Commercial Real Estate Investment and the HEALS Act

Originally published by Cris Feldman.

As the COVID-19 pandemic continues its spread, more and more business owners are looking for ways to recoup their losses due to mandated closures and stay-at-home orders. The same can be said for those involved in commercial real estate investing, where virus has also had a major impact. Recently, however, the Health, Economic Assistance, Liability Protection, and Schools (HEALS) Act was announced—potentially providing some relief to those in the commercial real estate investment market.

How the HEALS Act Can Affect Commercial Real Estate

The HEALS Act is a $1 trillion dollar package that aims to provide financial and economic support to citizens, states, businesses, and schools, as well as additional stimulus checks that would be similar to those from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. While the Act has multiple parts that affect various industries, several areas could directly impact commercial real estate. These areas include:

A Reduction in Unemployment Benefits

Rather than maintaining the additional $600 per week in unemployment benefits provided under the CARES Act, the amount will be reduced to $200 per week under the new HEALS Act. Over time, this amount could increase to up to $500 per week. While it’s unclear when the amount could increase, the decrease to $200 from $600 per week could drastically affect commercial property investors.

Liability Protection

The HEALS Act provides certain protections for business owners, doctors, and schools that shield them from liability. Because of this added protection, in the event an employee or client at a commercial real estate business became infected by COVID-19, they would be unable to pursue litigation against the company for contracting it. However, it’s important to note that this bar to lawsuits does not apply to instances where ‘gross negligence’ or ‘willful misconduct’ is found to be a factor.

A Modified Extension of the Paycheck Protection Program

The Paycheck Protection Program (PPP) was introduced as a part of the CARES Act, providing $350 billion to small businesses in forgivable loans, with the intention of retaining employees. Under the HEALS Act, an additional $190 billion in PPP funding would be allotted. These funds are only available to small businesses with 300 employees or less that have experienced a 50% reduction in revenue since the spread of COVID-19 began.

A Tax Credit to Business Owners

Under the HEALS Act, a 65% tax credit will be available to businesses with regard to employee wages. The maximum benefit amount would be $10,000 in credit per quarter and per employee.

The Impact to Commercial Real Estate Borrowers and Investors

While the new HEALS Act does provide additional economic relief to millions in the U.S., for many this relief may not last long. This is because the Act’s overall goal is to provide temporary relief now, and to also allow for long-term relief by stimulating economic activity through encouraging businesses to continue to reopen and retain or create jobs through incentives or tax credits. While this method may work for many businesses, it could also hurt some too, as individual states have jurisdiction over which and what type of businesses can reopen.

As several states, including Texas, experienced COVID-19 surges in June and July, some businesses that were able to reopen had to close their doors again. In the event these policies are maintained over time, millions of commercial tenants could continue to have their businesses closed, causing them to receive far less in unemployment support. This could result in an increased number of missed rent payments, along with a large financial burden placed upon both banks and commercial landlords.

Houston Commercial Real Estate Investment Attorneys

The daily lives of many business owners continue to shift due to COVID-19. For those in commercial real estate, these effects will likely remain in flux as they struggle to make rent payments due to the closure of operations. At Feldman & Feldman, we understand just how frustrating this can be. Our experienced Houston real estate lawyers have handled cases involving all types of real estate activities that occur at all stages of the process. If you are dealing with a real estate dispute, contact us today to see how we can best assist you.

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