant failed to timely pay rent.

Section II.C of Executive Order D 2020 223 states, “No landlord, mobile home park owner, property management entity, or any individual or entity acting on behalf of a landlord, mobile home park owner, or property management entity shall charge a monetary sum, fee, or other penalty against a tenant or mobile home owner for failure to timely pay any portion of rent, beginning the day this Executive Order is executed. Any fee or penalty assessed on or after January 1, 2021, shall apply only to rent due on or after that date.”

Gov. Polis’ news release announcing this order clarified that Executive Order D 2020 223 was intended to suspend the assessment and accumulation of late fees and interest until Dec. 31, 2020. The Special Eviction Task Force’s report explained that the task force had considered, but rejected, the retroactive application of the suspension of late fees and interest to the beginning of the pandemic. While landlords and tenants are likely to take different positions on whether late fees and interest could be charged between June 14, 2020, and Oct. 14, 2020, the task force report clarifies that the task force did not recommend the retroactive suspension of late fees and interest, and Gov. Polis’ news release does not mention the retroactive suspension of late fees and interest.

After Oct. 15, 2020, Gov. Polis extended the suspension of the assessment of late fees and interest four times. Executive Orders D2020 307, D 2021 029, D 2021 052, and D 2021 073 extended the effect of Executive Order D 2020 223 through April 27, 2021. As of April 28, 2021, commercial landlords can again charge late fees and interest.

Commercial real estate eviction rules for landlords and tenants have now returned to their prepandemic state. While this is not the marker of normalcy anyone is looking for, it is a sign that better times are ahead for the commercial real estate community. 

This article was originally published in the June 2 edition of the Colorado Real Estate Journal.

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