As parts of California begin to open up, life is slowly returning to a new version of normal. Landlords are tasked with increasingly complex issues and I address some of those questions below.
For example, how should you respond to a tenant’s questions about whether the common areas are safe? What actions should you take if you know that a tenant on the premises has the virus? Should a landlord allow a medical provider to render services to patients who may have the novel coronavirus?
It is tough to predict what lawsuits may arise from this novel situation, but in general, the best advice is to make medical privacy a priority. Do not spread tenants’ medical information to other tenants. Likewise, you should not inquire about a tenant’s medical issues.
With regard to common area cleanliness, one way to avoid liability and protect yourself is to document cleaning procedures in writing to reduce liability, and to use a responsible third party to perform the cleaning duties. That way, the landlord has multiple sources of evidence to demonstrate that they are meeting reasonable standards. If a property has small enclosed spaces such as an elevator, it is imperative to notify occupants that they must wear masks in these common areas. Also, protect any staff by providing the supplies they need to protect themselves while doing their jobs. These supplies might include gloves, masks, disinfecting wipes, etc. based on the specific level of interaction your staff has with the tenants and with the public.
Some of your tenants’ biggest concerns relate to landlords entering the premises to make repairs. Sometimes the entry is by an agent, such as a real estate representative who needs to show the property to potential buyers or new tenants. Maintenance workers and real estate professionals should be careful to inform tenants about when they are entering the premises. It is important to provide a written disclosure and agreement that those entering are going to wear appropriate protective masks, gloves, and possibly shoe coverings, and have tenants consent to the entry, if possible. Do not expect tenants to vacate while repairs or showings are happening.
In the commercial realm, many commercial tenants are concerned about how they will pay their rent. Paying rent becomes financially impossible, and the tenant is prevented from performing under the lease, if the COVID-19 crisis has shut down or greatly reduced their business. Commercial tenants are turning to this legal defense, and trying to negotiate subleases or rent reductions. One concept is that of “percentage rent” where the parties agree to rent based on the tenant’s income and the landlord’s expenses. A minimum rent payment covers the landlord’s basic expenses, and when the tenant is able to start catching up, new rent payments are based upon how much profit the tenant is able to bring in. As the city begins the slow process of reopening, we hope as many businesses as possible can recover. If they cannot, many tenants will resort to attempting to void their leases on the basis of frustration of purpose, or commercial impossibility.
If you have a commercial tenant who hasn’t been able to pay and want to explore your options, we are here to help.
Shanna Welsh-Levin is a California Real Estate Attorney who assists Realtors®, investors, and homeowners with real estate sale transactions and litigation. She authored legislation that became the California short sale anti-deficiency statute, Cal. Code of Civil Procedure §580e. Her firm, So. Cal. Realty Law, resolves real estate disputes and protects real estate investments. Services also include managing risk for real estate brokers and preventing future liability.