COVID-19 Update: Landlord/Tenant Issues

Dear Clients,

The novel coronavirus (COVID-19) has in a short period of time, presented enormous challenges and caused disruption to the way we all do business. As we all navigate through these difficult times, we find that many questions have arisen, the answers to which, understandably, are being deferred by government as it deals with the public health emergency. Rosenberg & Estis P.C. remains open for business to service your needs, although we have elected to work remotely to protect the health and safety of our employees. Many of you have already contacted us seeking guidance and information with respect to the novel issues arising out of the COVID-19 pandemic. There will be many legal issues to address as this situation progresses, and at its conclusion. In the interim, this memo is intended to provide preliminary guidance and to identify issues with which you may be confronted.

Standard of Care

What is an owner or managing agent required to do in order to safeguard the residents of a multi-family building or the tenants of a commercial property? While this is virtually uncharted territory, to a large extent, we suggest that the prudent course of conduct is similar in both contexts.

Residential Buildings

In multi-family buildings, this question will likely be determined based on the statutory warranty of habitability, which generally guarantees tenants the right to live in conditions which are free of conditions which threaten life, health and safety. In this crisis, owners and managing agents are best advised to, at a minimum, comply with the protocols being recommended by the Center for Disease Control (CDC) and the New York City and State Department of Health. These protocols generally address enhanced cleaning. Note that in the aftermath of a labor outage, where the limitation on services was outside of the landlords' control, the Courts nevertheless awarded rent abatements to tenants on a strict liability theory, because minimum housing standards were not satisfied. You should therefore make every effort to maintain your properties in clean and safe condition.

We are advised that Local 32BJ has advised that its members may not be compelled to enter a tenant's apartment if they have reason to believe the tenant poses a health threat. You should make alternate arrangements to ensure that repairs continue to be made, particularly emergency repairs. If tenants refuse access, as many may do during this period, those denials of access should be documented for potential future litigation. Similarly, you would be well served by maintaining a log of our cleaning schedule.

In addition, in order to enforce social distancing and eliminate potential risks, owners and managing agent may consider modifying services and/or amenities. This may include closing amenity spaces, restricting access to delivery persons (e.g., requiring food deliveries to be picked up in the lobby, rather than to individual apartments), suspending broker showings and/or open houses, suspending non-essential alterations or repairs, and/or forbidding large gatherings. Please contact us if you wish to review your rights and obligations with respect to modifying services under the law and pursuant to your written leases.

Commercial Buildings

In commercial buildings the question of whether an owner has satisfied its obligations will, more likely, turn on a constructive eviction analysis - - did an owner act, or fail to act, such that a tenant justifiably abandoned its space. In order to protect against such a claim, as in residential buildings, owners are advised to comply with CDC and Department of Health protocols with respect to cleaning and sanitizing. In contrast to warranty of habitability, constructive eviction historically has required an action or failure to act by the owner. For instance, tenants whose businesses were interrupted in the aftermath of 9/11 because of municipal restrictions downtown were not granted rent relief. However, the President's invocation of wartime authority to speed up the supply chain for medical supplies may have legal implication this time which we are analyzing. We are available to assist you in reviewing your leases to ascertain whether they contain any relevant provisions.

Following are the links to CDC and DOH guidance on protocols for businesses and individual apartments:

· https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html

· https://www.cdc.gov/coronavirus/2019-ncov/prepare/protect-home.html

· https://www1.nyc.gov/site/doh/health/health-topics/coronavirus.page

· https://www1.nyc.gov/assets/doh/downloads/pdf/imm/disinfection-guidance-for-commercial-residential-covid19.pdf

Rent Defaults

A likely consequence of the current situation is rent delinquency, both from residential tenants who may be furloughed or laid off, and commercial tenants (particularly retail and restaurant tenants) who may be closed for business. As a practical matter, the New York Courts are closed indefinitely, so there is no way to sue for non-payment until they re-open. Nevertheless, there is nothing that precludes owners from serving statutory predicate notices, although there may be public relations considerations. Nevertheless, the Mayor's Office is advising tenants that they are obligated to continue paying rent.

· https://www1.nyc.gov/content/tenantprotection/pages/covid19-home-quarantine

Prior to enforcing its rights with respect to non-payment, owners are now required to serve a five (5) day notice on any tenant that has not timely paid its rent, reminding that tenant of its delinquency. Such notices need only be served by certified mail, and as such could be served each month so that at the conclusion of this crisis, when the courts re-open, you can serve rent demands and commence proceedings, assuming no governmental action to preclude them. You should be aware that in conjunction with the court closure there is a moratorium on evictions in both residential and commercial cases. With respect to retail and restaurant leases, your tenants are likely to reach out to you for rent relief. Please contact us for assistance reviewing your leases and to discuss your options in this regard.

Protocol for Confirmed Positive Diagnosis

The most common question we are answering is what a landlord should do if it learns of a tenant with a confirmed positive test for novel coronavirus. First, it is unlikely that an owner has a basis to compel a tenant to disclose his or her medical condition. You may request that your tenants notify you for the safety of residents and employees of the building. If you are notified of a positive result, you may choose to notify your tenants of its existence without identifying the tenant, unless you have that tenant's consent. You may identify the floor on which the tenant resides but be careful if your building is so small that identifying the floor is tantamount to identifying the individual. Nevertheless, the New York City DOH has advised that owners are not obligated to do so. Once you have notice of the diagnosis, consider what additional steps are prudent to protect your tenants and staff, such as having the common areas sanitized by a professional service.

· https://www1.nyc.gov/assets/doh/downloads/pdf/imm/covid-19-residential-buildings-faq.pdf

Reduction in Workforce

As of March 20, the Governor has required that all businesses keep their employees at home, other than essential employees. Building service employees (e.g. doormen, porters and handymen) have been designated as essential employees and, therefore, owners need not reduce staff at their buildings.

A complete list of essential businesses and employees which are exempt from the Governor's Executive Order can be found at https://esd.ny.gov/guidance-executive-order-2026

We are continuing to monitor this ever-changing and fluid situation and will update you as warranted.

Please reach out to the undersigned as we are available to discuss any questions or concerns our clients have.

Sincerely,

Luise A. Barrack, Deborah E. Riegel and Jason R. Davidson