The Coronavirus Pandemic and the Crisis in Real Estate

The COVID-19 pandemic has created a crisis in real estate of unknown dimensions and with few clear answers. Following the many networks of real estate lawyers nationwide, the issues that have surfaced thus far are many. As with other calamities, there is often a cascading series of events and conditions, as with the Chernobyl disaster in 1986, and the “perfect storm” of 1991 that led to the loss of the Andrea Gale. The people least able to pay their rent and their mortgages are likely to be the ones let go and left without incomes as businesses shut down. Evictions and foreclosures will increase. Will landlords and lenders extend the time to cure and avoid having to take action? The mayor of San Jose has called for a moratorium for 30 days on evictions of residents who can demonstrate that they cannot pay their rent because of a substantial loss of income related to the virus. The council vote is expected in the next week or two. Italy is suspending mortgage payments throughout the country. As businesses slow down, close and fail, rents will evaporate, and the properties will become less valuable, altering the loan-to-value ratios, triggering default clauses, and making refinancings impossible.