COVID-19: Illinois Business Closures Impacting Commercial Real Estate Leases

Practical Law Legal Update w-024-6201 (Approx. 5 pages)

COVID-19: Illinois Business Closures Impacting Commercial Real Estate Leases

by Practical Law Real Estate

Overview of Restrictions

Essential businesses and operations (essential businesses) are encouraged to remain open.

Non-essential businesses must close, except that businesses may:

Continue operations with employees or contractors exclusively working from home.
Continue to perform minimum basic operations, which include the minimum activities necessary to:
- maintain the value of the business's inventory;
- preserve the condition of the business's physical plant and equipment;
- ensure security;
- process payroll and employee benefits; and
- facilitate work from home arrangements for employees.

Essential businesses and nonessential businesses performing minimum basic operation must comply with social distancing requirements, including:

Designating six-foot spacing for employees and customers in line to maintain appropriate distance.
Ensuring hand sanitizer and sanitizing products are readily available for employees and customers.
Implementing separate operating hours for elderly and vulnerable customers.
Posting online:
- whether the facility is open; and
- how best to reach continue services by phone or remotely.

Essential Businesses

Essential businesses may remain open. These include:

Healthcare and public health operations.
Human services operations.
Essential infrastructure.
Essential governmental functions.

Essential businesses include the following retail operations:

Stores that sell groceries and medicine, including:
- grocery stores;
- pharmacies;
- certified farmers’ markets;
- farm and produce stands;
- supermarkets;
- convenience stores; and
- other establishments engaged in the retail sale of groceries, and other household consumer products.
Gas stations and businesses needed for transportation.
Financial institutions, including:
- banks;
- currency exchanges;
- consumer lenders, such as payday lenders, pawnbrokers, consumer installment lenders, and sales finance lenders;
- credit unions;
- appraisers;
- title companies; and
- institutions selling financial products.
Licensed medical cannabis dispensaries.
Hardware and supply stores.
Mail, post, shipping, logistics, delivery, and pick-up services.
Laundry services, including:
- laundromats;
- dry cleaners;
- industrial laundry services; and
- laundry service providers.
Businesses that sell, manufacture, or supply products needed for people to work from home.
Businesses that sell, manufacture, or supply other essential businesses with the support or materials necessary to operate, including computers, audio and video electronics, and household appliances.
Airlines, taxis, transportation network providers (such as Uber® and Lyft®), vehicle rental services, paratransit, and other private, public, and commercial transportation and logistics providers necessary for purposes expressly authorized by EO 2020-10.
Professional services, such as:
- legal services,
- accounting services,
- insurance services; and
- real estate services (including appraisal and title services).
Hotels and motels, to the extent used for lodging and delivery or carry-out food services.

Personal Services

The definition of healthcare and public health operations expressly excludes:
Fitness and exercise gyms.
Spas.
Salons.
Barber shops.
Tattoo parlors and similar facilities.

Restaurants

On March 16, 2020, Illinois' Governor Pritzker issued Executive Order 2020-07 (Executive Order In Response To Covid-19 (Covid-19 Executive Order No. 5)) which regulates restaurant activities.

Effective March 16, 2020 at 9 p.m. all businesses that offer food or beverages for on-premises consumption, including restaurants, bars, grocery stores, and food halls:

Must suspend service for and may not permit on-premises consumption.
May serve food and beverages for off-premises consumption, as currently permitted by law, including by:
- in-house delivery;
- third-party delivery;
- drive-through; and
- curbside pick-up.
These businesses may allow customers to enter the premises to purchase food or beverages for carry-out, provided patrons are able to maintain adequate social distancing.

EO 2020-10 extends these restrictions currently until April 7, 2020.

Practical Implications

The evolving COVID-19 pandemic and the mandated closures or reductions of operations for businesses and stores are creating uncertainty for commercial landlords and tenants. Parties should consult with counsel to evaluate possible risks and liabilities, both under their lease agreements and applicable state law, and should proactively negotiate to:

Adjust the terms of the lease, either:
- for the duration of the COVID-19 pandemic; or
- permanently.
Avoid future lease disputes.
Mitigate damages.

To assist with future negotiations or dispute resolution, tenants should carefully document:

The dates when governmental orders become effective against the tenant.
All impacts of regulations and orders on the tenant's business at the premises.
All expenses that they are incurring in responding to the COVID-19 pandemic.
All efforts by the tenant to:
- perform under the lease; and
- mitigate losses.

For a collection of resources related to global coronavirus, COVID-19, pandemics, and business interruption content, see Global Coronavirus Toolkit.

COVID-19: Illinois Business Closures Impacting Commercial Real Estate Leases | Practical Law