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Thought Leaders: A Look At Some Legal Implications Of Covid-19 On Healthcare Real Estate

Written by
T. Andrew Dow (1)
Shareholder, Winstead PC

Conventional wisdom has held that the healthcare real estate industry is generally recession resistant.  While that has historically been the case, the conventional wisdom did not account for a recession caused solely by a public health crisis due to a global pandemic. While the long-term effects of the COVID-19 pandemic on the healthcare real estate market remain to be seen, the short-term effects of the pandemic are already being felt throughout the industry.  While some of the legal and economic issues facing healthcare real estate owners and tenants mirror the issues facing owners and tenants of other classes of commercial real estate, other issues are wholly unique to the healthcare industry. This article addresses the issues that owners and tenants alike are addressing in real time as the implications of this unprecedented event continue to unfold.

Rent and/or Mortgage Relief

Landlords have begun to be flooded with requests from tenants for rent relief, ranging from a rent deferral or abatement for a period of time, to a permanent reduction in the rent to be paid under the lease.  While the need for such relief may be obvious for hospitality, restaurant and most retail tenants, it is not as readily apparent for healthcare tenants.  Nevertheless, some healthcare tenants are undoubtedly feeling the effects of this public health emergency.  For example, some healthcare providers are seeing their revenues being severely impacted by the shelter in place restrictions being implemented by the federal, state and local governments as a result of the COVID-19 public health emergency, because these restrictions are preventing them from providing their core services, such as, for example, performing elective surgeries.  Depending on the duration of the restrictions preventing them from providing these services, this could certainly impact their ability to stay current on their contractual rent obligations.  However, other healthcare tenants are not impacted by the pandemic in the same way and should certainly be able to continue to satisfy their lease obligations.  How is a landlord to determine whether rent relief is appropriate?

For a detailed article that covers rent and/or mortgage relief, as well as regulatory considerations with rent relief, force majeure clauses, impossibility of performance and more, please click here.

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