The Effects of COVID-19 on Leasing Commercial Property
With more than 30 states recently reporting surges in COVID-19 cases, many commercial property owners are looking toward a future that includes necessary social-distancing precautions. Despite the rise in cases, many states, including Washington, are continuing their efforts to reopen the economy. However, this reopening must also comply with state and CDC guidelines to help curb the spread of COVID-19. Here are a few considerations for tenants and property owners when it comes to commercial leases during this time.
Beware of Force Majeure Provisions
Force majeure provisions in commercial lease documents allow for the postponement or suspension of specific landlord and tenant duties. These provisions are meant to allow protection for both landlords and leases if they are unable to perform specified obligations, both time-sensitive and material, due to circumstances beyond either party’s control. However, force majeure provisions rarely apply to monetary obligations such as a tenant’s obligation to pay rent or for a landlord to fund a tenant improvement allowance. While most commercial leases may not include provisions specifically related to epidemics, pandemics, or infectious diseases, any provision that mentions “unforeseeable events” or “events or circumstances beyond either party’s control” should cover any disruption of obligations arising out of the current COVID-19 outbreak in the United States. We recommend that both tenants and landlords carefully review their leases to determine whether any interruption in obligations or duties (either for the tenants or the landlords) due to COVID-19 are covered under the force majeure provisions in the lease.
Office Space Alterations to Allow for Social Distancing
Another important consideration for commercial property owners is how to reduce the density of their leased office spaces to allow for social distancing. It is in both the tenants’ and landlords’ best interest to grant a tenant’s request to alter the office space to allow for social distancing. Landlords should make themselves available to their tenants to reasonably accommodate emergency alterations or other requests related to reduce the impact of COVID-19 on their employees and staff. We recommend that landlords and tenants work together to help implement steps needed to curb the spread of COVID-19 in a commercial space.
For businesses for which it’s not practical to have employees working from home for the foreseeable future, office space is a bit of a dilemma. How can you keep everyone safe while staying productive? Here are a few ideas to implement in your office space.
Consider implementing a one-direction path throughout the office to encourage social distancing and reduce contact between employees and staff. Contact a local sign-printing company to make placards for the floor.
Any employee who is in regular contact with the public, such as a receptionist, should have a protective shield between their workspace and customers. Some businesses may opt to include these shields between all work stations.
Office spaces are notoriously dense. Tenants may need to get creative with office layout to ensure each employee has at least six feet of distance from other employees, including walkways. Face employees away from each other, and ensure that each workspace is disinfected regularly.
Business interruption insurance typically protects against business interruptions related to physical damage to commercial property. In the case that someone in a leased commercial space is infected or faced with a reasonable threat of infection (related to COVID-19), some landlords or property owners may wonder if these circumstances warrant “property damage” within an insurance policy’s business interruption provisions. However, unless the tenant has a corresponding right to abate rent under the lease, likely, landlords can’t claim this under their rent loss insurance. Both tenants and landlords should make sure they’re actively involved in coverage reviews with risk management consultants to understand whether (and to what extent) they have insurance protection for COVID-19 problems.
Communication Between Tenants and Landlords
One of the most important things for both tenants and landlords of commercial properties is communication. Proactive, open communication is critical to help protect against any potential impact from the current COVID-19 crisis in the United States. Cooperation benefits both parties, and trying to gain an advantage over either party is counterproductive to each party’s wellbeing.
How Can Kaufman Construction and Development Help You?
Kaufman Construction and Development has been designing, developing, constructing, and leasing throughout Western Washington for over half of a century. No matter what stage you are in, we can help you. If you’re looking for property to lease, call us today to get started. Our team has decades of combined experience and can help you find exactly what you’re looking for!