The Blame Game
Practice reasonable and precautionary behavior to protect yourself against dubious claims.
Q. A tenant is claiming she contracted COVID-19 from the cleaning staff who clean the building’s common areas. I gave tenants advance notice and recommended they stay in their units during the cleaning. How should I respond? Am I liable?
A. Since the pandemic, there seem to be a lot more medical experts than there were only a year ago. I have to constantly remind myself that I am not one of them, even though my first question is, “how does your tenant know she contracted COVID-19 from your cleaning staff specifically?” Instead, I will do my best to answer this question as a lawyer. A lawyer’s first concern is that your tenant is getting the medical attention they need to weather the virus as best they can. But after taking these initial “life and death” precautions, the lawyer’s attention turns to damage control.
You need to facilitate contract tracing—one infected by COVID-19 informs the health department of their interactions with others to help notify others who have been exposed to get tested, monitor their conditions, and self-isolate. You should ask this tenant if they have confirmed test results, so you can sound the alarm in the building and with your cleaning crew to let all parties know that they may have been exposed. (Whether or not anyone in the cleaning crew had the virus, they were potentially exposed to it.) You should also ask the cleaning company to let you know if any of the crew members tested positive for COVID-19.
Now that you’ve gotten out ahead of the concern, you want to think from the perspective that this tenant is going to blame you for their contracting COVID-19, and their claim would be styled as one for “negligence.” In that context, you’re in an impossible situation: if you hadn’t cleaned, you might be found negligent for permitting an unclean environment, but because you did, you invited in persons who didn’t necessarily need to be there.
Going forward, I think cleaning should occur, and that a third-party cleaning crew should take responsibility and accountability for their own COVID-19 management (including ensuring their employees are not symptomatic and that they are practicing safe protocols to minimize transmission). Beyond that, I think it is suspicious that your tenant “knows” they contracted it from the cleaning crew.
Unfortunately, because many tenants have lost income, rents are falling, and some tenants are looking to escape lease terms or higher-than-market rents, we are seeing more plain vanilla tenant complaints presenting as “the reason” that a tenant vacates. But if you ask, in real time, for the tenant to confirm their diagnosis and for the cleaning crew to confirm whether their employees tested positive, you have preserved information about whether any facts support your tenant’s claim. And because you’ve reacted to any “positives” by taking other precautions in your building, you’ve mitigated the situation. Whether you are liable is a question for a jury, but your practice of reasonable and precautionary behavior will serve you well in potentially avoiding that outcome.
Q. Our tenant has approached us about lowering his rent when his lease ends next month. Rather than reduce the amount, locking us into the lower rate, we’d like to keep the rent as is, but offer him a free month. Is
A. The law is very clear on this subject and has recently been circulated by the Rent Board in light of the COVID-19 crisis: A landlord who grants a rent reduction due to market conditions makes that reduction permanent. This means that future rent increases must be based off of the lowered amount, which becomes the new base rent. In addition, the property owner is likely precluded from withdrawing or canceling the reduction at a later time.
A rent reduction may only be rescinded or canceled if the tenant has requested a temporary adjustment based upon an economic hardship specific to that tenant’s personal or household situation. For example, the tenant is laid off or is ill (i.e., due to COVID-19), or encounters unexpected expenses to care for a member of the tenant’s home. In those instances, the landlord and tenant should clearly document the hardship and should spell out, in a signed writing, the amount of the reduction, why the reduction is being granted, and the length of time for the reduction.
Rebates and incentives are also very dangerous when given to dissuade tenants from leaving in a declining market or to entice new tenants to sign up at an unattractive rent. About 20 years ago, a large apartment operator in San Francisco offered incoming tenants “rent coupons” for use each month to lessen their rental obligations. For instance, Tenant A’s lease states that rent is $1,200 per month, although similar apartments were not renting at that level. To induce Tenant A to sign the lease at this amount, the landlord offered $1,200 worth of coupons for the first year of the tenancy. Consequently, Tenant A could submit a $100 coupon with each monthly rental payment, thereby only paying $1,100 out-of-pocket during Year 1. This landlord subsequently discontinued the coupon program when the rental market improved. Hundreds of affected tenants then pursued massive litigation in protest. The Rent Board held that, using this example of Tenant A, initial base rent was legally $1,100 per month for every year of the tenancy because the discount afforded by the coupon incentive was to be permanently built into the rental obligation and could not be legally withdrawn.
Other property owners have been held liable when they offer a free month of rent or engage in other gimmicks to effectively lower the tenant’s initial rent obligation, only to later take away the incentive once market conditions pick up. Indeed, if you offer a month’s free rent for a one-year term, the Rent Board will say that the value of that month is then amortized over the 12-month period of the initial term and then lowers the base rent for all future months by that amount. As one judge put it, you cannot evade rent control by setting up a lease with a starting rent higher than what the current market would justify in order to entice tenants to sign the lease. Other incentives like handing out a substantial gift certificate may also draw a similar ire.
The Rent Board policy is therefore quite clear. Rent rebates or reductions may only be lawfully rescinded, canceled, or withdrawn if the rebate or reduction is given because of a tenant’s particular need or hardship. A soft rental market is never a justification for a temporary reduction in rent. So if you do grant a reduction or offer an incentive in order to attract new tenants or to keep an existing tenant from moving due to a change in the marketplace, you risk making that reduction or the value of the incentive a permanent component of base rent.
Justin A. Goodman is with Zacks, Freedman & Patterson, P.C. and can be reached at 415-956-8100. Dave Wasserman is with Wasserman-Stern Law Offices and can be reached at 415-567-9600.