Major Changes Coming To Rental Property In New Hampshire On July 1st

Beginning on July 1 there will be major changes to the prior eviction stays in New Hampshire that were put in place through Executive Orders earlier in the pandemic. However, apartment tenants who have concerns about rent payment should be able to access the new $35M fund that will be set aside for assistance.

On the apartment rental side, throughout the pandemic there has been some concerns about payment of rent from both renters and landlords. While unemployment rates have risen to historical highs, renters without jobs have been concerned about payments. Offsetting these concerns has been an infusion of additional funds from the federal government to increase unemployment benefits. The net result has been that tenant defaults and rent contraction has yet to surface in a major way. However, with the expiration of the expanded unemployment benefits, there is concern of some folks losing their ability to pay.

The CARES Act, passed by Congress, also afforded each state with so called Flex Funds. New Hampshire’s share was $1.2B, and it has been used for various COVID related challenges. One recent announcement, was that Governor Sununu will be taking some of those funds and directing them to housing assistance:

“Governor Chris Sununu has authorized the allocation and expenditure of $35 million from the CARES Act Coronavirus Relief Fund (“flex funds”) to support families or individuals in need of housing assistance as a result of COVID-19. Of the allocated $35 million, $20 million will be initially expended, with $15 million being held in reserve, for rent stabilization and housing support.”

The goal of the program is to provide assistance for those folks who may not have the funds to pay, or may otherwise have back payments on their apartments that they may need to clear up. More on the fund can be found here: https://www.goferr.nh.gov/covid-expenditures/new-hampshire-housing-relief-program.

The goal is to have the funds and the distribution set up by July 1, which coincides with the reopening of evictions.

On March 17, the Governor announced that he was putting a freeze on evictions throughout the pandemic. While there were a narrow band that could move forward, non-payment evictions were stopped. As a practical matter, with the court system shut down, there was no channel for the process to go through. This stay on evictions was for all asset classes. Office, Industrial, Retail, and Apartments, were all collectively stayed on having evictions. As of July 1 this is being lifted as a result of Executive Order 51. More info on this can be found here: https://www.governor.nh.gov/sites/g/files/ehbemt336/files/documents/emergency-order-51.pdf

It is clear that the goal is to soften the concern of non-payment by providing some floor of support to those in need through the $35M flex funds, and dove tailing that with the lift on the eviction freeze. It is worth noting that many landlords and tenants on the commercial side have worked through payment plans, and the hope is that the landing this summer, for all asset classes, will be as soft as it can be.

Landlords and tenants alike should also take interest in the fact that the Executive Orders are not the only governing documents relating to evictions. As part of the CARES Act, the federal government did put a stay on evictions for certain federally backed mortgages on apartments. All parties should research accordingly.

July 1 is right around the corner, and it is very important for all parties to read about the funds, understand if there is appropriate access to them, and see how these new orders affect them, their families, and their businesses.

Leases In The Time Of COVID-19

COVID-19 has had a giant impact on our way of life, though at his point that doesn’t need to really be said. But with every day that brings us a new normal that we have to adjust to, it also brings new repercussions. That is also true for the commercial real estate sector, particularly commercial real estate investors and users.

As more and more businesses begin to shut their doors to work from home, or because of government mandates, questions have begun to arise for both owners of commercial spaces and their tenants. The biggest question of all, “do tenants have a right to stop paying rent due to the coronavirus?” This is a complicated question, one that, depending on how long the pandemic lasts, might be answered by the state, if not federal, government.

The answer to the question is, in most cases, no. Whether a tenant has a right to stop paying rent due to “force majeure” or any other number of clauses is ultimately based upon the specific language and terms laid out in each specific lease agreement. This, though, does not take into consideration if a floor or entire building is closed down by either the property manager or owner. Before mandating a floor or building closure, landlords and property managers should carefully review all possible impacts that decision could have.

While the legalese of each specific lease will ultimately determine whether a tenant is required to pay rent, landlords and tenants should still review their leases to ensure they understand their rights in these unprecedented times. 

At the end of the day though, due to the stress that many tenants, especially those in retail and hospitality, will be feeling at this time, the government may see it fit to step in and take extraordinary measures to ensure that businesses and people survive the financial impacts of the pandemic. For multifamily owners and tenants there have already been discussions within government of suspending rent payments, and some states, including New Hampshire, have already suspended evictions. This is also inclusive of commercial evictions as well.

The most important thing for tenants and owners to do right now is open up communication channels to discuss issues both tenant and landlord face, and come up with creative solutions that benefit both parties. For example, relaxing enforcement of continuous operation covenants, or, if a tenant comes to a landlord needing rent relief, entering into short-term arrangements that provide partial base rent abatement.

While challenges do indeed lay ahead, they can be overcome. By understanding that we are all feeling financial and personal stress right now, and finding ways to work with each other, we can come to a common ground that is fair to both parties. Taking this approach in life, and in real estate, will make dealing with the effects of COVID-19 at least a little easier to handle.

Nothing is Certain Except CAM and Taxes

written by Chris Norwood, NAI Norwood Group

The New Year’s parties are over. The champagne flutes and funky glasses are packed away for another 12 months. It is that time of year for resolutions and CAM review.

It is time to break out the lease and find out who is responsible for increases in expenses. Common Area Maintenance (CAM) and Taxes are expenses that are paid for by a tenant in a triple net lease. When the Real Estate Taxes or the CAM go up (or down in some cases) the tenant is responsible. Even in some gross or modified gross leases the tenant still has to pay for the overage charges if the expenses go up.

Typically as a tenant pays their rent on a triple net basis, the monies that get paid in rarely equal the actual expenses. Snow falls differently than budgeted, there is more landscaping that takes place, or the taxes went up. At the beginning of the new year the tenant should received a statement of what they paid in and what the new budget for the following year is. For triple net and some gross leases the tenant will be responsible for this increase marching forward. On most triple net leases the tenants will also have to look back over the previous year and come out of pocket for any difference in the expenses in one stroke.

If you are a landlord or a tenant, take the new year to review these clauses of your lease. In addition be on the lookout for expense “stops”. A stop is when one of the parties has a cap on their exposure to increases. For example there may be a tenant “stop” of a 3% increase annually on real estate taxes. Therefore a tenant shall pay for the first 3% increase but then the landlord picks up the balance. You should look into these details on your lease to see what your exposure is.

There are no guarantees and leasing is no exception. As such there are no “standards” when it comes to lease language, you must consult your own lease and your own counsel if necessary.  However, our team is always available should you have any questions on this clause or any other’s in your lease, we will be happy to point in the right direction.