Arizona Gov. Prohibits Small Business Eviction Actions

To all Arizona commercial property owners, property managers, and tenants, please be advised that pursuant to Executive Order 2020-21, effective March 11, 2020 through May 31, 2020, Gov. Ducey has ordered that commercial eviction actions including lock out, notice to vacate, or any other attempt to inhibit small business operations “shall be temporarily suspended for tenants unable to pay rent due to financial hardship caused by the COVID-19 pandemic.” Instead of taking any enforcement action during this period, commercial landlords are encouraged to defer or adjust rent payment obligations, and waive late fees, penalties, and interest that are otherwise provided for under the lease.

Any commercial tenant suffering a COVID-19 financial hardship (an undefined term), shall notify the landlord in writing as soon as feasible with any supporting documentation of the tenant’s inability to pay rent due to temporary conditions and must acknowledge that the lease remains in effect. To the extent that any commercial tenant receives financial assistance from a public program designed to assist businesses suffering COVID-19 hardships, a portion of the assistance funds must be applied to pay any past or currently due rents. However, the Executive Order does not provide a percentage and expressly states that the landlord may not require any specific percentage to be applied.

Commercial tenants that are the subject of the Executive Order’s protection are defined to be any business that is eligible for the federal Paycheck Protection Program, which is generally businesses of less than 500 employees that are organized as one of the following: (1) Sole Proprietor; (2) Partnership; (3) C-Corporation; (4) S-Corporation; (5) Limited Liability Company; (6) Independent Contractor; (7) Self-Employed Individual; (8) 501(c)(3) or (19) Organizations; and (9) Tribal Businesses.

Although the Executive Order principally protects commercial tenants, it also encourages lenders to consider forbearance for any commercial real estate borrower that has suspended its enforcement actions against its commercial tenants in accordance with the Executive Order.

All of the above may be overcome by specific court order under certain case-specific circumstances, however, absent such an order, if the commercial tenant seeks relief, the landlord must accommodate the tenant through May 31, 2020. Gov. Ducey also signed Executive Order 2020-14, which provides a suspension of all residential eviction actions effective March 24, 2020 through July 22, 2020.

For more information on residential evictions, click here.