Legal Challenges During COVID-19
We would like to take this opportunity to give our clients and friends some feedback on the legal landscape in light of the COVID-19 pandemic. Please keep in mind that this situation is very much a moving target so information may change rather quickly.
As it looks now, businesses are being both reactive and proactive in their day-to-day operations. Employers who have on site employees are taking precautionary measures by allowing employees to work from home, or at least alternate their employee presence in the office. Employers are also instituting more stringent workplace policies, such as implementing hand washing/sanitizing methods; rearranging workspaces to create more distance between employees; and monitoring employees for any COVID-19 related symptoms. If an employer becomes aware of any infected or potentially infected staff member, the employer is charged with immediately sending that person home to properly address all symptoms. Employers should also regularly monitor CDC, local, state and federal guidelines to conform to the highest level of care possible. We encourage employers to arrange for a disinfecting and cleaning protocol if they have not yet done so. Employees must feel comfortable in their work environments to prevent drops in worker productivity.
We are also advising employers to organize continuous, full, and professional cleaning and disinfecting measures of their office spaces. Other than this being a good measure all around, we are advising employers to take all precautionary measures that are reasonably practical to minimize liability for failing to protect employees. It is impossible to predict how courts may handle potential future cases of employees suing employers if there are any incidences of sickness related to COVID-19.
Commercial Leases and Tenant’s Obligations
With respect to businesses that are parties to a lease and are asking whether they must continue to pay their rent or lease payments, the short answer is: technically, yes. It is unlikely that any commercial lease has a provision that would excuse a tenant’s obligation to pay rent even under the current conditions. In fact, most commercial leases are heavy on landlord protection clauses and likely contain provisions that would require a tenant to continue paying rent without interruption or delay. However, state or federal guidelines may provide for some relief in this regard, and we must closely watch developments to understand how they may affect one’s personal or professional life.
It is important to remember that a landlord and tenant can always evaluate a particular situation and come up with a private solution. However, keep in mind that although a landlord may be sympathetic to a tenant’s business suddenly dropping, that same landlord may still have to pay mortgage, taxes and other expenses related to the leased property. It is likely that landlords who end up litigating a tenant’s failure to pay all or some of the rent in a timely manner during this time may face challenges should the matter end up in court. We encourage landlords and tenants to communicate their respective challenges to each other, provide full transparency, and attempt to resolve situations on a case by case basis, all while monitoring legal measures taken by federal and/or state governments.
Purchase and Sale of Real Estate
We would also like to address some questions we received from parties to real estate contracts and explain what a situation like this means for the purchase and sale of real estate. Generally, New York Courts are liberal in providing extensions to deadlines. It is our belief that opposing parties will extend courtesies and exhibit greater flexibility in scheduling closings and even getting commitments.
However, for those parties who are already in contract, we do not believe that the situation, as it currently exists, will enable a party to unilaterally terminate a contract. In other words, if you are already in contract to buy or sell a property, it is unlikely that the current pandemic will give a party the right to terminate the contract of sale in its entirety, unless there is a very specific clause that contemplates this very situation, which is highly unlikely.
Purchase or Sale of Goods
Contracts that involve the purchase or sale of goods, i.e. supply contracts, purchase contracts and the like, are very specific and need to be evaluated on a case-by-case basis. Once again, parties are encouraged to communicate with each other and discuss each side’s unique circumstances and situations. For example, if a purchaser wants specific performance of a purchase contract, but a supplier cannot access the goods needed, certain legal principles such as impossibility of performance may be invoked. Similarly, contracts involving performance of services need to be evaluated on a case-by-case basis to determine both the consequences and prudent next steps. It is imperative to involve your attorney as early as you can in these difficult situations, so that parties may begin to lay the groundwork of discussions to minimize future conflict and/or risk of litigation due to non-performance.
For those who are already in contracts need to carefully examine force majeure and material adverse change clauses that may excuse non-performance or delays. Now would be the time to pull out your contract, carefully examine relevant contractual provisions and your situation to determine if you need to send notification of any issues to the other party. Oftentimes notices are time sensitive and should be sent as soon as a party learns about particular circumstances.
We continue to monitor court closures and administrative orders and are seeing some cases get administratively adjourned for as long as two months. It is our view that adversaries will be very forgiving in meeting scheduling deadlines. It remains to be seen whether courts and clerks take an official position with their pending cases and issue global orders. Right now, you should expect any ongoing litigation to result in additional delays, even if these delays are prejudicial or cause harm to a party. Litigants may have to bring emergency motions if the situation warrants such measures.
From a personal and family planning perspective, the downtime that many folks will have in the near future is an excellent time to review estate planning to ensure that everything is in order. If you have had a will or trust prepared during a different time in your life, i.e. you were single or had one child and now you are married with several children, or you are divorced, now is a good time to consider your current needs and evaluate whether changes need to be made to your estate plan. Unfortunately, uncertain times like these require people to think hard about their estate and succession planning. Business owners should also carefully examine their succession plans, buy-sell agreements (or put such agreements in place), partnership agreements, employment agreements, and other contractual arrangements, as well as review and implement asset protection measures. Now is a good time to call your attorney to discuss your estate planning and asset protection, succession planning documents and plans.
Beress & Zalkind PLLC takes our client’s needs and issues very seriously and is prepared to promptly address your needs even in these difficult times. We are fully connected to provide remote consultations if necessary and respond proactively to any situation. Please do not hesitate to call or send us an email to discuss your specific needs and concerns.