With our last two blogs, we covered the unique challenges faced by millennial renters and the steps that real estate managers could take to work with them towards a mutually beneficial agreement. Working closely with tenants can help alleviate some of the tension and conflict brought on by the pandemic, but some landlords might wonder if there is more that they can do to stay safe during these uncertain times. After all, while programs have been put into place to help tenants amid COVID, the pain faced by landlords and property managers has not been well-publicized, nor has it been sufficiently addressed by federal or state programs.[i]
We at CCSK Law want to help address the needs of property managers by discussing a few protections and contractual considerations to keep in mind going forward, as they can help to mitigate risk and ensure security.
[i] Tierney, J. E., IV, & Van Someren, M. (2020, April 20). Strategies for Landlords in Dealing with Tenants in Light of COVID-19. The National Law Review. Retrieved from https://www.natlawreview.com/article/strategies-landlords-dealing-tenants-light-covid-19
For any future real estate sales or purchases, it is wise to keep in mind all provisions attached to any purchase/sales contracts, leases, or loan documents that may provide protections or guidance during this time. After all, property managers need to cover all of their bases, especially given the additional factor of uncertainty surrounding their more vulnerable millennial renters. Some provisions to be mindful of include:
- Force Majeure/Act of God: A provision for unforeseeable circumstances that would prevent someone from fulfilling a contract, which is important during a time defined by uncertainty.Such clauses can specify things such as a “national emergency” or even “disease,” so be sure to address all parties’ rights and obligations regarding events beyond their control.[i] Also, you should determine how such obligations are impacted by the CDC’s eviction moratorium.[ii]
- Remedies: Real estate agreements usually provide stringent remedies for nonperformance and default. Available remedies should be analyzed in the context of the overall climate in the courts and marketplace, especially during an ongoing pandemic and nascent financial crisis. Remedy rights might also be expanded or contracted temporarily by government entities at the local, state, and federal level.[iii]
- Operating Covenants: Property managers or tenants may have obligations to keep operations going or risk default. As such, be sure to check contracts for provisions which require “continuous operation.” In cases like these, parties may or may not have the right to close buildings, cease services, or implement security or screening measures.[iv]
- Maintenance and Repair Obligations: Many leases include maintenance and repair obligations, including but not limited to cleaning, which is particularly relevant during the pandemic. Such provisions might also address who pays or the additional costs of implementation of precautionary measures.[v]
- Performance, Contingency, and Delivery Periods: Contracts related to real estate may have these periods, and those dates should be carefully reviewed to determine whether voluntary or mandatory building closures affect the number of “days” or “business days” allowed for performance.[vi]
- Abatement/Self-Help: Certain agreements may provide abatement rights or self-help rights for missed delivery dates or failed obligations on the part of the other party.[vii] It is possible that governmental actions, force majeure, and common law doctrines might already or soon will provide protections or require reasonable extensions.[viii]
- Notice and Cure Periods: Leases, purchase contracts, and loan documents tend to be very specific about the required protocols for tenancy notices, so they are definitely worth looking into.[ix]
[i] Rose, F. B. (2020, March 23). Three Real Estate Contract Questions to Consider Now. The National Law Review. Retrieved from https://www.natlawreview.com/article/three-real-estate-contract-questions-to-consider-now
[ii] See our series of blog posts on the eviction moratorium, starting with COVID-19 and the Eviction Moratorium: Part One – Stimulus Bills, found here: https://ccsklaw.com/2020/09/covid-19-and-the-eviction-moratorium-part-one-stimulus-bills/
[iii] Rose, F. B.
[iv] Rose, F. B.
[v] Rose, F. B.
[vi] Rose, F. B.
[vii] Abatement: the interruption of a legal proceeding upon the pleading by a defendant of a matter that prevents the plaintiff from going forward with the suit at that time or in that form. Pleas in abatement raise such matters as objections to the place, mode, or time of the plaintiff’s claims.
[viii] Rose, F. B.
[ix] Rose, F. B.
The pandemic has created a number of unique considerations for landlords to keep in mind going forward. Some are matters that they’ve likely taken for granted: most landlords and property managers rely on some third-party providers, some of whom might not be classified as “essential workers.”[i] This means that, depending on how the COVID-19 pandemic plays out going forward, these services might not be able to perform their obligations, especially if they are unable to offer remote services.
One must also keep an eye out for any additions and changes made to federal, state, and municipal laws over the next few months (or even years), as they could completely reshape the field. Additionally, be aware of any technological changes that might affect regular business operations: electronic signatures and notarization are becoming increasingly common right now, but not all jurisdictions and providers have identical technology available at this time.[ii]
[i] Rose, F. B.
[ii] Rose, F. B.
COVID-19 has created challenges for real estate managers and tenants alike, and the pressure of the current situation can easily turn these two parties against one another. Yet as we’ve covered over the last few blogs, there are steps that landlords can take to protect their business while also helping tenants. It all comes down to perspective and an awareness of the available resources!
If you are a real estate manager who is looking for legal support, then reach out to CCSK Law. Our team specializes in residential and commercial real estate, offering the insights needed to navigate these difficult times. To contact us, call (219)-230-3600, or send an email to: firstname.lastname@example.org.