Your Daily Three: May 19
May 19, 2020
Thank you for your continued readership. Let us know if there are any topics you’d like to see covered in an upcoming issue.
Q1. “I'm an in-house counsel for a mid-market company. I am getting a lot of calls from management asking my opinion on various legal issues. I'm expected to be an expert and a leader, but I don't know anything more than anyone else when it comes to what's next. How, as business owners, are you living in that space, especially as lawyers where you are expected to know all the answers?” Answered by Gary I. Blackman
That's a great question. I'm the General Counsel of my firm as well. For many psychological reasons (too deep to talk about here), there's nothing harder for a lawyer to do than speak the words: "I don't know. Let me get back to you." But right now, our world is changing by the minute. Best practices and regulatory guidance can change by the hour. And whatever business challenges we are facing are only exacerbated by the underlying threats to our health and safety. As such, our clients (in your case, your company, in my case, my firm and our clients), are stressed and starved for information. They are calling asking what to do in real-time about business issues never before confronted and legal issues never before adjudicated by the courts. You want to be helpful. You want to reduce your client’s anxieties. So it is tempting to hip shoot, to give advice that will make your client feel better. So what to do?
We are lawyers and business counselors. And helping your company evaluate risk in the face of uncertainty is your most valuable contribution. So we suggest that you do what we do:
- First, slow down and take a breath. You are your company's calm in the storm. Your job is to (try to) not be emotionally triggered.
- Evaluate the time requirements of the "ask." Is this an immediate issue or something you can spend some time thinking about?
- Determine whether the issue is a legal or business one.
- If it's a legal issue, is it novel? Have the courts in Illinois or elsewhere addressed it? Given how quickly problems are arising, Google is not a bad place to start.
- If it's a business issue, consider the risks/benefits, notwithstanding the limited information you have. Not making decisions is not an option.
- Collaborate and seek out others' opinions. There is no shame in asking what others are doing. Most everyone is in the same boat (I refrained from a Titanic analogy).
- Give your best analysis in as honest and transparent a way possible, making sure your company understands that your advice is limited by the unprecedented nature of events.
- Lastly, read, read, read. Knowing the issues of the day and what questions to ask is half the battle.
You don't always need to know all the answers. But you do need to know the questions to ask, how to find the answers, and how to best communicate to your company. Good luck!
Q2. “I own a property management company that services owners of multifamily rental properties across Chicago. What is the current status of a residential tenant's legal obligation to pay rent?" Answered by Jason B. Hirsh
The short (legal) answer is that all tenants, whether residential or commercial, are legally obligated to pay their rent regardless of their financial situation or the economic harm arising from the Covid-19 crisis. The longer answer is that, regardless of their lease obligations, a residential tenant that is going through financial difficulty may not be able to pay their rent. Moreover, and as a practical matter, the courts are closed, and there is a moratorium on evictions. Governor Pritzker's April 23 Executive Order provides that residential evictions cannot proceed unless a tenant is a health or safety threat. Specifically, Section 2 of the Order states: "A person or entity may not commence a residential eviction action pursuant to or arising under 735 ILCS 5/9-101 et seq., unless a tenant poses a direct threat to the health and safety of other tenants, an immediate and severe risk to property, or a violation of any applicable building code, health ordinance, or similar regulation. Nothing in this Executive Order shall be construed as relieving any individual of the obligation to pay rent or comply with any other obligation that an individual may have pursuant to a lease or rental agreement."
When courts do open, and enforcements begin again, you can expect to see a number of defenses to payment raised by residential tenants that may, technically, not rise to a valid "legal defense" but may still convince a judge to afford a tenant some relief. So, while tenants are legally obligated to pay rent because there is nothing you can do right now to enforce your rights or obtain relief from the courts, the best strategy is to work cooperatively with tenants facing legitimate financial challenges.
3. Read our recap on employment issues. As you know, and especially if you’ve been closely following us, there have been a lot of employment-related questions. Given that we are seeing many of the same questions for a second time, we thought it would be helpful to compile a summary of the most frequently asked questions and updates.
For more resources and LP's response to COVID-19, visit this webpage.