Coronavirus – Best Practices for Commercial Real Estate Owners

Whitman Legal Solutions, LLC

Whitman Legal Solutions, LLC

Tragic operas are best known for their death scenes. In Verdi’s La Traviata, Violetta dies of consumption (tuberculosis) at 23. In Mozart’s Don Giovanni, the name character meets a terrifying death as he presumably descends into hell, punished for misdeeds during his life.

In La Boheme, written in 1895 by Puccini, Mimi dies of consumption. In the Broadway musical Rent, based upon La Boheme, the lead character dies no less tragically from HIV complications. Puccini ups his game in Tosca, written in 1900, where three of the lead characters die. And in Gotterdammerung, the last part of Wagner’s Ring cycle, Valhalla catches fire, killing the deities.

Recent weeks have brought concerns about novel coronavirus (“COVID-19”), including in Montgomery County, Maryland in the Washington, DC Metro area, where my office is located. It’s expected the virus eventually will find its way to the entire United States. Although fortunately, the death toll from COVID-19 doesn’t seem as high as that in some operas, even one death is too many. It’s more of a tragedy when a death is preventable.

Like all businesses, commercial real estate owners should educate themselves and do what they can to minimize the risk of COVID-19 to their employees and tenants. This is a matter of social responsibility that every business should embrace. But keeping employees, tenants, and visitors to the property safe should be a business priority all the time, whether or not they are legally obligated to do so.

This article provides a primer on potential commercial real estate owner liability from COVID-19 transmission and what owners can do to minimize their risk. Although real estate businesses need to be concerned about obligations to their employees, this article focuses on responsibilities to tenants and visitors in commercial real estate properties. Obligations to employees and contracting parties and obligations to residents and visitors at healthcare facilities, such as senior housing, are beyond the scope of this article.

Civil Liability for COVID-19 Transmission

Although the risk assessment for COVID-19 is changing daily, like influenza, COVID-19 probably soon will be in many communities (assuming it is not here already). It’s easy to think that because businesses didn’t create COVID-19, they can’t be held responsible for it. That’s largely true, but there are exceptions. Under limited circumstances, commercial real estate owners owners could be held legally responsible should a tenant or visitor at the property become ill with COVID-19 at a property.

It isn’t enough for a tenant to show they caught COVID-19. To win a lawsuit against an owner, a tenant also will need to show the owner was negligent or acted intentionally or recklessly, causing the tenant to catch the virus.

With CDC guidelines changing daily, it will be difficult for a tenant to prove owner negligence simply because it didn’t keep up with the standards. It would be a rare owner that acted recklessly, much less intentionally, so a tenant became ill.

Even if the third party can show the owner’s actions were negligent or reckless and got sick, it won’t be easy for them to directly connect their illness to the owner’s negligence. Scientists are still studying how COVID-19 spreads. As of the date of this article, they believe it is mainly transmitted when an infected person coughs or sneezes. However, people might be able to transmit COVID-19 before they have symptoms.

Some have compared COVID-19 to influenza (although it appears COVID-19 may be more deadly). Many people get the flu every flu season. By the time they become ill, they likely have been exposed to the virus in many places. They may think back to a situation where they were around someone who was sick and not covering their mouth when they coughed and think that’s how they got the flu. But absent a flu test, there’s no way to know if the coughing individual even had the flu. Plus, given how contagious the flu is and that people can transmit the flu virus when they have no symptoms, the sickened person likely was exposed to the flu in many places.

Although it’s not likely a tenant could win a lawsuit against an owner because the tenant caught COVID-19, that doesn’t mean the tenant can’t sue. It’s expensive to defend a lawsuit even when the defendant is in the right. And, under the United States’ system, each party usually pays their own legal fees no matter who wins.

Most owners have insurance for bodily injury, which they may think will cover COVID-19 claims, including legal defense. However, general liability insurance also frequently provides lower coverage limits (or excludes coverage altogether) for injury from fungi, bacteria, or viruses. Therefore, if a tenant sues, an owner may find itself without coverage or without adequate coverage to cover defense costs, even if the owner ultimately wins in court.

Criminal Responsibility for COVID-19 Transmission

Civil liability isn’t the only concern owners should have. In extreme situations, an owner might be held criminally liable if a tenant or visitor contracts COVID-19 because of the owner’s willful behavior.

Many states have laws criminalizing intentional transmission of HIV, as an example. Some states also have laws on the books criminalizing intentional transmission of infectious diseases, some of which may date to the era when the spread of tuberculosis was a concern.

In Maryland, for instance, someone can be fined for willfully or knowingly taking “an individual who has an infectious disease that endangers public health to the home of another individual” or carelessly exposing an individual to such a disease.

Also, under Maryland law, someone with an infectious disease that endangers public health also can be fined or be sentenced to up to a year in prison if they act willfully in a public place “without taking proper precautions against exposing other individuals to the disease” or “transfer. . . any article that has been exposed to the disease without thoroughly disinfecting” it.

It’s too early to know whether a prosecutor or court would consider COVID-19 an infectious disease under these laws. Maryland’s law and similar laws in other states haven’t yet been used to prosecute COVID-19 transmission, nor does not appear that the law has been used recently to prosecute someone for transmitting influenza.

Most prosecutors probably won’t prosecute anyone from COVID-19 transmission, if ever, until scientists understand COVID-19 better. With limited scientific understanding of the virus and CDC recommendations changing frequently, it’s not likely a court would impose criminal liability simply because someone didn’t keep up with new developments. Still, it’s worthwhile for owners to make business decisions in light of how they might be viewed under state criminal laws.

Minimizing Risk of COVID-19 Liability

Owners should keep up-to-date about CDC and government health recommendations because best practices are likely to evolve as scientists’ understanding of COVID-19 increases. By following recommended best practices to prevent the spread of COVID-19 at their properties, owners can minimize the likelihood a third party could successfully claim owner negligence.

The most likely source of claims of owner responsibility COVID-19 transmission to tenants and visitors will be through an employee who is ill. Owners should encourage employees who are sick to stay home without fear of job loss. Where feasible, employees who feel well enough to work but may be contagious, should be allowed to telecommute.

Where employees aren’t well enough to work, employers might “loan” or “advance” sick time to employees whose paid leave banks are empty so they can afford to stay home. Employers need a written plan establishing the criteria and process for employer advances of sick leave to assure that all employees receive consistent treatment. If an employer expects the employee to pay back the loan of sick leave through offset of future leave accruals or through a payroll deduction, the employee must sign an agreement documenting the arrangement before the additional leave is advanced.

For employees who appear well, frequent hand sanitizer and hand washing are a must. Customer-facing employees should be encouraged to forego social pleasantries, such as handshaking and to keep their distance from others, to minimize the possibility of disease transmission. Also, to minimize the need for physical contact, customers should be encouraged to fill out lease applications at home on their personal computers and to sign lease and other documents electronically.

Owner Emergency Planning and Social Responsibility

Even if COVID-19 isn’t prevalent in the owner’s location, owners should plan for the possibility of an outbreak in their city or at their properties. Owners should view the COVID-19 outbreak as an opportunity to evaluate their policies and procedures to assure that they are prepared not just for the current outbreak, but also for future ones.

Perhaps the biggest challenge for owners will be control over tenants and their visitors. Although owners can’t control what tenants do, by being proactive, owners can educate tenants and visitors about how they can reduce the risk of disease transmission and to consider the social responsibility aspect of disease prevention.

Landlords might provide complimentary hand sanitizer or incentivize tenants to minimize disease transmission. Landlords might implement a reward system for tenant compliance with CDC recommendations, even if it’s just a posted “honor roll” or other public recognition.

Although owners might not be likely to face a court judgment or criminal conviction if a tenant comes down with COVID-19, owners may be judged in the court of public opinion. If they don’t reasonably try to protect tenants, the negative publicity through online reviews, social media, or news media could hurt the business. This is another instance where owner social responsibility is also good business.

This series draws from Elizabeth Whitman’s background in and passion for classical music to illustrate creative solutions for legal challenges experienced by businesses and real estate investors.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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