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Landlord/Tenant, Eviction and Foreclosure Issues
LOUISIANA REALTORS • Mar 28, 2020
CORONAVIRUS LEGAL IMPACT: LANDLORD/TENANT, EVICTION AND FORECLOSURE ISSUES
By: Patricia B. McMurray, JD and Melissa M. Grand, JD Baker, Donelson, Bearman, Caldwell & Berkowitz, PC450 Laurel Street, Chase Tower North, 21st FloorBaton Rouge, Louisiana 70801
The COVID-19 outbreak is significantly impacting the real estate industry, and many legal issues are being raised as a result. We have compiled the following information in response to inquiries in areas affected by coronavirus, including landlord/tenant issues, eviction, and foreclosure.[1] This article is intended for general guidance and we encourage you to consult with your attorney if faced with any of the below scenarios. These issues are very fact specific and require even greater analysis given the uncertainty surrounding these events. In addition, we encourage you to reach out to your loan servicers and insurers to determine what, if any, financial resources or tools are available to you or your tenant at this time.
1. Can I still collect rent payments from tenants?
Short Answer: Rent payments may still be collected at this time unless the language in a lease provides otherwise.
The contract language of each lease is different. The impact of the pandemic on lease contracts is uncertain as this time. The lease contract language will impact each party’s duties and obligations under the lease, including collection and/or deferral of rent payments because of for example force majeure clauses. Each lease should be carefully examined and considering these novel circumstances, you should consult with an attorney in analyzing the landlord’s rights under the lease, as well as your business interruption insurer for possible coverage.
Also, commercial, residential, and multifamily, leases will each warrant varying considerations. For example, certain businesses may have been ordered to temporarily close by Governor Edward’s Stay at Home Order (the “Order”).[2] Other commercial tenants, classified as “essential” services under the Order, may be open and operating. In either instance, the commercial tenant’s cash flow may be severely limited at this time, leading it to seek rent relief from landlords. What ramifications this and other effects of the pandemic may have on specific leases is fact and contract specific.
For general information about federal relief programs for landlords and small businesses, please see REALTORS® and NAR.
2. Can a current tenant prohibit prospective tenants from viewing the property due to concerns related to coronavirus?
Short Answer: Generally, a tenant may not prevent the showing of a property unless prohibited by the terms of the lease. However, if the issue arises a landlord should consult his or her attorney to determine how to proceed.
Considering current CDC guidelines and the Governor’s Stay at Home Order, it is recommended that virtual tours of the property in lieu of in-person showings be conducted especially if the property is occupied by a tenant. See LR’s website for additional guidance.
Also, if the current tenant is quarantined or self-isolating at the request of medical professionals due to being exposed to coronavirus, the 14-day quarantine period should end before showing the property. See also, National Association of REALTORS® (“NAR”). Professional cleaning and sanitizing the property after the quarantine is also recommended.
Although there are no court cases on this issue yet, there is the potential for a claim of liability and damages for showing a property if the current tenant objects because of fear of the coronavirus depending on the facts and circumstances. Further, the tenant may be entitled to having the property cleaned and sanitized if the landlord wishes to show the property. Consult your attorney if this situation arises.
3. What happens if a landlord has leased a property that is still being occupied because the current tenant cannot (due to quarantine) or will not move due to coronavirus concerns?
Short Answer: If a tenant or anyone living in the property is under quarantine for coronavirus, they should be permitted to remain in place for the remaining time of their quarantine (generally 14 days).
A lease may provide holdover penalties for a tenant’s failure to timely vacate a property. A landlord should use discretion in choosing to enforce such a provision or not. This and other potential remedies are lease contract and fact-specific.
It is advisable that the landlord have the property professionally cleaned and sanitized before the next tenant moves in. Retain documentation that the property was professionally cleaned. For additional guidance, see NAR's website and the CDC's guidelines.
4. In the above scenario where a leased property is still being occupied and the tenant refuses to move, what happens to the security deposit from the new tenant? What happens to the security deposit from the previous tenant if this tenant is still occupying the property?
Short Answer:
The right to the security deposit will be governed by the lease.
The contract language of each lease is different and will determine what happens to the security deposit if a tenant fails to vacate, or a new tenant is unable to occupy the property. Depending on the lease language, holdover penalties or forfeiture of deposits may be provided. Consulting with your attorney is recommended.
5. Am I required to or prohibited from telling a potential tenant that the leased property was previously occupied by a tenant who tested positive for coronavirus or had symptoms suggestive of coronavirus?
Short Answer: General disclosure is most likely a good policy depending on the facts and circumstances. We have not located any specific rule prohibiting a general disclosure.
There are multiple laws to consider in determining whether the fact that someone in the property had coronavirus or symptoms suggestive of coronavirus must be disclosed. What disclosures are required will depend on the facts and circumstances. Louisiana law and the NAR Professional Standards discussed below, mandate various disclosures in certain circumstances. Further, privacy laws affect the disclosure of health and medical information.
A. NAR Professional Standards
Article 1 of the National Association of REALTORS® (“NAR”) Code of Ethics addresses a REALTOR®’s duty to clients and customers:
When representing a buyer, seller, landlord, tenant, or other clients as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly.
Thus, even when serving in a non-agency capacity, a REALTOR® remains obligated to treat all parties honestly.
In addition, Article 2 obligates REALTORS® to refrain from misrepresenting or concealing “pertinent facts” relating to a property or a transaction. Pertinent facts have been interpreted by NAR to mean any material fact that could affect a reasonable purchaser’s decision to purchase, or the price that a purchaser might pay unless the disclosure of such information is prohibited by law or regulation. Such factors include, but are not limited to, those factors that affect the habitability of the property, the desirability of the property, the price a reasonable purchaser might pay for it, or the potential purchaser’s ability to resell the property at a future date.[3]
Applying the general principles outlined above, whether the information is a pertinent factor “that would have an effect on a reasonable purchaser’s decision,” as set forth in the Code of Ethics, is a fact-intensive question.[4] While the agent owes a duty of fidelity to the client under Article 1, disclosure of such information must be consistent with the spirit of Articles 1 and 2. Historically, the conservative view has been to err on the side of disclosure, so depending on the circumstances, general disclosure is most likely a good policy. We will continue to monitor this issue for specific guidance from NAR.
B. Known Defects to Property
Generally, under Louisiana law, a broker or owner owes a duty to disclose “known defects” in the property. A “known defect” is a “condition found within the property that was actually known by the seller and that results in any of the following:
(a) has a substantial adverse effect on the value of the property,
(b) significantly impairs the health or safety of future occupants of the property, or
(c) if not repaired, significantly shortens the expected normal life of the property.”[5]
An action by the purchaser, based on a real estate agent's failure to disclose a known defect in the premises, stems from a general duty owed by the agent to the public at large.[6] A real estate agent owes a specific duty to communicate accurate information concerning the property to the seller or the purchaser, or both when circumstances warrant, and may be held liable for negligent misrepresentation.[7]
COVIC-19 is a novel situation, and there are no Louisiana cases directly on point. Whether a tenant with coronavirus would be a “known defect” that must be disclosed has not yet been decided by the Courts.
Currently, there is no evidence to suggest that the coronavirus survives on surfaces that are cleaned and disinfected per the CDC’s recommended protocols.[8] As such, a Court may find that this situation would not qualify as a “known defect” under a strict reading of La. R.S. 9:3196(1), and therefore would not have to be disclosed. On the other hand, depending on the facts and circumstances, it is possible that a Court may find that intentionally withholding information about an occupant of the property having coronavirus may be withholding material information to constitute a “known defect.”
C. Privacy Considerations
Louisiana does not have specific privacy law directed at landlords or tenants, but, like most states, Louisiana recognizes a general right of privacy.[9] It is considered an invasion of privacy to disclose someone’s private information, such as their health or medical information.[10] There are exceptions when the public has a legitimate interest in the information.[11] State and federal privacy laws typically balance the right of privacy with the need to disseminate information in which the public has a legitimate interest, and, in those instances where the public does have a legitimate interest, the law authorizes disclosures of the least amount of information necessary for the intended purpose.[12] Informing the potential tenant that a previous occupant tested positive for the coronavirus without disclosing the previous occupants’ name or other identifying information represents a balance of the previous occupants’ right of privacy and the legitimate interest in the potential tenant’s health and welfare.
6. It the leased property is a commercial building occupied by many tenants, am I required to or prohibited from letting tenants know that a tenant in the building has tested positive for the coronavirus?
Short Answer: General disclosure is most likely a good policy depending on the facts and circumstances. We have not located any specific rule prohibiting a general disclosure.
A careful examination of each of the applicable lease agreements is required. Certain leases may contain confidentiality or privacy provisions that would restrict landlords or property managers from sharing information about another tenant in the building. In the interest of public safety, many landlords of commercial buildings are notifying tenants in multi-tenant buildings if a tenant tests positive with coronavirus, without identifying the individual’s name in the notice provided. Also, landlords should request that tenants to “self-report” and notify a designated human resources staff member if they receive a positive virus test so that the local and state health departments can be contacted immediately. Some landlords are also requiring the building to be vacated for a specified time for a professional cleaning and sanitizing of the building. If this is done, we suggest retaining documentation of the professional cleaning. We also suggest supplying tenants with notification of your written policy concerning notice if a tenant within the building tests positive for the Coronavirus.
7. Can foreclosures and evictions be filed or still proceed if already filed?
Short Answer: Foreclosures and evictions for federally backed mortgages are suspended until April 30, 2020.[13] Other than this restriction for federally backed mortgages, we are not aware of any other specific order or proclamation expressly affecting the ability of foreclosures and evictions from proceeding in Louisiana; however, obtaining an eviction or foreclosure order from the courts currently will be difficult or impossible because of the suspension of legal delays and the limited court services available.
A. Louisiana law on eviction or foreclosure
Louisiana law, for the most part, requires a judicial process, i.e. Court filings for evictions or foreclosure. Many Courts are currently closed or not setting hearings on non-essential matters, so the ability to obtain Court orders may be very limited at this time. Further, Governor Edward's Order[14] suspended all deadlines in “legal proceedings... in all courts, administrative agencies, and boards...,” so the timeline for eviction or foreclosure under Louisiana law (such as the 5 days required notice to vacate[15]) cannot run, unless the notice requirements have been waived in the lease or mortgage.[16] Please note that certain courts and/or municipalities have issued orders prohibiting evictions and it is, therefore, prudent to check with your attorney before taking any action to evict a tenant to determine the proper procedures in your area.
B. Federal Housing Administration property
The Federal Housing Administration (FHA) implemented a foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages until April 30, 2020.[17] The guidance issued applies to homeowners with FHA-insured Title II Single Family forward and Home Equity Conversion (reverse) mortgages, and directs mortgage servicers to:
- Halt all new foreclosure actions and suspend all foreclosure actions currently in process; and
- Cease all evictions of persons from FHA-insured single-family properties.[18]
FHA is encouraging servicers to offer loss mitigation options to distressed borrowers – including those that could be impacted by the coronavirus – to help prevent them from going into foreclosure. These include short and long-term forbearance options, mortgage modifications, and other mortgage payment relief options available based on the borrower’s individual circumstances.[19]
8. What can we do if a tenant has abandoned the leased property?
Short Answer: The property owner can reclaim the abandoned leased property.
The Governor’s Order specifically states that an owner of immovable property is not prohibited from reclaiming leased property if abandoned or from entering leased property to make necessary repairs.[20] Depending on the circumstances, consider having the property professionally cleaned and sanitized before the next tenant moves in. For additional guidance, see NAR’s website and the CDC’s guidelines, CDC’s guidelines.
DISCLAIMER
Information and additional guidance and orders regarding the pandemic are being issued daily. The information in the article was last updated on March 27, 2020 at 9:00 a.m.
These materials are to be used for informational purposes and should not be construed as specific legal advice. These materials are not designed to cover every aspect of a legal situation for every factual circumstance that may arise regarding the subject matter included.
This publication is for reference purposes only and association members or other readers are responsible for contacting their own attorneys or other professional advisors for legal or contract advice. The comments provided herein solely represent the opinions of the authors and is not a guarantee of interpretation of the law or contracts by any court or by the Louisiana Real Estate Commission.
[1] Information and additional guidance and orders regarding the pandemic are being issued daily. The information is the article was last updated on March 27, 2020 at 9:00 a.m.
[2] See Stay at Home Order.
[3] Code of Ethics and Arbitration Manual, p. 53.
[4] Code of Ethics and Arbitration Manual, p. 53.
[5] See La. R.S. 9:3196(1)(emphasis added). See also Reeves v. Weber, 509 So. 2d 158, 160 (La. Ct. App. 1987)(discussing the real estate agent’s duty to disclose any “material defects” of which he is aware to the purchaser.)
[6] Id.
[7] See Watkins v. Karr, 716 So. 2d 399, 401 (La. Ct. App. 5th Cir. 1998). A real estate broker or agent owes a specific duty to communicate accurate information to the seller and the purchaser and may be held liable for negligent misrepresentation. Duplechin v. Adams, 95-0480 (La. App. 1 Cir. 11/9/95), 665 So. 2d 80, 83, writ denied, 95-2918 (La. 2/2/96), 666 So. 2d 1104. However, the duty to disclose any material defects extends only to those defects of which the broker or agent is aware. Reeves v. Weber, 509 So.2d at 160.
[8] See also, NAR guidance.
[9] See Jaubert v. Crowley Post-Signal, Inc., 375 So.2d 1386 (La. 1979).
[10] See Lambert v. Dow Chemical Co., 215 So.2d 673 (La. App. 1st Cir.1968).
[11] See Broderick v. State, Dept. of Environ. Quality, 00–0156 (La. App. 1st Cir.5/12/00), 761 So.2d 713, 715.
[12] For example, the Health Insurance Portability and Accountability Act (“HIPAA”) allows for disclosure of the minimum amount of information necessary for the intended purpose. 45 CFR 164.502(b), 164.514(d).
[13] See U.S. Department of Housing and Urban Development, Mortgagee Letter 2020-04 , dated March 18, 2020.
[14] See Proclamation JBE 2020-30 dated March 16, 2020. The Order specifically states that an owner of immovable property is not prohibited from reclaiming leased property if abandoned or from entering leased property to make necessary repairs. See Order, Section 5(D).
[15] It is important to review the lease agreement because a tenant may waive the notice requirements by written waiver contained in the lease. See La. R.S. 9:3197.
[16] Louisiana law permits the parties to waive certain notice requirements. See, e.g., La. Code of Civ. Proc. Art. 4701 (providing that a tenant may waive the 5-day notice requirement by written waiver contained in the lease).
[17] Id.
[18] See HUD press release
[19] Id.
[20] See Proclamation, JBE 2020-30 dated March 16, 2020, Section 5(D).
Last week, NAR President Kevin Sears checked in from the NAR Broker Summit, where he learned new tools to strengthen his business alongside several hundred fellow brokers. Next stop, Washington, DC for the REALTORS® Legislative Meetings, where we’ll show Congress our grassroots strength in action. We encourage you to watch Kevin’s video here to learn more about what NAR is advocating for this year at RLM. As always, the overarching theme is increasing access to homeownership. This video is also in the video section of our website. Stay tuned for Kevin’s next update.
Update from Katie Johnson, NAR Chief Legal Officer and Chief Member Experience Officer
Bill Tracking Report as of 4/19/2024
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