Minimizing Landlord Risk while Reopening Properties in the COVID-19 World

Like all sectors of the economy, the COVID-19 pandemic has greatly impacted the commercial real estate industry. Landlords and tenants alike have felt financial strain. Over the past few months, many landlords and tenants have negotiated rent abatements and other lease amendments in response to the pandemic. Now, as governmental restrictions ease and allow for the reopening of many commercial properties, landlords and tenants may begin to breathe a sigh of relief. However, emergency orders and health recommendations issued by governmental and public health authorities to mitigate the spread of COVID-19 require property owners to be more vigilant than ever. Below are six tips for landlords to safely reopen their properties and minimize potential liability due to COVID-19.

1. Assess risk. Landlords should begin by actively reviewing leases to determine their responsibility and liability for maintaining commons areas; performing building cleaning (and the ability to pass through costs to tenants); providing extra cleaning services in tenant premises; environmental risks; tenant indemnifications; and confidentiality. Landlords should also review both their own and their tenants’ respective obligations to comply with laws and review their remedies if a tenant fails to comply with laws or regulations enacted in response to the pandemic.

2. Review service vendors. Landlords should review the protocols of services vendors and review service vendor contracts for obligations to comply with laws and regulations enacted in response to the pandemic. If a service vendor’s practices do not comply with governmental laws or regulations, landlords may consider not allowing them on the property. Service vendors should be required to notify landlords if they expose the property to COVID-19. Landlords may also require the service vendor to indemnify them for the increased cleaning costs and other potential liability from such an exposure.

3. Control access. Some entrances or common areas may need to be closed to ease management of access, implement social distancing, and ensure cleaning protocols are followed. Landlords should review tenant leases to determine a tenant’s right to control access to their premises and any amenities and whether the closure of any common areas or amenities is a landlord default. Landlords will also want to understand any tenant rights to rent abatement or CAM adjustments for the period such common areas may remain closed.

4. Take responsibility for health and safety. All common areas should be cleaned and disinfected at least as often as CDC and public health guidance recommends. Hand sanitizing stations should be placed throughout the property. Social distancing should be implemented by limiting the number of individuals allowed to occupy elevators or other commons areas at any given time. Floor markings should be placed at least six feet apart in common areas. Building staff should be provided with and required to wear personal protective equipment.

5. Communicate with tenants. Frequent communication from landlords to tenants regarding governmental directives affecting the property and the related safety measures the landlord may be implementing is critical. Landlord should also post CDC and other guidance in prominent locations throughout the building.

6. Prepare for a tenant-related COVID–19 diagnosis. Landlords should request that tenants notify landlord if any of their employees are diagnosed with COVID-19. A policy to respond to a reported COVID-19 diagnosis should be established for the building. Such a policy should include: notifying local health department officials and following any directives they may issue; staying in contact with the tenant regarding its action plan for its business; and notifying other tenants and landlord’s employees of the diagnosis. Do not disclose more than the minimum necessary information and do not disclose any identifiable personal information of the affected person such as their name, gender, age, employer, suite number, or health condition. Landlords should also review their tenants’ insurance policies and their own policies for potential coverage of third-party claims for exposure to COVID-19 on the property. Commercial general liability insurance may provide broad coverage for a third-party claim alleging that landlord’s negligence led to the exposure and infection of clients or customers. However, such policies may also contain provisions that limit or preclude coverage for COVID-19 damages, including virus exclusions, specific exclusions for claims arising from a pandemic, or a broadly worded pollution exclusion. An attorney may need to review policies for coverage and, where necessary, landlords will need to seek endorsements for COVID-19 liability coverage.

These tips are intended to assist landlords in the reopening process which will undoubtedly extend for months to come. Because each lease and property is unique, landlords should consult with legal counsel to address the specific needs for their property and their tenants. This article addresses only a handful of issues that may arise as we work to reopen properties. As such, should you have any questions about how to minimize your risk during the reopening process, or any other lease issues related to COVID-19, please contact one of our attorneys.