LEGAL TIPS BY WINNIE WARD

COVID-19:  A Guide for Landlords and Tenants in Commercial Buildings

By: Winnifred C. Ward, Esquire, Stewart Ward & Josephson LLP

The disease known as COVID-19, which is caused by a new form of coronavirus known as SARS-CoV-2, has been sweeping across the world wreaking havoc on financial markets and supply chains, and threatens to disrupt the world economy, at least in the short term.  As this disease spreads throughout the United States, commercial landlords and tenants are struggling with how best to respond in an ever-changing environment.  This article focuses on the impact of this disease on commercial real estate, focusing on issues such as building sanitation, emergency planning, and communication between landlords and tenants.

As of the writing of this article, the Center for Disease Control (the “CDC”) is reporting 1,037 confirmed cases of COVID-19 in the United States, including 36 deaths.  (It is projected that the actual number of cases actually is much higher, due to delays with testing in the United States.)  COVID-19 is apparently more deadly than the flu (approximately 5-6 times the death rate for the flu), and disproportionately impacts the elderly and those who have severe underlying chronic medical conditions like heart or lung disease or diabetes.  No vaccine is currently available, although human trials for a vaccine reportedly are starting in April 2020 (the date for projected widespread vaccine availability is March 2021).  The disease started in a southeastern area of China known as the Hunan province in late December, and quickly spread throughout the world.  Italy has imposed strict travel restrictions on 16 million of its citizens, and Europe is in the process of coordinating a continent-wide response.  On March 11, 2020, the World Health Organization officially labelled this new coronavirus as a pandemic.

In the United States, the containment and mitigation efforts are being coordinated by the CDC, and several cities and regions (such as Seattle and the New Rochelle area of New York) have imposed quarantine areas.  Two major music festivals – South by Southwest and Coachella – have been either cancelled or delayed due to fears of spreading the disease, and major campaign events by the Democratic presidential candidates also have been cancelled.  The NCAA announced on March 11, 2020 that its men’s basketball tournaments are to be played with no fans over COVID-19 concerns, and the NBA cancelled the remainder of the season due to one player testing positive for SARS-CoV-2.  On Wednesday evening, President Trump announced a 30-day moratorium on foreign travelers entering the United Stated from Europe.  Events are moving rapidly on the national stage.

In Sacramento County, as of Wednesday, March 11, 2020, there had been 11 reported cases of COVID-19, including one student in the Elk Grove Unified School District who was diagnosed on March 6, 2020, which prompted that district to shut down all classes until March 16, 2020.  The Sacramento chapter of NAIOP delayed its Family Office & Private Wealth Summit to the fall, and other local events are likely to be impacted by the disease.  All Catholic Archdiocese of San Francisco schools have been closed as of this week, and public gatherings with 1,000 people or more have been banned in the City of San Francisco through at least March 21.  Decisions by each company, organization, school district are being made on a case-by-case basis as the impact of the disease is being evaluated and re-evaluated based upon the most current information.

I have had two separate telephone calls from landlord clients this week seeking guidance on the best practices for landlords given the current situation with COVID-19.  In both cases, the landlords had received inquiries from one or more tenants asking what steps the landlords were taking in their buildings to reduce the spread of the disease.  The landlord representatives were wondering what the best “proactive” steps are for building owners in this situation.

So, I have come up with some basic “do’s” and “don’ts” for landlords:

Do:

  • Step up janitorial cleaning practices in common areas, using alcohol-based disinfecting solutions;
  • Ensure that your on-site staff and any on-site contractors’ (including landscaping, maintenance and janitorial) staff WASH THEIR HANDS often (especially before and after entering any common areas of the building) and do not report for work if sick;
  • If available and practical, provide hand sanitation or hand washing stations in the common areas of the building (such supplies are difficult to obtain now, but some commercial janitorial supply companies may still have those items in stock);
  • If you receive a report of a person in the building testing positive for COVID-19, close off and disinfect the potentially affected common areas;
  • Advise tenants as soon as possible (hopefully, before media reports surface) of any reported COVID-19 issues in the building and the steps the landlord has, is or will take regarding those issues;
  • Designate one person within your organization as the “point person” for coordinating the COVID-19 procedures and fielding tenant inquiries;
  • Check in with your insurance carrier now regarding the steps you are taking, follow the advice of your insurance carrier regarding those steps and any additional steps, and report any COVID-19 issues in your building to your carrier immediately; and
  • Heed the advice of the CDC and state and local governments regarding mitigation and quarantine requirements.

Don’t:

  • Publish to anyone (other than your insurance carrier or legal counsel) the names of persons or companies affected by COVID-19 (if asked, report the area of the building or the project that was impacted, but not the specific tenant or individual(s));
  • Provide medical advice to individuals or companies; instead, direct them to the CDC website (see the link at the end of this article);
  • Use antibacterial soaps in common area restrooms (antibacterial soaps do not work on viruses and are bad for the environment; plain soap and water is effective if used as recommended by the CDC);
  • Send notices to your tenants “requiring” that they notify you of any COVID-19 cases (most commercial leases do not require such reporting).

Additional Optional Steps:  Other steps that landlords can take include:

  • Posting in the common area restrooms directions for the “proper” method of handwashing (the CDC has a link to “printable” posters at CDC Handwashing Posters)
  • Sending a notice to your tenants outlining the steps you are currently taking, and encouraging reporting of any COVID-19 issues within their premises.

The additional cleaning, notice and other steps taken in the buildings should be included in operating expenses under most commercial leases.  If any tenant desires additional cleaning in its premises, or needs to disinfect its premises due to a COVID-19 outbreak, then the cost of that additional cleaning should be borne by the tenant as additional rent under its lease.  Landlords should check the provisions of their individual leases to confirm, but standard commercial leases should provide for the passthrough of the costs as described above.

For tenants, I recommend that they contact their landlords if they are concerned about any COVID-19 issues in their building or have questions about the steps their landlords are taking to address those issues.  I also encourage tenants to report to their landlords any employees, invitees or contractors who have tested positive for COVID-19 and been in the building.  Tenants will need to make individual decisions about encouraging or requiring all employees to work from home, but sick employees definitely should be required to work from home, if at all possible.  I also encourage both landlords and tenants to be flexible with employees who are either sick, dealing with sick children or are dealing with child care issues due to school closures.

For guidance on how to protect yourself and your family, visit the CDC’s website: CDC Steps to Prevent Illness.

Given the evolving nature of the situation, and the fact that the United States has not faced a pandemic of this magnitude in many decades, the advice in this article must be gauged based upon how the situation evolves in the future (including updates that may develop in the hours, days and weeks after this article is published).  I encourage all landlords and tenants to remain vigilant, but not panic, and to heed the advice of state and federal authorities as the situation on the ground changes.

DISCLAIMER:  This article does not constitute legal advice.  Readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented.

BIOGRAPHY:  Winnie Ward is a named partner of Stewart Ward & Josephson LLP.  She specializes in office, retail and industrial commercial leasing, as well as real property acquisition and divestment.  wward@swjllp.com; 916-569-8161.

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