Guidance for Commercial Real Estate
LOUISIANA REALTORS • April 3, 2020
Information provided by:
Patricia B. McMurray, JD and Melissa Grand, JD,
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
450 Laurel Street, Chase Tower North, 21st Floor Baton Rouge, Louisiana 70801
COVID-19 and its long-reaching effects continue to change the way we conduct our everyday business, and commercial real estate practitioners continue to adapt to these changes on a daily basis.
Transactional Guidance
for Commercial Real Estate
The coronavirus pandemic continues to impact the real estate industry, from brokerage operations to marketing listings and closing transactions. NAR is providing guidance to some common transactional questions, based on the current directives from the WHO, the CDC, and the White House. All members are encouraged to stay informed by regularly visiting the CDC’s website(link is external).
In deciding how to address new issues that may come up in their day-to-day business, NAR urges members to find answers that will ensure first-class services to their clients, while also demonstrating care for the health and well-being of clients, agents, and the greater public welfare in reducing the risk of exposure to and spread of COVID-19.
This is general guidance only. Members should consult their brokers, legal counsel, and government-provided public health information.
What should a landlord or property manager do if someone has tested presumptive positive or positive for COVID-19?
If a tenant, visitor or employee has tested presumptive positive or positive for COVID-19, issue a building alert to other tenants, residents and others who share facilities. Report the matter to the local health agencies and be sure to follow directions regarding cleaning and other appropriate actions. Be careful to neither reveal the identity of the individual nor an affected company because of health privacy and other legal considerations.
Do special instructions need to be given to building maintenance or housekeeping services?
They should be provided training on protocols for wearing protective gear, sanitizing tools and equipment, and proper disposal of gear and materials that may have been exposed to COVID-19.
Can individuals who enter the building be asked questions related to COVID-19, such as about symptoms, exposure or recent travel?
As long as everyone who enters the building are asked the same questions this should be fine. Some appropriate questions could be:
- How are you feeling today?
- Have you recently been in close contact with someone or attended an event where there has been a confirmed case of COVID-19?
- Have you recently traveled anywhere?
Questionnaire answers only should be used to determine whether additional precautionary measures should be taken or alternative measures should be used. The answers must not be used to deny someone's employment or services.
My building has a common mail room. What should be done about mail and packages?
Consider adopting a protocol where a few appropriately protected people handle and deliver the mail or establish a mail schedule for smaller groups of people to collect their mail. And be sure to increase disinfection efforts in between each group’s time.
Will parties be excused from performing their services or obligations in the lease due to the COVID-19 pandemic?
Review the lease, specifically, you will want to check the Force Majeure, Casualty, and Condemnation/Eminent Domain provisions. Depending on the language, these provisions can give the landlord or tenant certain rights to excuse, suspend or terminate obligations or services.
A force majeure clause generally permits parties to suspend or terminate their obligations due to certain circumstances beyond their reasonable control. In the context of COVID-19, look to see if the force majeure clause enumerates circumstances such as “disease,” “epidemic,” quarantine,” “acts of government,” and “pandemic.” If the force majeure clause includes broad general language such as “any cause whether similar or dissimilar to the foregoing,” it is likely to cover circumstances that are not specifically enumerated in the provision.
A casualty clause usually covers fire, flood, explosions or other similar occurrences that degrade the physical or structural integrity of the building. A tenant might look to this clause on the basis that their ability to operate their business or to use their lease space has been significantly disrupted by the COVID-19 pandemic.
Tenants in buildings and spaces that are directly affected by government closures may view their lease spaces as being taken over by the government. Check to see if the lease addresses condemnation or eminent domain and whether it provides any termination or rent abatement rights.
Which party’s insurance is triggered by the claims arising from the COVID-19 pandemic?
If the lease contains an insurance requirement, you will want to check whether it states when and how each party’s insurance is triggered. The provision may specify circumstances where only one party’s insurance would apply or where the insurance of both parties apply, or neither policy will apply.
What should be done if a tenant just decides to stop rent based on a theory from a lease provision or any other reason?
A landlord should have the right to deliver a notice of monetary default, and possibly the right to accelerate all lease payments with possible immediate recourse to guarantors and/or letters of credit. This action will require the tenant to defend its decision. It is important to note that some states have a moratorium on commercial (and residential) eviction proceedings.
Does rent relief or assistance need to be provided to any tenant who requests it?
A landlord has financial responsibilities so it wants to be sure that any relief or assistance provided is to a tenant who actually needs help and not one who is just trying to exploit the situation. Using a rent assessment application, like the one provided by SterlingCRE Advisors(link is external) can provide information about the tenant’s situation and help determine what type of relief is needed. A landlord should not feel obligated to provide relief to any tenant who is in default. And tenants should be encouraged to seek assistance from government relief programs and their franchisor, if applicable. If a tenant submits a rent relief request, try to respond as soon as practicable to avoid potential vacancies.
What relief should be provided to tenants seeking assistance?
With the landscape rapidly changing due to the COVID-19 pandemic, discussions or relief should be limited to 30 to 60 days. This allows the landlord to monitor the situation and to consider any new circumstances. In terms of relief, try offering the tenant rent deferral instead of a rent waiver. Another option could be using the tenant’s security deposit in place of a month’s rent and to have the tenant repay the deposit over time. Be sure to check with the lender and attorney before offering any relief to confirm that it is permissible.
How should I keep track of rent relief and assistance that is provided to tenants?
Be sure to keep documentation of all rent relief, adjustments and other types of assistance provided to tenants. Also, be sure to have the tenants agree to a confidentiality clause.
We are in the middle of negotiating a new lease, is there anything different we should do considering the COVID-19 pandemic?
Parties negotiating leases or new contracts should pay close attention to the force majeure clause and consider including “disease outbreak,” “epidemic,” “quarantine,” “acts of government,” “pandemic,” and others of the like as force majeure events.On the flip-side, if the parties want to carve out an exception about the effects of the COVID-19 pandemic, then specific language stating such should be incorporated.
Any recommended practice for resolving disputes?
With everything that is happening due to the pandemic, parties should assess appropriate actions with the knowledge that it is sure to be delayed and lag time in seeking any legal recourse to resolve disputes. The federal and state government have been announcing plans or intentions of providing emergency monies to assist businesses to survive through this pandemic. Therefore, parties working together to find solutions together to keep leases and relationships intact may be the best practice!
ALWAYS COMPLY WITH LOCAL AND STATE GOVERNMENT ORDERS REGARDING CORONAVIRUS-RELATED RESTRICTIONS.
Week 9 brought several major Louisiana REALTORS® priorities into posture as the Legislature moved deeper into the final stretch of the session. Two of our top priority bills, HB 468 and HB 1027 both by Representative Troy Hebert , cleared the Legislative Bureau and advanced to the Senate floor calendar for third reading and final passage. HB 468, our residential wholesaling regulation bill, remains one of the most important consumer protection measures of the session. The bill brings transparency, accountability, and clear rules of the road to residential real estate wholesaling in Louisiana. HB 468 previously passed the House by a vote of 96–0 and is now positioned for final Senate consideration. HB 1027, which clarifies that licensed real estate appraisers are not liable for a seller’s failure to comply with carbon monoxide detector requirements, also advanced to the Senate floor calendar after previously passing the House by a vote of 90–0. Both bills remain in strong posture, and Louisiana REALTORS® will continue working for final passage as they move through the Senate. Another major development this week was the House passage of HB 1166 by Representative Kim Carver , which passed unanimously on May 5, 103–0. HB 1166 creates a practical disclosure framework for vacant residential property transactions and is designed to help buyers, sellers and real estate professionals avoid late-stage surprises involving access, utilities, drainage, flood risk, prior use and other material property conditions. This bill has been a key part of Louisiana REALTORS®’ consumer protection and transactional clarity agenda. HB 1166 was received in the Senate on May 7 and now moves into the Senate side of the process, where Louisiana REALTORS® will continue working closely with the author and stakeholders as the bill advances. Tort reform and civil justice issues also moved forward this week. HB 437 by Representative Michael Melerine , which addresses the award of expert witness fees in civil litigation, passed the House by a vote of 75–18 and was received in the Senate on May 7. HB 1089 by Representative Dennis Bamburg Jr. , which creates structured CARE Accounts for certain categories of tort damages, passed the House by a vote of 67–29 and was also received in the Senate. Louisiana REALTORS® continue to support meaningful tort reform as part of the broader effort to improve Louisiana’s legal environment, reduce litigation-driven costs, and help stabilize the property insurance market. A more predictable civil justice system directly supports property owners, consumers, businesses and the long-term health of Louisiana’s real estate market. Property insurance remains one of the most important issues facing homeowners and property owners across the state. HB 1187 by Representative Paul Sawyer , dealing with Citizens Property Insurance emergency assessments, has been received in the Senate and referred to the Senate Insurance Committee after previously passing the House by a vote of 87–9. Several additional insurance-related measures remain active, including bills addressing fortified roof endorsements, stated-value homeowner policies, insurance notice requirements, nonrenewal restrictions, and pre-suit claim review. HB 408 , which addresses insurance nonrenewal prohibitions, and HB 1210 , which addresses mandatory pre-suit claim review, remain pending in the House Insurance Committee. Louisiana REALTORS® will continue to closely monitor these measures because insurance affordability, availability and market stability remain central to housing affordability and private property ownership in Louisiana. Several Senate bills also continued moving through the House processes this week. SB 241 by Senator Valarie Hodges , which requires insurance adjusters and appraisers to include their license numbers in written communications, cleared the Legislative Bureau on May 6 and returned to the House floor calendar. This measure remains relevant to transparency, accountability, and consumer confidence in the insurance claims process. SB 180 by Senator Franklin Foil , which allows surviving spouses of deceased disabled veterans to transfer their expanded property tax exemption, was scheduled for House floor debate this week and remains a positive homeowner protection and property tax fairness measure. Louisiana REALTORS® also continues to monitor legislation dealing with blight, redevelopment and rent stabilization. HB 284 by Representative John Wyble , which would authorize certain parishes and municipalities to expropriate blighted property by declaration of taking, remained on the House calendar this week as a notice-given, subject-to-call bill. The bill previously failed on the House floor by a narrow vote of 48–47 and remains under active reconsideration. Blight policy is important, but redevelopment tools must be balanced with private property rights, due process, and protections for property owners. HB 472 by Representative Alonzo Knox , which would authorize municipalities to implement rent stabilization programs, remains involuntarily deferred in committee. Louisiana REALTORS® continues to oppose rent control and rent stabilization proposals in any form because these policies reduce housing supply, discourage investment, and ultimately worsen affordability challenges over time. As we move into Week 10, Louisiana REALTORS® will remain focused on securing final Senate passage of HB 468 and HB 1027, advancing HB 1166 through the Senate, and continuing to engage on the tort reform and insurance measures that directly affect property owners, housing affordability and the real estate profession. With REALTOR® Day at the Capitol taking place during this critical stretch of the session, member engagement will be especially important as legislators continue to make decisions on real estate, insurance, liability, redevelopment and private property rights issues. Please view the weekly bill tracking report provided by our lobbying team over at Harris, DeVille and Associates.
Week 8 was one of the most consequential weeks of the session so far for Louisiana REALTORS® and the real estate industry. Two of the association’s flagship bills moved to the brink of final Senate action, rent stabilization was stopped again in committee, major insurance legislation continued to advance, and several bills affecting property rights, tort reform and transaction practice saw meaningful movement. The biggest developments of the week came on HB 468 and HB 1027 , both by Rep. Troy Hebert . HB 468 , the residential wholesaling bill, cleared the Senate Commerce Committee on April 28, had its amendments adopted on April 29, and was referred to the Legislative Bureau putting it one step away from the Senate floor. HB 1027 , the appraiser liability bill, followed the same path after its overwhelming House passage earlier this month and is also now pending Legislative Bureau review before final Senate consideration. Louisiana REALTORS® strongly supports both measures, which are designed to strengthen consumer protection, improve market clarity and reinforce confidence in the real estate transaction process. On the rent-control front, HB 472 by Rep. Alonzo Knox was brought back before the House Municipal, Local and Parochial Affairs Committee this week. Louisiana REALTORS® testified in opposition, and the committee voted 8-5 to defer the bill involuntarily. That is a meaningful win for property owners, housing providers, and the long-term health of Louisiana’s housing market. Louisiana REALTORS® remains firmly opposed to rent stabilization proposals, which may sound politically attractive, but have consistently been tied to reduced housing supply, deterioration in rental stock and long-term affordability problems in markets where they are adopted. Insurance remained one of the session’s most active and important policy areas. HB 1187, Rep. Paul Sawyer , dealing with Louisiana Citizens for emergency assessments, passed the full House 87-9 on April 29, and now heads to the Senate. Because Citizens' assessments can ultimately affect policyholders across the state, this bill has clear relevance for affordability and homeownership costs. HB 408, Rep. Edmond Jordan was heard in House Insurance Committee this week and remains pending. This bill would prohibit insurers from non-renewing residential policies when homeowners have taken documented steps to reduce risk, an issue with direct implications for insurability and failed closings in vulnerable markets. In addition, SB 241 by Sen. Valarie Hodges , which requires insurance adjusters and appraisers to include their license numbers in written communications, cleared House Insurance unanimously and is now headed to the House floor. Taken together, these measures reflect the legislature’s continued focus on insurance stability, transparency and accountability, all of which remain central to real estate activity in Louisiana. Week 8 also brought movement on broader tort reform and property-rights-related legislation. HB 437 , addressing expert witness fees, and HB 1089 , creating structured CARE Accounts for tort damages, both cleared House Civil Law and are now set for House floor debate next week. Meanwhile, SB 180 by Sen. Franklin Foil , allowing surviving spouses of disabled veterans to transfer a property tax exemption, is nearing final House passage after advancing to third reading. While not all of these bills directly regulate licensees, they reflect the broader civil liability and property tax environment that affects the cost and accessibility of owning property in Louisiana. Another key bill for the industry, HB 1166 by Rep. Kim Carver , remains very much alive and is now positioned for House floor debate on Tuesday, May 5 . The bill would require disclosures for vacant residential property, and it would close an existing gap in Louisiana law that currently exempts many vacant homes from standard seller disclosure rules. After being called and returned to the calendar earlier in the week, the bill is now finally set for debate. Louisiana REALTORS® also intends to use the bill as a vehicle for a structural amendment to the Louisiana Real Estate Commission that would move toward a more geographically balanced appointment process, with one member appointed from each congressional district and the remaining members appointed at large. That change would better ensure regional representation across Louisiana’s diverse real estate markets and help modernize the commission’s structure. Taken together, week 8 was a strong and consequential week for Louisiana REALTORS®. The association’s two flagship bills are now within reach of Senate floor passage, rent stabilization was turned back in committee, important insurance legislation continued moving, and HB 1166 remains positioned as both a major disclosure bill and a possible vehicle for meaningful LREC reform. Louisiana REALTORS® remains fully engaged at every stage of the process to protect private property rights, support practical regulation and advance policies that strengthen Louisiana’s real estate market. Lastly, this week, Louisiana REALTORS® wants to extend sincere thanks to Rep. Delisha Boyd — a real estate broker herself — for her tireless work shepherding HB 292 through the legislative process. The security deposit fairness bill, which allows landlords and tenants to mutually agree in writing to extend the timeline for returning a security deposit when damage is found, has passed to third reading and final passage in the Senate and is nearly on its way to the Governor's desk. This has been a meaningful win for both property owners and renters across Louisiana. Please view the weekly bill tracking report provided by our lobbying team over at Harris, DeVille and Associates.
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