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COVID-19: Should Landlords Apply Security Deposits to Unpaid Rents?
Many landlords of shopping centers and other commercial buildings have been asking whether landlords can begin eviction proceedings or exercise other lease or legal remedies now that tenants have missed April rent payments. While there are currently several bills in various stages of being passed into law in several states as of early April, which would restrict, on a temporary basis, the eviction of commercial tenants from their leased premises for failure to pay rent, the current restrictions only apply to residential tenants throughout the country.
Just recently, the Massachusetts state senate passed a bill that prohibits all non-emergency evictions for small businesses and prohibits evictions and foreclosures for residential properties for at least 120 days after the bill is signed by the governor. The legislation also prohibits late fees or negative credit reporting for non-payment of rent if the lack of payment if the lack of payment is due to financial impact related to COVID-19. Several other states are passing similar bills on a temporary basis. Whether these bills get signed into law and survive judicial scrutiny remains to be seen. And since most judicial proceedings have come to a standstill, eviction or other proceedings do not seem to be a wise choice at this time.
The question then logically follows whether, instead of taking the severe remedy of evicting a commercial tenant, or applying late charges, a landlord may enforce the security deposit section of its lease and take the deposit should the tenant miss a rent payment.
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