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BLOG / 05.11.20 /Eric P. Blaha,Jeffrey D. Buss,Kenneth R. Jacobs,Emanuela Lupu-Ferrante,Thomas W. SmithandDomenick J. Tammaro

Coronavirus: EXECUTIVE ORDER RE SECURITY DEPOSITS AND EVICTIONS; PPP SAFE HARBOR EXTENSION; SAFE CONSTRUCTION PRACTICES; ARE YOU PREPARED FOR LOOSENED RESTRICTIONS?

Executive Order Allows Use of Security Deposits for Rent, Extends Moratorium on Evictions and Foreclosures. On May 7th Governor Cuomo issued Executive Order 202.28, which provides in part that (i) residential landlords and tenants can agree with each other to use security deposits to pay rent arrears; (ii) requires landlords to use a security deposit for rent at the tenant’s request, provided the tenant is “eligible for unemployment insurance or benefits under state or federal law or are otherwise facing financial hardship due to the COVID-19 pandemic;” and (iii) bars landlords from charging late fees on rent arrears accruing between March 20th and August 20th.” Any security deposit applied against rent is to be reimbursed by the tenant in 12 monthly installments beginning no earlier than 90 days after the security was applied.

In addition, the Order bars commencement of any new nonpayment of rent, eviction or mortgage foreclosure proceedings against “someone that is eligible for unemployment insurance or benefits under state or federal law or otherwise facing financial hardship due to the COVID-19 pandemic” for a period of sixty days beginning on June 20, 2020.” That part of the Order applies from May 7th through June 6, 2020. (It is not clear what happens between June 6th and June 20th.)

How can a landlord or Community Association verify whether someone is “facing financial hardship” due to COVID-19? We are now incorporating a request for verification into our initial notices of default or non-payment. If the debtor fails to respond, this may indicate that they are not eligible for forbearance.

PPP Updates. The SBA extended the “safe harbor” until May 14th for the return of improperly obtained funds under the PPP loan program without penalty. The SBA also issued an updated set of “Frequently Asked Questions” that reiterated the same question and answer to Question #35 as we noted in our May 5th E-blast regarding the entitlement of “cooperatives” to PPP loans.

Preparing for Reopening: Construction. The Governor’s office has laid out a plan for reopening certain businesses in different regions of the state that meet its criteria for a decreasing pandemic caseload, availability of personal protective equipment, and the like. The first types of businesses include construction, which should be a relief to all those buildings with half-completed construction projects.

“Social Distancing” required for contractors. The reopening plan contemplates that contractors will comply with recommended “social distancing” and personal protection guidelines. OSHA has also published its own “Construction Guidance”, comprised of recommendations for best practices rather than mandatory requirements (available here). The Department of Buildings also issued construction guidelines similar to OSHA’s (also available here), but like OSHA’s, they are phrased as “best practices.” In contrast, the state of California has published guidelines which also require contractors to provide (a) mandatory training to workers in ways to protect against infection at the work site; (b) disposable wipes containing CDC-approved disinfectant; and (c) a designated “COVID-19 Officer” to observe and promote compliance.

We have developed a sample “Social Distancing Rider” for owners for use in construction contracts, incorporating some of the above ideas as well as OSHA procedures. Although no Rider survives first contact with the Department of Buildings, it may provide useful parameters if the DOB publishes additional guidelines. Please click here for a copy of the Rider.

Issues with Reopening.  “Reopening” is in the eye of the beholder. Owners may want to resume deferred repairs, alterations and moves. Others may seek to start using previously closed building services and facilities. All of these involve increased interaction between staff and owners, and among owners, that raise sticky questions for Boards.

  • Employee Protection. Do you have sufficient personal protective equipment for your staff? If your staff enters an apartment, what distancing guidelines should be observed? Can staff direct owners to keep proper distancing as well?
  • Employee Cooperation. Is your staff willing to engage in more “risky” behaviors in service of reopening the building? Have you investigated the right ways to deal with a refusal to participate out of fear, or due to other caretaking obligations?
  • Priorities for Staff and Services. Who gets first priority for use of elevators and other building services – owners with deferred but non-essential repairs, owners with alterations, or moves? (And should alterations and moves be prioritized by “seniority” or need?)
  • Priorities for Reopening Facilities. When should the gym or pool be reopened? How about the day care center or community room? What additional safety protocols should be implemented as part of reopening? Do you have adequate staff to monitor the new activity?
  • Additional Fees. Should owners pay an additional charge for daily disinfection by staff after an alteration or move, or for the additional costs of making common facilities safer and monitoring them thereafter?
  • Elevators. Should physical distance restrictions on elevators be relaxed? Could any restriction be enforced except voluntarily?
  • Deliveries, Visitors, Showings, Parties. What new protocols will the Board establish for food deliveries? Open houses and showings? Individual visitors and parties?
  • Liability. Should the building require “coronavirus” waivers before allowing restrictions to be eased (that is, acknowledging that coronavirus is highly contagious and can be acquired from numerous sources, so the person giving the waiver agrees that the association will not be liable if anyone contracts coronavirus after entering the building or using a renewed service or facility)? What about from persons involved in newly resumed activities like moves, alterations, or use of the pool or gym? What standards (if any) should the Board adopt to avoid a claim by an owner that the Board negligently conducted disinfection that it had committed to perform within reopened facilities?

We are currently exploring all of these issues with managing agents and Boards, and will share their ideas and ours as they become available. Please feel free to share your own methods with one of our partners or let us know if we can be of assistance.