Owners of commercial, industrial and mixed-use real estate need to be prepared for the economic impact of the coronavirus epidemic on their tenants and on their business operations.

Because the applicability of force majeure clauses and performance related provisions are fact and lease specific, owners should carefully review their leases to determine whether provisions exist to provide performance relief.

In general, force majeure clauses address events that are beyond the parties’ control and typically provide that, if an event renders performance impossible or delays performance, the affected party’s performance obligations under the lease may be excused or suspended.

Following is a brief summary of the recurring issues and questions presented to our office:

Does COVID-19 qualify as a force majeure event? Courts have interpreted force majeure clauses narrowly and will only excuse performance if the event that prevents a party’s performance is expressly defined or specified. If the lease’s definition of force majeure includes language similar to pandemic, disease or public health emergency, then the COVID-19 outbreak is likely to be interpreted as a force majeure event.

Does a mandatory governmental shutdown order qualify as a force majeure event? Typically, phrases similar to governmental restriction or regulation are included within a standard force majeure clause and are likely to constitute a force majeure event. 

If COVID-19 qualifies as a force majeure event under the lease, obligations relating to performance, not payment, are likely to be excused or suspended such as continuous operation of the premises.

Generally speaking, force majeure clauses often expressly exclude payment obligations of the parties. Unless the tenant has negotiated specific rent offset rights arising from events such as a pandemic or government ordered closure of its business, a tenant’s obligation to pay rent is recognized, under many state laws, as an independent obligation that must be performed without set off, abatement or reduction and is unlikely excused by a force majeure clause.

Before you engage in any significant deviations from the lease, such as restricting access, please contact our firm to assist you in determining what your rights and obligations are based on the circumstances of the pandemic and its impact on the use of the property.

Further, the COVID-19 outbreak will cause an increase in operating expenses. Therefore, owners and tenants should start by contacting our firm for a review of the property’s assessed value and real estate taxes.

Cook County Tax Reassessment of Niles

Comparison of Median Assessed Value Changes between 2016 and 2019

Don’t overlook your property tax re-assessment notice and the deadline to appeal. The Assessor has released Niles’ commercial and residential assessment reports for the 2019 tax triennial which can be found here:

https://www.cookcountyassessor.com/assets/forms/NilesCommercial.pdf

https://www.cookcountyassessor.com/assets/forms/NilesResidential.pdf

Based on the published valuation statistics, the Assessor believes that the median sale price of residential properties in Niles’ are as follows: $233,000 in 2013; $276,000 in 2015; $285,000 in 2016; and, $334,000 in 2019. The Assessor used these changes in market value to support a median percentage change in the township’s overall residential assessment of 18.36% in 2016 and 14.0% in 2019.

Even though the Assessor posted the 2019 residential assessment neighborhood map, he focused on limited or cherry-picked data from 2017 to 2019 for Niles’ sales trends. The following is a comparison of the Overall Median Sales and Median Percentage Change regarding residential assessed values between the 2016 and 2019 reassessment periods by neighborhood:

Neighborhood 13
$253,500 (2016) vs. $311,000 (2019). 18.79% (2016) vs. -1.0% (2019)

Neighborhood 21
$1,083,000 (2016) vs. $1,095,000 (2019). 23.98% (2016) vs. 18.0% (2019)

Neighborhood 22
$453,500 (2016) vs. $487,500 (2019). 22.24% (2016) vs. 9.0% (2019)

Neighborhood 23
$667,500 (2016) vs. $660,000 (2019). 22.22% (2016) vs. 27.0% (2019)

Neighborhood 31
$261,000 (2016) vs. $305,000 (2019). 19.01% (2016) vs. 17.0% (2019)

Neighborhood 32
$294,000 (2016) vs. $247,000 (2019). 19.43% (2016) vs. 0.0% (2019)

Neighborhood 51
$314,000 (2016) vs. $369,500 (2019). 18.36% (2016) vs. 12.0% (2019)

Neighborhood 52
$262,500 (2016) vs. $295,000 (2019). 18.06% (2016) vs. 13.0% (2019)

Neighborhood 60
$503,500 (2016) vs. $545,000 (2019). 18.16% (2016) vs. 1.0% (2019)

Neighborhood 81
$249,000 (2016) vs. $314,750 (2019). 18.16% (2016) vs. 14.0% (2019)

Neighborhood 101
$325,000 (2016) vs. $352,000 (2019). 19.78% (2016) vs. 12.0% (2019)

Neighborhood 102
$601,000 (2016) vs. $577,250 (2019). 19.21% (2016) vs. -11.0% (2019)

Neighborhood 103
$403,500 (2016) vs. $438,500 (2019). 19.93% (2016) vs. 18.0% (2019)

Neighborhood 140
$290,000 (2016) vs. $366,500 (2019). 18.81% (2016) vs. 9.0% (2019)

Neighborhood 150
$372,000 (2016) vs. $400,000 (2019). 18.95% (2016) vs. 11.0% (2019)

Neighborhood 160
$625,500 (2016) vs. $730,000 (2019). 22.43% (2016) vs. 11.0% (2019)

As the primary component of your real estate tax bill, your tax assessment continues to fluctuate and its reduction is critical in reducing your tax liability.

Regarding the apartment, commercial, industrial and office properties, the proposed changes in assessed values are summarized in the following excerpt from the Assessor’s commercial report:

The Assessor has employed a computer assisted mass appraisal method that used data points from various opinions of value. Simply, the Assessor, from an investment perspective, focused on income and broad, unadjusted market data (Appendix A – Median Rents and Vacancy) to materially lower the Cap Rates for all property types (Appendix B – Cap Rate Tables) resulting in disparity as well as disproportionate changes in assessed values throughout the township as shown in the above excerpt.

Given the challenge of revaluing all properties in the North Suburbs and Cook County, it can be difficult for the Assessor to fully understand specific challenges facing your property since his office does not take the time to review nor make special considerations for your property’s unique aspects. Therefore, property owners and tenants should start by contacting our firm for a prompt review of the 2019 assessed value for the property taxes payable in 2020 and the remainder of the current triennial period.

Dimitrios P. Trivizas, Ltd., has successfully filed tax appeals, negotiated settlements and litigated tax complaints on a variety of properties ensuring real property tax savings and tax refunds for property owners and tenants across all Counties in Illinois.