Probate and Property (35:01)

THE COVID-19 ISSUE

EFFECT OF THE COVID-19 REMOTE INK NOTARIZATION EVICTIONS AND THE VOL 35, NO 1 VIRUS ON COMMERCIAL LEASE AND REMOTE WITNESSING COVID-19 PANDEMIC JAN/FEB 2021 TRANSACTIONS DURING THE PANDEMIC

A PUBLICATION OF THE AMERICAN BAR ASSOCIATION | REAL PROPERTY, TRUST AND ESTATE LAW SECTION

SO MANY HAVE DIED COVID-19 in America’s Nursing Homes The Section is excited to announce the RPTE Book Club. The RPTE Book Club is a lecture and Q&A Series with the authors. Each series will be a different book title within the legal field. THE COLOR OF LAW A Forgotten History of How Our Government Segregated America

Join RPTE along with author Richard Rothstein as he discusses how segregation in America is the byproduct of explicit government policies at the local, state, and federal levels along with a Q&A session. Wednesday, February 24, 2021 12-1 PM CT The first 100 registrants will receive a copy of the book with their registration fee.

Register at ambar.org/rptebookclub PROFESSORS’ CORNER PROFESSORS’ CORNER A monthly webinar featuring a panel of professors addressing recent cases or issues of relevance to A monthlypractitioners webinar and featuring scholars ofa panel real estate of professors or trusts addressing and estates. recent FREE cases for RPTE or issues Section of relevance members to! practitioners and scholars of real estate or trusts and estates. FREE for RPTE Section members! Register for each webinar at http://ambar.org/ProfessorsCornerRegister for each webinar at http://ambar.org/ProfessorsCorner WILLS IN THE 21ST CENTURY: TOWARDS THE SECURE ACT: RETIREMENT PLANNING SENSIBLE APPLICATION OF FORMALITIES AND MONETARY EXPECTATIONS THE LEGACIES OF RACIAL RESTRICTIVE MOORE ON POWELL AND I.R.C. § 2043 Tuesday, July 14, 2020 COVENANTS Tuesday, AugustFebruary 14, 9, 2020 2021 12:30-1:30 pm ET 12:30-1:30 pm ET 12:30-1:30 pm ET Tuesday, January 12, 2021 12:30-1:30 pm ET ELAINE H. GAGLIARDI, Alexander Blewett III School of Law at BRIDGET CRAWFORD, Elisabeth Haub School of Law CHRIS HOYT, University of Missouri-Kansas City School of Law SHELLEY ROSS SAXER, Pepperdine University, Caruso School of Law University of Montana NAOMI CAHN, George Washington Law School Moderator:J. MARTIN BURKE AMY ,M. Alexander HESS, BlewettUniversity III ofSchool Tennessee of Law College at of Law KARENCAROL M.J. SNEDDON, ROSE, Yale LawMercer School University School of Law CHRIS MYERS ASCH, Colby College University of Montana Moderator: AMY M. HESS, University of Tennessee College of Law Moderator: AMY M. HESS, University of Tennessee Moderator: SHELBY D. GREEN, Elisabeth Haub School of Law

SPONSORSHIP & ADVERTISING OPPORTUNITIES CONTACT CHRIS MARTIN Vice President, Sales Sales Solutions & Services 410.584.1905 | [email protected]

BRYAN LAMBERT Associate Director | Marketing | Business Development Real Property, Trust and Estate Law 312.835.8978 (cell) | [email protected] (contact for law ﬁ rm sponsorship opportunities) americanbar.org/groups/real_property_trust_estate/sponsorshipwww.abarpte-mediaplanner.com

PP_v034n04_JulyAug20-CC20.indd 1 6/15/20 12:51 PM THE COVID-19 ISSUE CONTENTS January/February 2021 • Vol. 35 No. 1

12 Features

12 So Many Have Died: COVID-19 in 24 America’s Nursing Homes By David English

24 A COVID-19 Heavyweight Bout: Departments Tenant Safety Versus Discrimination By Alex J. Schnepf 4 Section News 34 The Impacts of the Coronavirus Pandemic on Real Estate Contracts: Force Majeure, 6 Young Lawyers Network Frustration of Purpose, and Impossibility By George P. Bernhardt and Jack Fersko 8 Uniform Laws Update

42 Evictions and the COVID-19 Pandemic 18 Keeping Current—Property By Cashauna M. Hill 30 Keeping Current—Probate 46 The Effect of COVID-19 on Commercial Lease Transactions 60 Technology—Property By Alan M. DiSciullo 64 The Last Word 53 RPTE Advocates for Remote Ink Notarization and Remote Witnessing During the Pandemic By Jo-Ann Marzullo

55 ABA Resolution 10H: Placating Landlords, Protecting Tenants By Jo-Ann Marzullo, Orlando Lucero, and Jo Ann Engelhardt Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 2 January/February 2021 A Publication of the Real Property, Trust and Estate Law Section | American Bar Association

EDITORIAL BOARD ABA PUBLISHING Editor Director Edward T. Brading Donna Gollmer 208 Sunset Drive, Suite 409 Managing Editor Johnson City, TN 37604 Erin Johnson Remotigue Articles Editor, Art Director Real Property Andrew O. Alcala Brent C. Shaffer Young Conaway Stargatt & Manager, Production Services Taylor, LLP Marisa L’Heureux Rodney Square Production Coordinator 1000 N. King Street Scott Lesniak Wilmington, DE 19801 Articles Editor, ADVERTISING SALES AND Trust and Estate MEDIA KITS Michael A. Sneeringer Chris Martin Porter Wright Morris & Arthur LLP 410.584.1905 9132 Strada Place, 3rd Floor [email protected] Naples, FL 34108 Senior Associate Cover Articles Editors iStockphoto Departments Thomas M. Featherston Jr. Michael J. Glazerman Associate Articles Editors All correspondence and 4 Section News Travis A. Beaton manuscripts should be sent to Kevin G. Bender the editors of Probate & Property. Emma L. Osborne 6 Young Lawyers Network Kathleen K. Law Alice M. Noble-Allgire 8 Uniform Laws Update Amber K. Quintal Aaron Schwabach Bruce A. Tannahill 18 Keeping Current—Property Departments Editor James C. Smith 30 Keeping Current—Probate Associate Departments Editor Soo Yeon Lee Editorial Policy: Probate & Property is designed to assist lawyers practicing Probate & Property (ISSN: 0164-0372) is published six times a year (in January/February, March/ 60 Technology—Property in the areas of real estate, wills, trusts, and estates by providing articles and April, May/June, July/August, September/October, and November/December) as a service to editorial matter written in a readable and informative style. The articles, other its members by the American Bar Association Section of Real Property, Trust and Estate Law. editorial content, and advertisements are intended to give up-to-date, practical Editorial, advertising, subscription, and circulation offices: 321 N. Clark Street, Chicago, IL information that will aid lawyers in giving their clients accurate, prompt, and 60654-7598. 64 The Last Word efficient service. The price of an annual subscription for members of the Section of Real Property, Trust and Estate The materials contained herein represent the opinions of the authors and Law ($20) is included in their dues and is not deductible therefrom. Any member of the ABA may editors and should not be construed to be those of either the American Bar become a member of the Section of Real Property, Trust and Estate Law by sending annual dues Association or the Section of Real Property, Trust and Estate Law unless of $70 and an application addressed to the Section; ABA membership is a prerequisite to Section adopted pursuant to the bylaws of the Association. Nothing contained herein membership. Individuals and institutions not eligible for ABA membership may subscribe to is to be considered the rendering of legal or ethical advice for specific cases, Probate & Property for $150 per year. Single copies are $7 plus $3.95 for postage and handling. and readers are responsible for obtaining such advice from their own legal Requests for subscriptions or back issues should be addressed to: ABA Service Center, American counsel. These materials and any forms and agreements herein are intended Bar Association, 321 N. Clark Street, Chicago, IL 60654-7598, (800) 285-2221, fax (312) 988-5528, for educational and informational purposes only. or email [email protected].

© 2021 American Bar Association. All rights reserved. No part of this publica- Periodicals rate postage paid at Chicago, Illinois, and additional mailing offices. Changes of tion may be reproduced, stored in a retrieval system, or transmitted in any form address must reach the magazine office 10 weeks before the next issue date.POSTMASTER: or by any means, electronic, mechanical, photocopying, recording, or otherwise, Send change of address notices to Probate & Property, c/o Member Services, American Bar without the prior written permission of the publisher. Contact ABA Copyrights Association, ABA Service Center, 321 N. Clark Street, Chicago, IL 60654-7598. & Contracts, at https://www.americanbar.org/about_the_aba/reprint or via fax at (312) 988-6030, for permission. Printed in the U.S.A.

BEST PRACTICAL USE ARTICLE REAL PROPERTY Risky Drafting: Practical Tips for Lease Liability Insurance Requirements By Marie A. Moore and Charles E. Comiskey (July/August)

TRUST & ESTATE Making Lemonade out of Lemons: Estate Planning Opportunities in a Low Interest Rate Environment By Anna Katherine Moody and Emily A. Plocki (September/October) BEST CUTTING-EDGE ARTICLES REAL PROPERTY Hurricanes and the National Flood Insurance Program: Is Congress Paying Attention? By Robin Kundis Craig (May/June) TRUST & ESTATE Tilting the Litigation Playing Field under the Uniform Trust Code: The Availability of Temporary Injunctive Relief in Trustee Removal Actions By Julian C. Zebot and Evan A. Nelson (May/June)

BEST OVERALL ARTICLES REAL PROPERTY Capture or Convert By Tara Righetti, John Smith, and Bruce M. Kramer (September/October) TRUST & ESTATE Life Insurance: What Attorneys and Trustees Should Know By Bruce A. Tannahill and Melisa Seyhun (November/December) BEST LAW PRACTICE MANAGEMENT ARTICLE The Future Is Now: eClosings and a Lawyer’s Ethical Obligations By Orlando Lucero (September/October)

All articles published in Probate & Property during the current year will be eligible for the 2021 Excellence in Writing Awards. Any author interested in submitting an article should contact either Michael Sneeringer or Brent Shaffer at the addresses listed on page 3. The magazine’s “Memorandum for Authors” is posted on the ABA website at https://www.americanbar.org/content/dam/aba/ administrative/real_property_trust_estate/publications-magazine-memo-for-authors.authcheckdam.pdf.

Negotiating the Commercial Real Estate Deal – A Tribute to Sid Saltz

Sidney Saltz, an active leader of the Sec- point and when to let it go. As Sid would “That is the dumbest request I ever heard” tion of Real Property, Trust and Estate say, “[i]f you don’t have a good reason to will not put you in anyone’s good graces. Law, died in October. Sid was a giant in say ‘no’, say ‘yes.’ If you have a good rea- If anything, it will make the attorney on the field of commercial leasing. He was son, explain it. If you cannot agree, try to the other side more pugnacious. The a prolific writer and teacher in the Sec- find a compromise position.” It may be parties on each side of the deal may not tion and the Chicago Bar. He authored that after you employ that strategy, the always have cool heads, but their attor- numerous articles in Probate & Property parties may still not be able to agree on a neys need to make an effort to be as and wrote From Handshake to Closing: deal point. If that is the case, involve the agreeable as possible for the sake of the The Role of the Commercial Real Estate client or broker. The client or broker may deal. Lawyer, among other books for the Sec- be able to think of a compromise you tion. He mentored and worked with had not envisioned, or they may permit Never Dismiss Opposing many of the current leaders in the Sec- you to concede the point. Counsel’s Requests tion. As a tribute to Sid, this issue’s YLN Answers such as “We never give that” or column focuses on negotiating the com- Pick Up the Phone to Close the “Well, I’ve never heard that one before” or mercial real estate deal and presents Gaps simply “Denied, what’s your next point?” material from the third edition of From In a typical real estate transaction, coun- belittle opposing counsel, whose points Handshake to Closing: The Role of the sel for each side exchange drafts of the should be responded to respectfully and Commercial Real Estate Lawyer, which agreement that is the subject of the with sound argument rather than flip- the Section published in 2019. See transaction several times before the par- pantly, even if you think that the point is https://bit.ly/3n94ByR. ties pick up the phone. More often than silly and, frankly, pointless. not, the parties hope they can take care All Experience Is Valuable of the transaction via e-mail. A brief Do Not Take Advantage of Your success in negotiating purchase phone call, however, can save you a lot Opposing Counsel’s Mistakes and sale agreements, leases, and loan of time and your client a lot of money. Everyone makes mistakes. No amount documents for commercial real estate Sometimes it is advantageous to make of careful preparation, drafting, analy- transactions is a function of how many sure there is agreement on the major sis, or discussion with one’s clients and deals you handle and what degree of points before advancing to the minor their brokers will eliminate all errors. involvement you have in such trans- items. We must do the best we can to avoid actions from beginning to end. With errors, and we need a lot of luck to avoid experience comes expertise. Know Where the Deal Should having errors that cause adverse conse- Land quences for our clients and ourselves. It The General Approach Know your client’s goals in the transac- may be tempting to take advantage of The goal of any real estate negotiation tion. Having the major “deal points” in the errors of opposing counsel. Do not should be to air the issues, discuss them mind can serve as guideposts in your do it. As the golden rule states, “Do unto as dispassionately as possible, and reach negotiation of the transaction. A letter of others as you would have them do unto a conclusion. intent will usually lay out the major deal you.” Helping others—even when it may points in a lease or purchase transaction. not benefit you—will quickly earn you a A Useful Strategy In a financing transaction, a term sheet good reputation as someone that people A challenge for commercial real estate will spell out the significant business want to work with. practitioners is when to fight for a deal and legal terms. Do Not Be a “Deal Killer” For more information on the RPTE YLN, Never Belittle Opposing Counsel No matter how strongly you may feel please contact: Josh Crowfoot, Chambliss, Do not make off-putting remarks to that a deal is not in your client’s best Bahner & Stophel, P.C., Liberty Tower, 605 Chestnut Street, Suite 1700, Chattanooga, opposing counsel that will make the interest, it is not your decision to make. TN 37450, [email protected]. negotiation more difficult in the future. You can advise your client, explain your Statements such as “That is absurd” or view, and why you have reached it, but Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 6 January/February 2021 YOUNG LAWYERS NETWORK

the decision is always the client’s. It is in the way of a deal that the parties want Handshake to Closing: The Role of the the client’s money; and the client, not to make. Commercial Real Estate Lawyer. Whether you, will have to live with the conse- We hope the above pointers will assist you are a seasoned practitioner or just quences of the decision. Present the best you in your practice. For more in-depth starting in your legal career, the book legal advice you can offer, but do not get mentoring from Sid, please read From offers great value for your practice. n

LETTER TO THE EDITOR

In the Nov/Dec 2020 issue, Bruce A. Tannahill and Melisa Seyhun write a terrific article, Life Insurance: What Attorneys and Trustees Should Know.

I would like to clarify and elaborate on a statement that they make under the part subtitled “Gift of Policy to Charity.” They write, “Because the policy is ordinary income property, however, the income tax deduction is limited to the lesser of the policy’s fair market value or the donor’s basis in the policy.”

According to Rev Rul. 2009-13, Situation 2, however, gain from the sale of a policy is ordinary income only to the extent of its cash surrender value (CSV). If and to the extent that the fair market value exceeds CSV, that portion is long-term capital gain.

Therefore, the following should replace that sentence: “To the extent that the policy’s value consists of cash surrender value (CSV), the policy is ordinary income property, and the income tax deduction is limited to the lesser of the policy’s fair market value or the donor’s basis in the policy. If and to the extent that the policy’s value exceeds CSV, however, that excess value is deductible.”

The authors have confirmed that they agree with this clarification.

Steven B. Gorin Thompson Coburn LLP St. Louis, Missouri

2020 Legislative Update

The unprecedented pandemic that caused pandemic. The need for social distancing many of us to change our work environ- accelerated the trend and caused the gov- Uniform Laws Update ments in 2020 also had significant effects provides information on ernors of many states that did not already on state legislatures. Nearly all the states uniform and model state allow remote online notarization to issue that were in session last winter recessed in laws in development as they executive orders authorizing the practice March 2020 under mandated or recom- apply to property, trust, and temporarily. In 2020, Hawaii and Wiscon- mended social distancing protocols. Some estate matters. The editors of sin became the tenth and eleventh states legislatures reconvened later in the year Probate & Property welcome to enact permanent legislation based on with a more limited legislative agenda, but information and suggestions the latest version of the Revised Uniform others implemented new rules to allow from readers. Law on Notarial Acts (RULONA), which legislators to meet remotely. Much leg- includes provisions to facilitate remote islation deemed not to be essential was notarization. Arizona, Connecticut, Kan- deferred for consideration in 2021, includ- sas, and New Jersey also introduced ing many bills to adopt uniform acts. Virginia adopted UPHPA bills in the last RULONA bills, and many more states are This edition of Uniform Laws Update year, bringing the total number of enact- expected to consider the act in 2021 now reviews the limited 2020 legislative ments to 18. Six other states and the that the pandemic has demonstrated the activity for uniform acts involving real District of Columbia considered a bill to need for and feasibility of remote online property law and trust and estate law. The enact the UPHPA before legislative activity notarization. enactment data includes activity from slowed, and those bills should be revisited West Virginia became the thirty-sev- October 1, 2019, through September 30, in 2021. enth state to adopt the Uniform Real 2020. Any bills enacted after September The Uniform Commercial Real Estate Property Electronic Recording Act (URP- 30 will be counted as part of the Uni- Receivership Act (UCRERA) was adopted ERA) in 2020. URPERA authorizes county form Law Commission’s 2021 legislative in Florida and North Carolina, bringing recording offices to accept deeds and statistics. the current number of enactments to nine. related documents for recording elec- UCRERA provides needed consistency to tronically, following state-established Real Property the law governing the appointment and standards. The Uniform Partition of Heirs Property powers of receivers who manage commer- Mississippi adopted the Uniform Real Act (UPHPA) continued to gain momen- cial property that is subject to a lawsuit or Property Transfer-On-Death Act (URP- tum as more states adopted its procedures bankruptcy proceeding, leading to greater TODA), and three other state legislatures for partitioning real property owned by predictability for heirs of a previous owner. The act has everyone involved resonated with many legislators follow- and ultimately to ing local and national media attention to more efficient com- the issue of land loss through forced par- mercial lending tition sales and the resulting depletion of markets. Connecti- family wealth. Some state farm bureaus cut also introduced supported the enactment of the UPHPA as a UCRERA bill that a result of provisions in the 2018 federal failed to receive farm bill giving preference for certain fed- a hearing in the eral farm development loans to applicants abbreviated 2020 from states that adopted the uniform session and is act. New York, Florida, Mississippi, and expected to be reintroduced. Uniform Laws Update Editor: Benjamin Remote online Orzeske, Chief Counsel, Uniform Law notarization was Commission, 111 N. Wabash Avenue, Suite already a hot 1010, Chicago, IL 60602. topic before the Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 8 January/February 2021 UNIFORM LAWS UPDATE

considered URPTODA bills: Connecticut, The Revised Uniform Fiduciary retain an earlier version of the uniform Iowa, and Rhode Island. Over half of the Access to Digital Assets Act (RUFADAA) act. states now permit the non-probate trans- was adopted in two more states—Ken- Mississippi also enacted the Uniform fer of real property at the owner’s death tucky and Pennsylvania—bringing the Estate Tax Apportionment Act in 2020, with a beneficiary deed—the 19 jurisdic- total number of adoptions to 46. The law becoming the tenth state to do so. tions that adopted URPTODA and another gives a fiduciary the legal ability to access The Uniform Power of Attorney Act 11 states that have a non-uniform law. online accounts of a represented person or (UPOAA) has been enacted in 28 juris- Michigan and the US Virgin Islands estate. The legislatures of Massachusetts, dictions, including Kentucky and South considered, but failed to pass, legislation Oklahoma, and the District of Columbia Dakota in 2020. Massachusetts, Tennes- to adopt the Uniform Assignment of also considered RUFADAA bills in 2020. see, and the District of Columbia also Rents Act. Before adjourning, the Okla- Kansas and Tennessee considered the considered UPOAA legislation last year homa legislature was poised to consider Uniform Fiduciary Income and Princi- before the break in legislative activity. separate bills to adopt the Uniform Com- pal Act (UFIPA), an updated version of the Kentucky adopted the Uniform Pow- mon Interest Ownership Act and the Uniform Principal and Income Act with a ers of Appointment Act (UPAA) in 2020, Revised Uniform Residential Landlord new name. Both legislatures are expected bringing the total number of UPAA and Tenant Act. Lastly, the legislature to revisit the act in 2021. UFIPA adds enactments to ten. of the US Virgin Islands received a pro- innovative new provisions for unitrust An omnibus trust and estate bill posal to adopt the Uniform Residential conversion and a helpful choice-of-law passed by Georgia included conform- Mortgage Satisfaction Act. All of this leg- section that clarifies which state’s law gov- ing amendments to the state’s prudent islation is likely to be reconsidered in erns disputes over a trustee’s allocation of investor statute, bringing Georgia law 2021 once the legislatures resume normal receipts and disbursements. Forty-seven into compliance with the Uniform Pru- activity. states adopted the previous version of this dent Investor Act (UPIA). All but six The Uniform Law Commission (ULC) act, but so far only Utah has adopted the states have now adopted the UPIA. approved a brand new uniform real prop- revision, which it approved in 2018. A few other uniform trust and estate erty act at its annual meeting in 2020: Nebraska and West Virginia became acts were introduced in legislatures but the Uniform Easement Relocation Act is the latest states to adopt the Uniform did not pass in 2020: the Uniform Rec- available for consideration by state legisla- Trust Decanting Act (UTDA). The UTDA ognition of Substitute Decision-Making tures beginning in the 2021 sessions. provides a statutory framework for trust- Documents Act in Minnesota, the Uni- ees to distribute assets from one trust form TOD Security Registration Act in Trusts and Estates into a second trust with different provi- Louisiana, and the Uniform Transfers In 2020 Utah became the first state to sions (like decanting wine from the bottle to Minors Act in South Carolina (which adopt the Uniform Electronic Wills Act to another vessel). Ten states have now is the only remaining state to operate (E-Wills Act). The act permits the elec- adopted the UTDA, and a bill was also under the prior Uniform Gifts to Minors tronic execution of wills, with appropriate introduced last year in Massachusetts. Act). security protections to prevent abuse. Nebraska adopted the Uniform Wills Despite the relatively low amount of Social distancing requirements during the Recognition Act (UWRA), which imple- legislative activity during the pandemic, pandemic caused many governors to issue ments an international convention on 26 new uniform state laws involving real executive orders temporarily allowing for wills. Under the act, a resident of an enact- property, trusts, and estates were enacted remote witnessing of wills and other doc- ing state who executes a will with the in 2020. Another 34 bills were intro- uments. The E-Wills Act provides a more usual two witnesses and also includes a duced but not passed, many because permanent legislative solution and is certified statement from a licensed attor- legislative sessions were cut short. ULC expected to be widely considered in 2021. ney is assured recognition of the will by legislative counsel will continue working In 2020, Virginia, West Virginia, any jurisdiction that has implemented with uniform law commissioners and and Washington adopted the Uniform the convention. Reciprocally, Nebraska state legislators in 2021 to encourage Directed Trust Act (UDTA), which allo- probate courts can now recognize wills the adoption of uniform laws on topics cates liability between trust directors executed in foreign jurisdictions using where uniformity between the states is and directed trustees according to their the same formalities. International wills beneficial. respective duties. The act also imports are now recognized in 18 US states, the More information about these acts a state’s existing law on resignation and District of Columbia, and 19 foreign and other uniform law drafting projects replacement of trustees and applies the countries. is available from www.uniformlaws.com. same rules to trust directors. So far, the The Uniform Disclaimer of Property ULC Legislative Counsel provides sup- UDTA has been adopted in 13 states. Interests Act (UDPIA) was adopted in port for the enactment of uniform laws Rhode Island also considered the UDTA Mississippi and introduced in New Hamp- in your state. For details, contact ULC in 2020, but the bill did not make it out of shire. Twenty-four jurisdictions have now Chief Counsel Ben Orzeske at (312) 450- committee. adopted the UDPIA, and a few more states 6621 or [email protected]. n Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 11 THE COVID-19 ISSUE

So Many Have Died COVID-19 in America’s Nursing Homes

By David English

s of the date of this writing in late September 2020, over A 77,000 residents and staff of long-term care facilities have died of COVID-19 with more to come. This article will describe the reasons for this mass wave of death and provide practical suggestions for attorneys who represent a resident or family members of residents. istockphoto Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 13 But, before diving into the numbers, to report deaths that occurred earlier. Nursing home death rates from we should put names on some of the There is no way to determine or even COVID-19 vary by state. The New York victims. I have chosen to focus on James reliably estimate how many of the Times reported on September 16, 2020, Miller and Emilio DiPalma, who were 31,782 reported deaths occurred before that in 18 states, COVID-19 deaths in members of America’s Greatest Gen- May 8. Second, CMS counts only deaths long-term care facilities accounted for eration. Jim Miller was among the first at Medicare/Medicaid certified nursing more than half of all COVID-19 deaths. troops onshore at Utah Beach on D-Day homes. Deaths at assisted living facili- In New Hampshire and Rhode Island, and later was among the liberators of ties, which are not regulated by CMS, deaths in long-term care facilities Nordhausen Concentration Camp. Pho- are excluded. But even among nurs- accounted for more than 75 percent of tos of the liberation that he donated are ing homes, 12 percent of them did not COVID-19 deaths statewide. But these part of the collection at the US Holo- file a report. There is also great variabil- numbers also gave an incomplete pic- caust Museum. Lio DiPalma was a ity on how states count nursing home ture. Five states did not report. military guard responsible for guarding deaths. Nursing home residents who The high death rates in nursing the Nazi Hermann Goering. Jim, who were transferred to and then died in a homes are not solely an American phe- died on March 30, 2020, and Lio, who hospital are not counted in many states. nomenon. Over half of all COVID-19 died on April 8, 2020, were both resi- States also vary on whether they count deaths in Canada and in several Euro- dents of the Holyoke Soldiers’ Home in only those confirmed to have died from pean countries have occurred in care Holyoke, Massachusetts. Of the 210 resi- COVID-19 or also count those who homes. The United Nations has taken dents at the Holyoke Soldiers’ Home on probably died from COVID-19 but were note and in May 2020 issued a pol- March 29, 2020, 74 subsequently died never tested. icy brief describing this worldwide of COVID-19. Frustrated by the lack of comprehen- phenomenon, “The Impact of COVID- Unfortunately, the torrent of deaths sive data from the federal government 19 on Older Persons”(see https://bit. at the Holyoke Soldiers Home is not an and states, the New York Times assem- ly/3oiFFpj). isolated incident. The official count is bled its own database. See https://nyti. Although the natural inclination is maintained by the Center for Medicare ms/3odBgDT. This database is not lim- to focus on the elderly, who constitute and Medicaid Services (CMS). Although ited to deaths at nursing homes but also the majority of nursing home residents, the first reported incidents of COVID- includes certain assisted living facilities. younger residents with disabilities also 19 in nursing homes occurred at the The New York Times found that as of have a higher rate of infection. Out- end of February, CMS waited until May June 25, 2020, at least 54,000 residents breaks of COVID-19 have been reported 8 to issue an interim rule requiring that and staff at long-term care facilities in state-operated facilities for the nursing homes report COVID-19 cases. had died of COVID-19, constituting 43 developmentally or intellectually dis- The first official set of statistics, pub- percent of all COVID-19 deaths. By Sep- abled. For example, the Chicago Tribune lished in early June, showed that as of tember 16, this number had increased reported on May 22, 2020, that one in May 31, 2020, 31,782 nursing home to 77,000, although the percentage of all five residents of group homes in Illi- residents had died of COVID-19. This COVID-19 deaths had decreased to 40 nois had tested positive for COVID-19. is more than 2 percent of the national percent. See Jennifer Smith Richards & Jodi S. nursing home population of approxi- Despite its problems, the CMS data Cohen, “Our Residents Are in Crisis”: In mately 1.3 million. Also, CMS reported does offer the advantage of being State-Run Homes for Adults with Disabili- that over 400 staff had died. broken down by individual facilities, COVID-19 Spread Quickly, Chi.Trib., But we know that the CMS figures ties. See https://www.medicare.gov/ May 22, 2020. The death rate among are too low. Estimates of the actual nursinghomecompare/search.html. individuals with developmental dis- number of deaths as of May 31, 2020, (Nursing Home Compare). But this tool abilities who catch the virus is also range from 40,000 to 50,000. A primary at Nursing Home Compare should be significantly higher than among the reason for the undercount is that nurs- approached with caution. If the nurs- general population. A study published ing homes were required to report only ing home did not report to CMS at all in the Disability and Health Journal deaths that occurred after May 8, 2020, or if the facility reported only deaths found that the fatality rate for COVID- the date CMS issued the interim rule. that occurred after May 8, 2020, the 19 was more than 50 percent higher Facilities could but were not required individual facility reports will mirror than average for individuals with devel- the undercounting. Life Care Center of opmental disabilities between the ages Kirkland, Washington, was the first US of 18 and 74 and also higher for indi- nursing home to have a major outbreak viduals with developmental disabilities David English, the W.F. Fratcher Professor of of COVID-19. As of April 2, 2020, the under age 17. See Margaret A. Turk, et Law at the University of Missouri, is a past Life Care Center had been linked to 37 al., Intellectual and Developmental Dis- chair of the ABA Section of Real Property, COVID-19 deaths. But the entry for the ability and COVID-19 Case-Fatality Trust and Estate Law and a past chair of the ABA Commission on Law & Aging. Life Care Center at the CMS site states Trends: TriNetX Analysis, Disability and that it had zero COVID-19 fatalities. Health J. (May 24, 2020). Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 14 January/February 2021 Why So Many Deaths The residents of nursing homes are mostly older and are more medically fragile than the general population. Based on CDC figures compiled through September 16, 2020, adults 65 and older accounted for 79 percent of COVID-19 deaths in the United States even though they constitute only 15.2 percent of the population. The top three underlying conditions for those hospitalized with COVID-19 (heart disease, chronic lung disease, and diabetes) also rise markedly with age. It is therefore not surprising that there is a high death rate among nursing home residents who have contracted COVID-19. The more important question to ask and problem to address is why one infection control deficiency, and 30 states, found that the infection rate such a high percentage of nursing half of the homes had deficiencies in from COVID-19 was significantly higher home residents have become infected. multiple consecutive years. Some infec- in larger facilities (over 150 beds) than According to CMS, 223,626 nursing tion control issues are very basic, such in medium facilities (50-150 beds), home residents had confirmed cases of as handwashing. For a survey period which was in turn higher than at small COVID-19 through September 6, 2020, ending on March 30, 2020, CMS found facilities (under 50 beds). See Hannah and there were also 132,911 suspected that 36 percent of facilities did not do R. Abrams, et al., Characteristics of U.S. cases. When added together, the total proper handwashing. Other recom- Nursing Homes with COVID-19 Cases, indicates that close to 20 percent of mended steps include the use of masks J. of the Am. Geriatrics Soc’y (June 2, America’s nursing home population has to protect staff and residents from infec- 2020). contracted COVID-19. tions. But, as described in the CMS In 1987, the federal Nursing Home This high infection rate results from Commission report discussed below, Reform Act was enacted into law as a combination of factors: lack of PPE remains a chronic issue in part of OBRA-87. A principal purpose many nursing homes. of the Nursing Home Reform Act was • Problems with infection control The failure to separate the sick from to assure adequate staffing in nursing in nursing homes, a long-time the well has been a contributing factor. homes. That goal was never achieved. issue that the pandemic has In New York state early in the pan- There is a chronic shortage of qualified exacerbated; demic, nursing homes were forced to staff in many nursing homes, and high • Chronic lack of personal protec- accept positive COVID-19 cases, thereby turnover is a decades-old issue. These tive equipment (PPE); enhancing the transmission of the problems have been exacerbated by • Failure to separate COVID-19 infection. One of the reasons for the COVID-19. Staff who have been quaran- cases from non-COVID residents; high death rate at the Holyoke Soldiers’ tined are not easy to replace, and some • Nursing home designs that make Home was the failure or perhaps impos- staff members are reluctant to place it easy for infections to spread; sibility of separating the COVID-19 their lives at daily risk of infection. • Staffing shortages made worse by residents from those not yet infected. Testing must be a priority. CMS has the pandemic; and In recent years, there has been a “cul- recommended that all residents be • Inadequate testing. ture change” at many nursing homes. tested and that staff be tested weekly. Part of this culture change is to make Testing allows for the isolation of Infection control has long been a nursing homes more home-like. Ide- infected residents and staff and, if the chronic problem in nursing homes. In ally, living arrangements should be virus is caught early enough, enables a report issued on May 20, 2020, the organized into apartment-like suites effective contact tracing to determine US Government Accountability Office instead of large dormitories. The long others whom that person might have (GAO) noted that an estimated 388,000 hallways and large common areas in tra- infected. News reports from numer- residents die yearly from infections. See ditional designs make social distancing ous sources indicate that many states U.S Government Accountability Office, more difficult and facilitate the spread have struggled to meet the CMS testing GAO-20-576R. The GAO also found that of infection. A study published in the standard. for the period 2013-2017, 82 percent of Journal of the American Geriatrics Soci- Fortunately, on July 22, 2020, the inspected nursing homes had at least ety in June 2020, examining data from Trump administration announced an Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 15 • More support should be provided to ensure 24/7 RN staffing. • Nursing homes should employ infection control specialists with The lofty ambitions of the Nursing Home Reform Act educator capabilities. • Steps should be taken to profes- have not been achieved, as the massive number of sionalize the job of a certified deaths from COVID-19 has laid bare. nurse assistant (CNA).

Looking Forward The nursing home industry is one of the more heavily regulated industries in the country. The Nursing Home Reform Act of 1987 prescribed a bill of initiative that responds to some of the family but also other residents. This resident rights and standards for ade- above issues. Under the initiative, $5 ban was lifted on September 17, 2020, quate staffing and resident care. But billion of CARES Act funding is being when CMS issued guidance permitting the lofty ambitions of the Act have not made available to Medicare-certified outdoor visitation whenever possible. been achieved, as the massive num- long-term care facilities and state vet- The availability of indoor visitation is ber of deaths from COVID-19 has erans’ homes to address COVID-19 guided by a list of factors including the laid bare. Perhaps it is time for differ- issues. To receive funding, a nursing infection rate in the facility, the posi- ent approaches. One step would be to home must participate in COVID-19 tivity rate in the county, and whether improve programs that keep people training focusing on infection control the visit is for compassionate care at out of nursing homes. A substantial and best practices. Among other things, the end of life. But as nursing homes majority of the elderly prefer living the funding may be used to hire addi- implement this guidance, the challenge in their own home or community to tional staff, including infection control remains on how to best protect the resi- placement in a nursing home. Yet the consultants, and to provide additional dents from infection. current funding model favors nursing services, such as technology, to enable home placement over less restrictive residents to stay in touch with families. The CMS Commission Report alternatives. Medicaid pays for the The Trump administration initiative On April 30, 2020, the Trump admin- care expenses for a majority of nurs- also finally requires, not merely recom- istration announced the formation ing home residents, yet Medicaid Home mends, that staff be tested weekly. The of a commission to develop recom- and Community-Based Services (HCBS), testing requirement applies to facilities mendations on how to better address a program designed to keep people out in states with a test positivity rate of 5 COVID-19 in nursing homes. Of the of nursing homes, is starved for funds. percent or greater. To address equip- Commission’s 25 members, 14 were A second step would be to rethink ment shortages, more than 15,000 from the long-term care industry or the concept of the traditional nurs- testing devices are to be shipped to trade organizations representing the ing home. The Green House project, facilities. long-term care industry. The final which originated in 2003, is a possible report of the Coronavirus Commis- model. Instead of large dormitory struc- Social Isolation sion on Safety and Quality in Nursing tures with long halls and large common To control the spread of COVID-19, vis- Homes was released on September 16, areas, Green Houses are facilities with itors to nursing homes were banned 2020. 10 or 12 residents who each have a beginning in mid-March 2020. This ban The report makes numerous posi- single room and private baths. A 2011 on visitors was not limited to family tive recommendations. But funding study found that the costs of operat- but also extended to court-appointed sources to fully implement the recom- ing a Green House are comparable to guardians and the long-term care mendations are not specified, and the those of a traditional nursing home. See ombudsman. Social isolation can lead report does little to set higher standards Jenkens, et al., Financial Implications of to physical and mental decline and the or to hold nursing homes account- THE GREEN HOUSE® Model, 19 Seniors loss of contact with family and oth- able for their actions. Among the Housing & Care J. 3 (2011). In addition ers who will advocate for the resident’s recommendations: to providing more of the ambiance of quality of care. Social isolation is even a family home, the risk of infection is more extreme in facilities that can • A national testing strategy should also less. As of May 31, 2020, among successfully socially distance their resi- be established. 1862 residents at 178 Green House dents and thereby better protect them • CMS should assume responsi- homes, only one resident had died of from infection. In those facilities, the bility to ensure and sustain a COVID-19. residents are not only separated from three-month supply of PPE. Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 16 January/February 2021 Practical Steps The local ombudsman can be par- not be a surprise. But it wasn’t inevi- There are numerous practical steps ticularly effective as a go-between, table. On July 24, 2020, the Washington an attorney can take in advising resi- a mediator of disputes, and a gen- Post ran a story on the Maryland Bap- dents and potential residents and their eral source of information. Under the tist Aged Home, which is located in a families concerning issues relating to ombudsman program, which is admin- lower income neighborhood in West COVID-19. Perhaps the most impor- istered by the federal Administration Baltimore. See Rebecca Tan, In Balti- tant is guidance on the selection of a on Independent Living, an ombuds- more, a Struggling Black-Owned Nursing nursing home or other long-term care man, who is usually a trained volunteer, Home Keeps COVID-19 at Bay, Wash. facility. Relevant factors include not is assigned to each Medicare or Medic- Post, July 24, 2020. The Baptist Aged only the convenience of location and aid-certified facility. Information on the Home as of that date had experienced size but also whether there is a history ombudsman program is available at the no cases of COVID-19. The facility is of violations, their type and sever- National Long-Term Care Ombudsman small, with only 29 residents. Following ity, and their recurrence, particularly Resource Center (NORC), www.ltcom- the first national reports of outbreaks in issues relating to infection control. budsman.org. To locate an ombudsman late February, the facility ordered PPE Much of this information can be found program for a particular locale, click two weeks before the first infections at Medicare Nursing Home Compare “Visit Our Map.” were reported elsewhere in Baltimore. at medicare.gov although, as discussed The following organizations have The facility also acted quickly to bar all above, the data relating to COVID-19 is resource pages devoted to COVID-19 visitors and stop communal meals. The incomplete. and long-term care facilities. These staff is encouraged to stay home except For residents already in a facility, organizations also provide exten- for work and to keep their distance guidance can be provided on ways to sive information on facility selection, from others, including their own fami- stay connected with family and other rights of residents, ways family can stay lies if necessary. Most importantly, the significant contacts. In addition to involved, and methods for resolving Baptist Aged Home tests all residents reg- the limited visits authorized by the disputes: ularly and 10 years ago added to its staff CMS guidance of September 17, 2020, a nurse specializing in infection control. methods for family and others to stay • National Consumer Voice for The experience of the Baptist Aged Home connected with the resident include Quality Long-Term Care, https:// and the steps it has taken provide a useful handwritten letters and cards, using theconsumervoice.org/ model for other facilities to emulate and the telephone, email, or other technol- • Justice in Aging, https://www.jus- also provides a useful model for attorneys ogy for residents who have access, and ticeinaging.org/ and their clients to consult when select- visiting through the window. Able resi- • Center for Medicare Advocacy, ing a nursing home. n dents should practice self-protection to https://medicareadvocacy.org/ the extent feasible. This includes wash- • Long-Term Care Commu- ing their hands frequently, practicing nity Coalition, https:// social distancing, and asking facility nursinghome411.org/ staff to schedule regular time for family communication. Conclusion More often, an attorney won’t On July 23, 2020, the CDC predicted become involved until concerns have that COVID-19 will be among the top arisen. When problems arise, the attor- ten causes of death in the United States ney should first advise the client to try in 2020. The CDC was being conser- informal methods of resolution. This vative. For 2020, COVID-19 will be includes speaking with the director of the third leading cause of death, well nursing or nursing home administra- below heart disease (655,381 deaths in tor and involving the long-term care 2018, the latest year available) and can- ombudsman. Not all facilities have res- cer (599,274 deaths) but ahead of such idents’ councils and in those that do others as accidental death (167,127 they are not always effective, but resi- deaths), chronic lower respiratory dis- dents’ councils can be a useful forum ease (159,486 deaths), stroke (147,810 for resolving concerns. Should informal deaths), and Alzheimer’s disease resolution fail, more formal methods (122,019 deaths). for addressing concerns include filing a Given the high morbidity of COVID- complaint with the state survey agency 19 and the fragility of the nursing home or filing a complaint under the facility population, the 70,000 plus deaths that grievance procedure. Litigation should have occurred in nursing homes as of be viewed as a last resort. late September 2020 should perhaps Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 17 KEEPING CURRENT PROPERTY

CASES to claims for injunctive or declaratory relief. The Ninth Circuit affirmed in part CONDEMNATION: Leasehold is Keeping Current—Property and reversed in part. It explained that property interest subject to condem- offers a look at selected recent although proximate cause is not easy nation, giving rise to unconditional cases, literature, and legislation. to define, the basic inquiry is whether statutory right to intervene. The The editors of Probate & the harm alleged has a sufficiently close Vermont Agency of Transportation Property welcome suggestions connection to the conduct the stat- (Agency) planned to construct high- and contributions from readers. ute prohibits; it bars suits for alleged way improvements on property leased harm that is too remote from the defen- from Lake Champlain Transportation dant’s unlawful conduct. In Miami I, Company (LCT) to Vallee. The lease the Supreme Court stated that a plain- agreement gave Vallee “an easement for FAIR HOUSING ACT: Regression tiff under the FHA must do more than vehicular access … through the connect- analysis of lender’s data may estab- show that its injuries foreseeably flowed ing driveway” that ran through LCT’s lish proximate cause for Fair Housing from the alleged statutory violation; property and a parcel owned by Val- Act claim. The City of Oakland claimed rather, some direct relation between the lee. LCT retained the right, under the Wells Fargo Bank engaged in long- injury asserted and the wrongful con- lease, to use the driveway and to grant standing and ongoing discrimination duct is required. But the Court stopped third parties a similar right. After the in home lending practices, including short of saying precisely when that con- Agency acquired the property from redlining and reverse redlining, in vio- nection is met. The Ninth Circuit looked LCT by negotiation, it then filed a lation of the Fair Housing Act (FHA), to the text and legislative history of the complaint to acquire other parcels in 42 U.S.C. § 3604(a), (b). The city used FHA and amendments and found the the same area. Because it had already Wells Fargo’s data in a regression anal- FHA to be far-reaching in its aims. This reached an agreement with LCT, it did ysis to show that its Black and Latino is shown by the statutory term “per- not name LCT or Vallee as defendants residents were roughly 2.5 times more son aggrieved” including not only those in the complaint. Vallee moved to inter- likely than white borrowers to receive who are the direct objects of discrimina- vene because the construction would predatory loans, and borrowers from tion but also those who have an interest occur in the driveway area, asserting an minority neighborhoods were more in ensuring fair housing. It was thus interest in the property at stake in the than three times more likely to be clear that Congress intended the proxi- condemnation. The trial court denied offered predatory loans than borrow- mate cause requirement of the FHA to the request to intervene, finding that ers from non-minority neighborhoods. reach neighborhood-wide and city-wide the statute gives “property owners” the Minority borrowers were almost three injuries, such as that suffered by the right to intervene, but Vallee was not times more likely to end up in fore- city. However, the allegations were not a property owner. The supreme court closure than non-minority borrowers. sufficient as to the claim for munici- reversed. It read “property owner” in the The city alleged that the high number pal expenses, because the city had not condemnation statute, 19 Vt. Stat. Ann. of foreclosures reduced property val- accounted for other independent vari- §501(3), to mean one with a legal inter- ues, diminished the city’s tax revenues, ables that might have contributed to or est of record in the property proposed and forced the city to increase munici- even caused the spike in expenses. On to be taken. A leasehold is such an pal expenses and reduce spending on the second question, the court ruled interest in the property and therefore fair housing programs. The district that proximate causation must be met covered by the condemnation statute. court denied Wells Fargo’s motion to in every case, even if the plaintiff is not Agency of Transp. v. Timberlake Assoc., dismiss and certified two questions on entitled to damages but is only seek- 239 A.3d 253 (Vt. 2020). an interlocutory appeal to the Ninth ing injunctive relief. City of Oakland v. Circuit: (1) whether the city’s claims Wells Fargo & Co., 972 F.3d 1112 (9th for damages satisfy proximate cause Cir. 2020). Keeping Current—Property Editor: Prof. required by the FHA and (2) whether Shelby D. Green, Elisabeth Haub School of the proximate-cause requirement artic- FORECLOSURE: Protection against Law at Pace University, White Plains, NY ulated in Bank of Am. Corp. v. City of deficiency judgment may extend to 10603, [email protected]. Contributor: Prof. Darryl C. Wilson. Miami (Miami I), 137 S. Ct. 1296 (2017), construction loan used to rebuild extends beyond claims for damages existing home. In 2003, Michael Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 18 January/February 2021 KEEPING CURRENT PROPERTY

existing struc- equal protection rights. In 2017, Min- ture is largely neapolis amended its civil rights law demolished. on discrimination in real estate to pro- By contrast, a hibit landlords from refusing to rent home improve- to a prospective tenant “because of… ment loan any requirement of a public assistance,” includes defined to include the Section 8 hous- elective ing choice voucher program. The new enhancement, rule provides an affirmative defense such as the for landlords if the “requirement would expansion of impose an undue hardship.” The rule an existing automatically exempts owner-occupied structure, but duplex units and single-family homes not the recon- rented for no more than 36 months struction of that were previously homesteads. The Pasquans’ house in Helvetica Servicing, Inc. v. Pasquan. Photo courtesy a damaged Property owners filed suit alleging a of Daniel Kloberdanz, Kozub Kloberdanz, Scottsdale, Arizona. structure. The violation of their rights under the due court laid out process and equal protection clauses of and Kelly Pasquan began renovating five non-exclusive factors for making the Minnesota Constitution. The trial their 4,000 square foot home, which the determination: (1) whether there is court granted summary judgment for they purchased with a $600,000 loan a complete or substantially complete the owners, but the court of appeals from Hamilton Bank and a cash pay- demolition of an existing structure and reversed. The supreme court affirmed, ment. Over the next several years, the a new building constructed in its place; finding the ordinance is a reasonable Pasquans expanded the property by an (2) the intent of the parties when exe- means of achieving the goals of increas- additional 7,000 square feet. In 2004 cuting the loan documents; (3) whether ing housing opportunities for voucher and 2005, they borrowed approxi- the structure is inhabitable or inhab- holders, addressing the discrimina- mately $2.1 million from Desert Hills ited during construction; (4) whether tory effects of housing denials, and Bank and used a portion of the loan the structure is largely preserved and prohibiting prejudice-based discrimi- to pay off the Hamilton loan and the improved or substantially expanded; nation. The rule is rationally related to remainder to renovate and expand the and (5) whether the project is char- an acceptable legislative purpose, even property. In 2006, the Pasquans bor- acterized as “home improvement” or if not the best approach or a bit over- rowed $3.4 million from Helvetica, “construction” in the loan documents inclusive. Additionally, the court found secured by a deed of trust, using the and the permits or other official docu- the city did not act arbitrarily or capri- proceeds to pay off the Desert Hills loan. ments. No particular weight is assigned ciously because it gathered substantial After the Pasquans defaulted, Helvetica to any of the factors; instead, the totality evidence and deliberated for two years brought an action for judicial foreclo- of the circumstances must be evalu- before passing the ordinance. The dis- sure. After the sheriff’s sale, the trial ated. The court found this case to be tinctions in the ordinance between court entered a deficiency judgment a “close call.” Some factors argued for owners who must show hardship and against the Pasquans for $1.9 mil- a construction loan—the Pasquans those automatically exempted does not lion. The Pasquans appealed, arguing demolished most, but not all, of the violate some owners’ equal protection that the Helvetica loan was entitled to residence and replaced the existing rights under the rational basis analysis. anti-deficiency protection under Ariz. building with a larger structure, and the Fletcher Prop., Inc. v. City of Minneapolis, Rev. Stat. § 33-729(A). The supreme loan documents referred to a Construc- 947 N.W.2d 1 (Minn. 2020). court reversed. It explained that by tion Deed of Trust. Other factors—there opting to pursue judicial foreclosure, was an inhabitable structure on the LANDLORD-TENANT: Landlord’s Helvetica is entitled to a deficiency property when they purchased it and, at waiver of no-pet policy to accom- judgment, unless the loan is a purchase- all times, someone resided there—sug- modate tenant’s emotional support money loan or a construction loan. gested an improvement loan. The court animal breaches lease agreement of That exception does not apply to home remanded for a determination under prior tenant with pet allergies. Cohen, improvement loans. But there is little the factors. Helvetica Servicing, Inc. v. who had a medically documented guidance in the statute for characteriz- Pasquan, 470 P. 3d 155 (Ariz. 2020). severe allergy to pet dander, rented an ing the loan. Finding a “substantial grey apartment, relying in large part on the area” between the types of loans, the LANDLORD-TENANT: Ordinance no-pet provisions of the rental agree- court ventured to fashion a definition. prohibiting refusals to rent to Sec- ment. Although the agreement noted A construction loan means build- tion 8 voucher holders does not that “[r]easonable accommodations ing or rebuilding a residence after an violate landlords’ due process or [were] accepted,” there were no pets in Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 19 KEEPING CURRENT PROPERTY the building when Cohen’s lease began. improvements. Rogers farmed early- for the equitable relief sought. Borton Later the landlord rented a unit down season potatoes, which requires & Sons, Inc. v. Burbank Props., LLC, 471 the hall from Cohen to Clark. After mov- rotating the potato crop with grass seed P.3d 871 (Wash. 2020). ing in, Clark asked the landlord for or timothy hay every two to three years. permission to keep a dog and submit- When Rogers began to have financial MINERAL RIGHTS: The formation ted a letter from his psychiatrist stating trouble, he sold the property to Borton of special district does not require that an emotional support animal (ESA) & Sons for $1.55 million, a below-mar- the consent of owners or lessees of would be beneficial to his physical and ket price, with a three-year leaseback mineral rights. The surface owners of emotional health. The landlord checked agreement and an option to repurchase a 13,000-acre tract of land known as with other tenants in the building, and at the end of the lease. The sale required 70 Ranch successfully petitioned to only Cohen opposed the ESA. However, the option to be exercised by Decem- include their tract in a special district after telephoning the Iowa Civil Rights ber 31, 2017, via registered mail, with under the Colorado Special District Commission, the landlord decided to closing to occur by December 31, 2018. Act, Colo. Rev. Stat. § 32-1-101, et seq. allow his ESA. Despite the landlord’s Time was of the essence. Three days The subsurface mineral rights were efforts to mitigate negative effects from before the option was to expire, Rogers previously severed from the surface the animal by installing air purifiers drafted a Notice of Exercise of Option to ownership. After incorporation, the and requesting that Cohen and Clark Purchase the Subject Property but did special district began taxing lessees for use different stairwells, Cohen suffered not mail it until January 4, 2018, via the oil and gas they produced from the persistent and multiple illnesses. She regular mail. After receiving the notice ranch. The lessees objected to being sued the landlord and Clark alleging on January 8, 2018, Borton notified taxed and claimed that their mineral breach of lease and breach of her quiet Rogers that it failed to timely exercise interests could not be included in the enjoyment. The lower court and appel- the option and requested an acknowl- special district because neither they late court dismissed Cohen’s claims. edgment that the option terminated. nor the owners of the mineral estates A divided supreme court reversed, Rogers contended the notice was valid consented to inclusion, which they explaining that neither the Iowa Civil and enforceable and affirmed his intent maintained was required by the Spe- Rights Act, Iowa Code § 216.8B(1)(a)-(b), to close the sale on December 31, 2018. cial District Act. Id. § 32-1-401(a). The nor analogous federal laws require an Borton initiated a declaratory judgment lessees sued, and the trial court ruled accommodation for an ESA, as opposed suit, and Rogers counterclaimed. The that only surface estate fee owners to a service animal that requires spe- trial court granted summary judgment are statutorily required to consent to cific training. Although the Iowa statute to Rogers, ruling that he is entitled to the inclusion because a severed min- recognizes ESAs, no law specifically an equitable grace period based on the eral estate is not real property capable addressed how landlords should handle potential loss of the timothy hay and of being served by the district. The them. In any case, the court explained, the loss of equity in the property. The appellate court affirmed. The supreme under Iowa Code § 216.8A(3)(c)(2), a supreme court reversed, explaining court affirmed, but largely on differ- landlord may deny an accommoda- that an abuse-of-discretion standard is ent grounds. Looking to certain words tion when it constitutes a direct threat appropriate on the issue of fashioning used in the act—territory, boundar- to the health or safety of other persons. equitable remedies, but on the ques- ies, tract, square feet—it is clear that its Noting that accommodation issues gen- tion of whether an equitable remedy is focus is on expanding the surface area erally require balancing the needs of appropriate in the first place, a de novo of the district, and, as such, the assent both parties involved, one important review is in order. The court went on required is that of all owners of sur- consideration is who is first in time. to explain that, in general, when a les- face property whose inclusion would Because Cohen’s tenancy preceded see fails to exercise an option “within expand the boundaries. Even if the Clark’s, and the landlord owned avail- the time specified or in the manner mineral estates could be served by the able rental units in other buildings, the provided, all rights under the con- district, they are still not real property landlord’s actions were not necessary as tract, along with any consideration contemplated by the procedural mecha- a reasonable accommodation under the given, are forfeited.” The terms of the nism that the special district creates for lease or the civil rights laws. The court option contract are strictly construed, “inclusion of territory.” Bill Barrett Corp. cautioned that the outcome would and generally time is of the essence. An v. Lembke, 474 P.3d 46 (Colo. 2020). likely differ if the facts involved a certi- equitable grace period to provide relief fied service animal instead of an ESA. from forfeiture is available in “very lim- MORTGAGES: Amendments to Cohen v. Clark, 945 N.W.2d 792 (Iowa ited” circumstances—essentially when statute to raise dollar caps for protec- 2020). the lessee has made valuable perma- tion as “residential mortgage” do not nent improvements, the delay is short, apply retroactively. In 2002, the John- LANDLORD-TENANT: Equita- and the lessor has not changed posi- sons obtained a $74,000 residential ble grace period to avoid forfeiture tion. All that Rogers showed was the mortgage loan from Bank of New York of option requires showing loss of planting of crops, which is not sufficient Mellon Trust Co. Six years later, they Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 20 January/February 2021 KEEPING CURRENT PROPERTY

defaulted. In 2009, an attorney for the rather than commencing foreclosure of limitations ran out in May 2016. The bank filed a complaint to foreclose and in Idaho. The bank then domesticated bank was required to renew the foreign sought $1,300 in attorneys’ fees. During the judgment for $287,597 in Idaho judgment in 2015 but failed to do so. the pendency of that action, the John- by recording it in the county record- As such, the bank could not “collect or sons filed a suit against the attorney er’s office. Soon thereafter, the Bennetts enforce” the Oregon judgment. Bennett alleging violations of 41 Pa. Stat. Ann. filed a Chapter 7 petition in bankruptcy. v. Bank of Eastern Oregon, 472 P.3d 1125 § 406 (Act 6), which limits attorneys’ The bank filed a proof of claim for unse- (Idaho 2020). fees in the case of a “residential mort- cured debt, and the trustee disbursed gage.” The attorney moved to dismiss, $4,658 to the bank, extinguishing the TRUSTS: Trust that reserved right to arguing that the $74,000 mortgage did Bennetts’ personal liability on the sell property for care of surviving set- not qualify as a “residential mortgage” judgment. The bankruptcy estate “aban- tlor creates remainder, not life estate, under Act 6, which at the time of loan doned” the property under 11 U.S.C. in settlor’s daughter. In 1994, Phil- protected only mortgages that did not § 544 (c), and the Bennetts received lip and Rose Jackson set up a revocable exceed a $50,000 cap. The Johnsons a final discharge. Eight years later, family trust, appointing themselves as responded they were eligible based the Bennetts filed a quiet title action the initial trustees. The Jacksons trans- on 2008 amendments that raised that against the bank, alleging that the deed ferred title to a residence to the trust, cap to $217,873. The trial court dis- of trust was unenforceable under the to be “managed and held free of court missed the complaint, finding nothing Idaho single-action rule and the judg- supervision.” In 2010, they amended in the amendments showing that they ment lien had expired. The trial court the trust instrument to add section 6.3, were intended to operate retroactively. granted the bank’s motion to dismiss, which provided that on the death of The superior court affirmed unani- but the supreme court reversed. First, both settlors, a separate trust would be mously. The supreme court agreed with the court explained that although the created with the trust property held for the lower courts. The Johnson’s mort- single-action rule once applied only to the benefit of their daughter “for her gage was not governed by Act 6 when it mortgages, not to deeds of trust which natural life” and then to her then-living was executed, and nothing in the 2008 the case law treated as distinct inter- children. The daughter would be enti- amendments provided that it should ests, an Idaho statutory amendment tled to live in the house rent-free but apply retroactively to mortgages in exis- extends the single-action rule to deeds responsible for taxes and the cost of tence before the amendments. The of trust. Here, the domestication of the maintenance. In March 2018, the Jack- court was not persuaded that the Gen- Oregon judgment is not distinct from sons were determined to be incapable eral Assembly wanted courts to assess the underlying collection action and of managing their financial affairs, and whether a long-ago executed mortgage as such is covered by the single-action Rose Jackson died in May 2018. Phil- qualified as a “residential mortgage” rule. The bank’s violation of the single- lip Jackson resided in an assisted living only after some later statutory violation action rule renders its security interest facility, which cost $3,500 per month. occurs. Instead, the plain language indi- unenforceable. The court rejected the The successor trustee determined to cates the proper focus is on the “amount bank’s argument that the proper sanc- sell the trust property and use the proof the mortgage at the time of origina- tion should be loss of the right to ceeds to pay for his care. The daughter tion.” Moreover, the court cautioned, a foreclose, explaining that the only right refused to vacate the property, and the retroactive application of Act 6 essen- that the trustee in a deed of trust holds trustee brought an action to quiet title tially would void already agreed-upon is the power of sale, without which the and for ejectment. The trial court held contract provisions, creating a “messy trustee’s interest is effectively elimi- that the daughter was able to live in the state of affairs” and raising serious con- nated. The court also ruled that the property, rent-free for her natural life, stitutional concerns. Johnson v. Phelan Bennetts were entitled to quiet title as finding no authority for the trustee to Hallinan & Schmieg, LLP, 235 A.3d 1092 to the expired judgment lien because eject the daughter and sell the property (Pa. 2020). it nevertheless constituted a cloud on for the benefit of the remaining settlor. the title. Under the plain language of The supreme court reversed, finding MORTGAGES: Single-action rule the statute, Idaho Code §§ 6-412, 6-413, such authority in the express terms makes deed of trust unenforceable a party may quiet title against a judg- and under the Wyoming Uniform when lender obtains out-of-state judgment if that party can show that an Trust Code, Wyo. Stat. §§ 4-10-801. ment on debt. The Bennetts obtained action on an underlying judgment is First, one section of the trust directed several loans from Bank of Eastern Ore- barred by the statute of limitations, but the trustee to pay to the surviving set- gon for their business in Oregon. One not when the judgment lien has expired tlor, at convenient intervals, all of the business loan was secured by a deed by operation of law, the judgment lien net income from the trust and amounts of trust on the Bennetts’ residence in being distinct from the underlying from the principal of the trust as the Idaho. When the Bennetts defaulted, judgment, and therefore the judgment surviving settlor may request or the the bank successfully pursued a col- does not expire merely because the lien trustee determines to be necessary for lection action against them in Oregon has expired. Here, the six-year statute the settlor’s care, comfort, welfare, and Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 21 KEEPING CURRENT PROPERTY maintenance. Second, consistent with brokerage firms also engaged in com- unscrupulous and self-serving practices the trust code, a trustee has the power mercial real estate services (CRES) and that occur through dual agency. The to sell trust property “where necessary actively engaged in the practice of dual only adequate way to reverse course is or convenient” to facilitate any distri- agency. Dual agency involves an agent to fully prohibit dual agency in CRES bution of assets under the trust. Finally, or broker representing both sides of a and restore all protections previously the express terms of section 6.3 must be transaction, such as a buyer and a seller, afforded by common law. read to create only a remainder interest or, in leasing, the landlord and the ten- in daughter, one that would vest only ant. The article provides insight into HOUSING: When landlords around upon the death of both settlors. Other- the details involved in negotiating deal the country refuse to rent to people wise, the trust’s clear intent to benefit points between commercial tenants who rely on vouchers or other govern- the settlors during their lives would be and landlords, from which the broker- ment assistance programs, the ability defeated. Jackson v. Montoya, 471 P. 3d age firms obtain the lion’s share of their of these programs to serve their pur- 984 (Wyo. 2020). annual revenue. The authors found poses is undercut, if not nullified. In that since the report, the commercial Source-of-Income Discrimination and the LITERATURE real estate sector nationally has taken Fair Housing Act, 70 Case W. Res. 573 no steps to address the problems high- (2020), Prof. Robert G. Schwemm makes BROKERS: In David v. Goliath: How the lighted in the report. On the contrary, the case for an amendment to the Fair Replacement of a Commercial Real Estate consolidation among major broker- Housing Act to include discrimination Agent’s Common Law Duty of Undivided age firms and legislative action has based on income. He notes that many Loyalty with Washington State’s More- increased the problems in many loca- states and municipal governments Limited Statutory Obligations Advantages tions. They argue that Seattle, as one of have amended their fair housing laws Landlords to the Detriment of Commer- the fastest-growing urban areas in the to prohibit discrimination against Sec- cial Tenants, 169 Seattle Univ. L. Rev. 43 country, is emblematic of the failures tion 8 voucher holders and sources of (2019), Prof. Peter Smirniotopoulos and outlined in the report as their policies income, and bills are pending in Con- his co-author Ryan Mathisen analyze have nearly eradicated the common- gress for an amendment to the FHA. Seattle’s commercial real estate leasing law duties an agent owes a principal in Prof. Schwemm reviews the efficacy landscape. Their article focuses on a the commercial leasing context. Those of state and local measures and shows report published by the Center for Real duties include the duty of undivided how an FHA amendment would go a Estate and Urban Analysis (CREUA) in loyalty, confidentiality, full disclosure, long way in getting to one of the basic 2014, which found adverse legal and reasonable care, and due diligence. The aims of the FHA, that is, breaking down transactional consequences from con- authors conclude that current prospects barriers to affordable housing in afflu- flicts of interest in the representation are dim for commercial tenants who are ent white areas. While landlords have of commercial tenants by full-service without adequate legal recourse against a legitimate interest in knowing that prospective tenants can pay the rent, the source of those funds is irrelevant. Objections based on source seem to be Moving? Changing Firms? Retiring? thrown up as a camouflage to keep out certain persons, and lower income often coincides with race. A source of income Don’t leave characteristic would have the ease of administration and proof, putting the Probate & Property behind. burden on the landlord to demonstrate Send your change of honest reasons, such as administra- address notice to: tive burdens. In disparate impact cases against governments, the burden of proof would be significantly lessened if Probate & Property the evidence shows that persons with American Bar Association a source of income from government 321 North Clark Street assistance make up a large portion of the potential market for blocked devel- Chicago, IL 60654-7598 opment projects. Though not a panacea, a source-of-income prohibition would go a long way toward ending arbitrary limits on housing choice.

MINERAL RIGHTS: As geologic res- PROPERTY THEORY: Can people system—at the core is the interest of ervoir space becomes more useful for agree to stay put and not to relocate? protecting the liberty interests, indeed energy storage and carbon capture, con- That is the question asked by Prof. Lior the primary justification for property tests for ownership of the interstitial J. Strahilevitz in Co-Location Covenants, under some theories. Under the main- space are arising. In Getting Possession: 2020 U. Chi. L. Rev. Online 87 (2020). stream theory, the system allocates Subsurface Property, 95 Wash. L. Rev. His thesis is that “Sometimes in order interests in resources to an owner, who 315 (2020), Prof. Joseph A. Schremmer to induce people to relocate today it is acquires the power to decide how and explains that the traditional legal the- necessary to protect them against the when to use the resource, although ory applied to resolve these contests possibility that they may need to move there are some constraints. In this con- is trespass, a possession-based con- unwillingly tomorrow.” That protection ception, there is great reliance on the cept applying a property rule, but he could come in the form of co-location marketplace as a vehicle for manag- believes the better view is to analyze the covenants, which would require people ing property interests, meaning that disputes under nuisance law, applying to move to a different location together efficiency norms underlie the modern a liability rule. He claims that the law of or remain in place. While they may property system. Commodification nuisance is no longer an “impenetrable work to keep old and newly-created is celebrated as opposed to steward- jungle,” thanks to the Restatement (Sec- neighborhoods (avoiding residential ship. It is not premised on notions of ond) Tort’s approach to nuisance, which turnover) and families intact, the con- equality or resilience. Yet, Prof. But- takes into account social and economic cept must contend with property law’s ler does not give up on property but values of the defendant’s conduct, the hostility to restraints on alienation. believes it is capable of change. In commonness of the conduct in the area, Prof. Strahilevitz shows how co-location her view, one of the marvels of prop- and the severity of the harm suffered covenants are consistent with the pre- erty as an institution is the inherent by the plaintiff. A nuisance approach vailing aims of private property, such as ability to change, formally and infor- has the advantage of flexibility to encouraging investment. He also sug- mally, to address changing physical allow a balancing of the claimed injury gests how they might be crafted with and social conditions, both foresee- against the societal need and benefits. temporal limits to achieve the societal able and unexpected. Formal changes Once a certain analytical framework is goals of preserving social relations and occur through the courts on an ex post adopted, we should have greater pre- connections, at the same time avoiding facto basis—through the recognition dictability of results. Prof. Schremmer trapping people in places and relation- of new interests, the redistribution of examines various positions taken by ships that are not suitable or valuable to interests for equitable reasons, and courts around the nation involving a them and providing grounds for relief, the management of complex resources range of uses of the pore space and min- such as an illness. What is not entirely through various governance strate- ing activities that are alleged to intrude clear is whether these covenants burden gies. Equity has always served as the onto another’s rights. He concludes that the land or the owners of the property equalizer. Professor Butler’s theory nuisance is far superior for making the personally. If the latter, will they work to promises to nudge the law along to evaluations of competing production preserve neighborhoods? respond to a threatening new world. techniques and what plans are better Property has long meant stability, calculated to maximize the efficient both in the sense of being able physi- LEGISLATION exploitation of a common reservoir. cally to stay put and in the sense of an His central claim is that mining con- unchanging legal regime. This stability DELAWARE amends mortgage law flicts involve interference with use and is said to encourage reliance and invest- to set priority of liens. A purchase not possession. His research finds that ment in the property. Society profits money mortgage has priority over a courts already, de facto, are applying when landowners work to put land to judgment against the mortgagor or nuisance principles in subsurface inter- its best use. Property has continued any other lien, even though the judg- ference cases because they are designed at its deliberate pace, but the world is ment or lien is prior in time to the to mediate competing uses of property being pushed in many threatening ways purchase money mortgage if the pur- to achieve maximally efficient results. by climate change. In Property’s Prob- chase money mortgage is recorded Trespass principles, on the other hand, lem With Extremes, 55 Wake Forest L. within 10 days after the deed convey- seem inapt in situations involving Rev. 1 (2020), Prof. Lynda Butler shows ing the property from the seller to the unauthorized subsurface encroach- that the traditional rules of property purchaser is recorded. 82 Del. Laws ments because they do not interfere may work reasonably well in mediating 292. with exclusivity and are not suscep- competing claims to use and value that tible to a strict scheme of governance. fall in the mainstream, but they do not HAWAII amends notary act to allow Employing nuisance principles in the work well with the extremes. Climate remote notarizations. The amend- open will aid the coherence of courts’ change is such an extreme. She sees the ments prescribe the methods of decisions and lead to more investment reasons for this challenge as residing acting, the technology required, and in beneficial sequestration technology. largely in the Western-styled property record-keeping. 2020 Hi. Act 54. n Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 23 THE COVID-19 ISSUE

A COVID-19 HEAVYWEIGHT BOUT Tenant Safety Versus Discrimination

By Alex J. Schnepf istockphoto

ith news media outlets cov- The Health Effects of COVID-19 States are being forced to consider their ering COVID-19 daily, it’s no The harsh realities of the government duty of safety to their tenants and how Wsecret that fear of the dis- shutdowns and other new restrictions they will discharge that duty in the face ease has taken the nation by storm. today are a result of what COVID-19 of COVID-19. These fears have spurred state-wide can do to the human body. Mayo Clinic, A COVID-19 shutdowns, mandatory mask-wear- Coronavirus Disease 2019 (COVID- Statutes and Other Laws ing, and other drastic measures from 19) (June 16, 2020), https://mayocl. Landlords Should Consider Before governments across the world. The pan- in/3jNlo9G. COVID-19 belongs to Acting in a COVID-19 World demic has also created a challenge for a family of diseases known as coro- Before considering what statutes will HEAVYWEIGHT BOUT landlords attempting to balance ten- naviruses. Id. These types of viral protect COVID-19-positive tenants from ant safety with anti-discrimination illnesses have surfaced before, notably discrimination by landlords or other laws. This article will discuss acts that in the form of severe acute respira- property owners, landlords may won- Tenant Safety Versus may expose landlords to discriminatory syndrome (SARS) and Middle der why they have to protect tenants tion lawsuits in their residential renting East respiratory syndrome (MERS). Id. from COVID-19 at all. If landlords had practices, as those practices relate to But, with the possible exception of the no duty whatsoever to protect their COVID-19, and some practical solu- 1918 Spanish Flu outbreak more than tenants, they could stay hands-off in Discrimination tions to help ensure tenant safety while a hundred years ago, none has had their management approach and avoid minimizing the risk of engaging in ille- the economy-halting, world-changing all possible discriminatory actions istockphoto gal discriminatory practices against effects COVID-19 has had. by doing nothing. But the absence of istockphoto COVID-19-positive tenants. The reason for the world’s extreme a duty to keep tenants safe is not the reaction to COVID-19 is largely because reality in many states across the coun- of the virus’s incredible propensity try because of the implied warranty of to spread and its potential lethality. habitability. Mayo Clinic, supra. Though much is The implied warranty of habitabil- still unknown, and the situation con- ity requires that landlords maintain tinues to develop daily, it is currently premises in a habitable condition believed that COVID-19 spreads primar- throughout the term of the lease and ily through airborne pathogens that get that the premises be safe for the health inhaled into the lungs. Id., see also Kathy of those living in it. Legal Inform. Katella, 5 Things Everyone Should Know Inst., Implied Warranty of Habitability, About the Coronavirus Outbreak (Aug. 5, https://bit.ly/3g64T6r. COVID-19 is 2020), https://bit.ly/2WZ848u. COVID- a dangerous disease that spreads eas- 19 can cause many symptoms, but most ily, and, although the issue has not notable are fever, cough, shortness of been litigated yet, it is possible that breath, muscle aches, and tiredness. the implied warranty of habitability Mayo Clinic, supra. When these symp- would foist at least some responsibil- toms become severe enough, they can ity on landlords to try to mitigate the lead to patients becoming bedridden or spread of the virus within their proper- hospitalized. In the worst cases, COVID- ties. See Harvard Health Publishing, If 19 may cause death. Id. You’ve Been Exposed to the Coronavirus Given the severity of the disease and (Aug. 3, 2020), https://bit.ly/3hFJQbf. the world’s reaction to it, it may be no Many states incorporate the implied surprise that COVID-19 has spurred a warranty of habitability into their res- whole new set of business issues. The idential leases, but some states have real estate industry is no exception to more rigid standards than others. Legal this development. Residential land- Information Institute, supra. Landlords lords, in particular, are being forced to need to understand exactly what their grapple with a myriad of difficult deci- individual state’s implied warranty of sions regarding their properties and habitability requires. tenants in the COVID-19 age. Residen- Although most landlords are tial landlords throughout the United required to keep their premises in a habitable condition, they are also pro- hibited from discriminating against Alex J. Schnepf is an associate at Katten in Chicago, Illinois. tenants of a protected class in pursu- ing that goal. These protective statutes Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 25 range from federal law down to munici- conditions the ADA describes. is residents with severe alcohol or drug pal regulations. At the federal level, of Under the FHA and ADA, refusal to addictions; although the afflictions import are the Fair Housing Act, Title rent a dwelling to a renter because of are not contagious diseases, such resi- VIII of the Civil Rights Act of 1968 a handicap of that renter, or a handi- dents have also been found to qualify (FHA) and the Americans with Disabili- cap of any person associated with that as handicapped under the FHA when ties Act of 1990 (ADA). 42 U.S.C. § 3604; renter, is unlawful discrimination. 42 those individual addictions rise to a id. § 12182. At the state and municipal U.S.C. §12182(a); id. at § 3604. The level that substantially limit major life level, some acts and ordinances provide FHA defines a handicap as “a physical activities. See Oxford House Inc. v. City protections based on the same funda- or mental impairment which sub- of Baton Rouge, La., 932 F. Supp. 2d 683, mentals as the FHA and ADA. See, e.g., stantially limits one or more of such 689 (M.D. La. 2013). 775 ILCS 5/3-102, 3-102.1(A); Chi. Mun. person’s major life activities . . . or being COVID-19 may be analyzed under Code § 5-8-20. This article will focus regarded as having such an impair- a similar light. Ultimately, this would solely on federal law, but landlords ment . . . .” 42 U.S.C. § 3602(h)(1)(3). The mean determining whether a COVID- are advised to look to their individual ADA’s definition is virtually identical. 19 patient’s symptoms rise to the level state’s and local government’s laws for 42 U.S.C. § 12102(1). that would substantially limit his major further guidance. At the heart of the issue is whether life activities. As mentioned above, in having COVID-19 will qualify as a hand- some cases, COVID-19 does substan- Federal Law icap under both acts. As of November tially limit a person’s ability to function The FHA and ADA apply to different 2020, there were no FHA or ADA rul- at a normal level physically and requires types of landlords but provide simi- ings or regulations that expressly quarantine or isolation. Lisa Du, Virus lar protections. The FHA applies to all address whether individuals afflicted Survivors Could Suffer Severe Health landlords, unless the property in ques- with COVID-19 would be deemed Effects for Years, Bloomberg (May 12, tion is being rented as a single-family handicapped under the acts; however, 2020), https://bloom.bg/333CURd; see house and the private owner of the there have been other cases brought also CDC, Quarantine and Isolation (May house (1) does not own more than three under each act that have found differ- 6, 2020), https://bit.ly/3f4dci2. This such single-family houses at any one ent infectious diseases to be handicaps. decrease in functional ability, such as time and (2) rents without the use of a See, e.g., Bragdon v. Abbott, 524 U.S. 624, quickly occurring shortness of breath, broker or advertising. 42 U.S.C. at 630-647 (1998) (HIV infection is a dis- muscle aches, inability to sustain physi- § 3603(b)(1). The act also exempts ability under ADA); Assoc. of Relatives cal activity, or in some severe cases the apartments of four units or less, if the and Friends of AIDS Patients (A.F.A.P.S.) necessity for a respirator, are all factors owner lives in one of the units, and v. Regulations and Permits Admin., 740 that may qualify a person as handi- housing operated by organizations and F. Supp. 95 (D.P.R. 1990) (persons ter- capped under the FHA and ADA. See private clubs that limit occupancy to minally ill with AIDS are handicapped Nat’l Fair Housing Alliance, COVID-19, members. Id. § 3603(b)(2). within meaning of the FHA); Bax- Illegal Housing Discrimination, and Pro- The ADA applies to private entities ter v. City of Belleville, Ill., 720 F. Supp. tections for People with Disabilities and that lease or operate a place of public 720 (S.D. Ill. 1989) (persons who are Those Who Care for Them under the Fair accommodation. 42 U.S.C. §12182(a). A HIV-positive are handicapped within Housing Act, at 2 (Apr. 9, 2020), https:// place of public accommodation includes meaning of ADA). bit.ly/3kpFfuT. a “[p]lace of lodging, except for an estab- Consideration of AIDS and HIV may It is important to note that the dura- lishment located within a facility that provide guideposts for how COVID- tion of disability has no bearing on contains not more than five rooms for 19 will be addressed in the context its treatment under the FHA, so long rent or hire and that actually is occupied of whether an individual will be con- as the impairment substantially lim- by the proprietor of the establishment as sidered handicapped by having the its a major life activity for the time the the residence of the proprietor.” 28 C.F.R. disease. In cases where individuals with impairment exists. Id. But this is not Part 36.104. The regulations further either AIDS or HIV have been deemed the case for everyone under the ADA, define a “place of lodging” to include as handicapped under the FHA and which excludes transitionary impair- hotels (including inns and motels) or ADA, it is because both diseases “sub- ments from coverage as they pertain facilities that provide guest rooms for stantially limit” an individual’s major to “regarded as” disabilities. 42 U.S.C. short term stays (generally 30 days or life activities. The determination of § 12102(3)(b). A “transitionary impair- less) and provide those rooms with whether a person is deemed handi- ment” is defined as “an impairment amenities similar to those at a hotel. capped is made on an individual basis with an actual or expected duration of Id. Absent from the ADA’s definition of and is a largely fact-intensive determi- 6 months or less.” 42 U.S.C. § 12102(3) public accommodation are privately- nation. Sutton v. United Air Lines, 527 (b). At this point, it is far too early to owned apartments that impose lease U.S. 471 (1999) (“whether a person has determine whether COVID-19 patients agreements for rooms that last over a a disability under the ADA is an indi- will suffer long-term effects that could month and do not meet the hotel-like vidualized inquiry”). Another example substantially limit their major life Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 26 January/February 2021 Consequences of Violating the FHA and ADA (November 2020)

Statute Maximum Civil Penalty Other Penalties

FHA • First violation: $21,410 • Private right of action; • Second violation (within five years of the first): • Injunctive relief; and $53,524 • Actual and punitive • Subsequent violations (within seven years of damages. the last): $107,050 42 U.S.C. § 3613. See Jeff Dillman, HUD Publishes 2020 Civil Penalty Amounts for Fair Housing Violations (Mar. 11, 2020) https://bit.ly/3hFNCkV; see also 42 U.S.C. § 3612(g)(3).

ADA • First violation: $92,383 • Private right of action; • Subsequent violations: $184,767 • Injunctive relief; 28 C.F.R. § 36.504, as adjusted by id. § 85.5. • Ordering accommodation; and • When the case is brought by the Attorney General, additional monetary relief to aggrieved party. See id. activities and thus whether contraction relevant judicial bodies that specifi- keep their tenants safe and their prem- of the virus would be limited to classi- cally state whether a COVID-19-affected ises in a habitable condition. With fication as a “transitory impairment.” individual would constitute such a creative innovation, there can be many Neha Pathak, M.D., Life After COVID-19: threat under either act. Regardless, different modifications to a property The Road to Recovery (May 13, 2020), COVID-19 is thought to be a highly con- to make it cleaner and safer for resi- https://wb.md/2EpJs2p. With that in tagious viral disease, spread through dents, but balancing this pursuit with mind, treading carefully and assuming airborne transmission, that is threaten- cost considerations is a difficult task. that the ADA does cover most COVID- ing to human life, and could be deemed The following are some possible steps: 19 patients who experience serious a direct threat under the Acts. As this (a) implementing building-specific symptoms, regardless of duration, may issue has not been determined for cer- restrictions, requirements, and policies be advisable. tain yet, acting with caution may be to mitigate spread, (b) development of Although the above analysis should advisable. an incident response plan to curtail the spur caution from landlords regarding spread of COVID-19 and other disas- their treatment of tenants with COVID- Penalties for Violation of the ters moving forward, and (c) keeping 19, landlords still must consider how Regulations up to date with the ever-changing law they will protect their non-affected Above is a chart showing the civil pen- and guidance from government offi- tenants as much as possible. Both the alties and other possible penalties for cials surrounding the disease. See Nat’l FHA and ADA address that concern violating each respective act. Multifamily Hous. Council, Coronavirus with what is known as the direct threat Preparedness for Apartment Firms (Mar. exception to the disability discrimina- Practical Approaches to Help 16, 2020), https://bit.ly/3hKhb55. This tion sections of the acts. This exception Ensure Tenant Safety While section will also include examples of provides that the acts do not require Avoiding Legally Discriminatory policies to avoid as a landlord. that dwellings, services, or benefits Practices Against COVID-19 thereof be made available to individu- Positive Tenants Implementing Building Specific als who would pose a direct threat to After navigating the long and ardu- Restrictions, Requirements, and the health or safety of other individu- ous path of statutes that may protect Policy to Mitigate Spread als. 42 U.S.C. § 12182(b)(3); id. § 3604(f) COVID-19-positive tenants from dis- The highly contagious nature of COVID- (9). As of November 2020, the author crimination, landlords may be left 19 has made the procurement of had not discovered any rulings by any wondering what steps they can take to sanitation and cleaning services some Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 27 of the most important steps to mitiga- allowed in an area or restrictions on time be rulings and regulations coming tion. See Chicago Dep/t Pub. Health, of day areas are operational, should be down the pipeline that deal with the COVID-19: Guidance for Multifamily Res- uniformly applied to all tenants. This issue, and even now many states are idential Buildings (Apr. 1, 2020), https:// means refraining from restricting the already issuing executive orders that bit.ly/2P2XmcR. The Center for Dis- use of common areas to COVID-19- may affect housing on a monthly basis. ease Control and Prevention provides free tenants only. Additionally, possible See, e.g., Resources For Executive Orders, detailed guidelines regarding the cor- full shut-downs of major use common https://bit.ly/3hAj5oC (listing more rect cleaning protocol. CDC, Reopening areas, like gyms or grilling areas, should than four dozen executive orders in Illi- Guidance for Cleaning and Disinfecting be considered if the situation at a par- nois as of early August 2020); see also Public Spaces, Workplaces, Businesses, ticular building is especially dire and Executive Orders from the Office of the Schools, and Homes, (May 7, 2020), necessitates more drastic measures. Nat’l Governor, https://on.ny.gov/3jE8CKG; https://bit.ly/3g8FyJk. Some measures Multifamily Hous. Council, supra. Texas Executive Orders & Public Health can be taken beyond cleaning that Disaster Declaration (June 5, 2020), might be considered as building poli- Incident Response Plans for https://bit.ly/3hDiuCL (listing execu- cies moving forward. Employee sick COVID-19 tive orders in Texas). It is crucial to stay leave, remote work policies, and restric- A perhaps-overlooked strategy for up to date with new laws and regulations on the use of common areas are dealing with COVID-19 and simi- tions to avoid any unlawful activity in among the viable options. lar incidents is creating an incident the future. Landlords might consider adopt- response plan for emergencies. Id. Hav- The NMHC also recommends staying policies that allow their employees ing a response plan for immediate ing in constant contact with relevant to be absent from work if they are feel- action when faced with a disaster such government officials surrounding ing ill. These policies may already exist as COVID-19 will facilitate mitigation COVID-19 to ensure compliance with in some form, but, now more than ever, more quickly. At this point, the plan will their guidelines. Public officials will it is crucial to impress upon employees not be preemptive, but developing a often have the most up-to-date infor- that if they are feeling ill they should plan for future incidents that could also mation on the impact of a disaster not come into work under any circum- be applied to the present pandemic is a and input on recovery efforts. Nat’l stance. See Nat’l Multifamily Hous. useful exercise. Multifamily Hous. Council, supra. A Council, supra. An additional allotment The National Multifamily Housing relationship with government officials for employees who should be self-iso- Council (NMHC) suggests creating a in charge of recovery efforts will allow lating or quarantining after exposure is crisis team comprising members who landlords to keep residents informed on another consideration. would be tasked with creating such a the most current information, as well as Remote work options may be dif- plan. Id. The NMHC stresses assembling get ahead of the curve in implementing ficult for some building employees, a crisis team that is diverse in terms future policies and corrective measures. such as maintenance workers or clean- of personnel—with employees from ing staff, but some jobs may be done the corporate suite, risk management, Policies to Avoid remotely. For buildings with in-house human resources, legal, informa- Although there are many productive leasing offices, having those employees tion technology, and operations—who steps that landlords can take to quell work remotely unless necessary should would have decision-making and residents’ concerns and improve the be considered. In apartment buildings, spending authority. Id. Creating a team well-being of their properties, there are when applicable, moving the concierge with this kind of power in crisis sce- also seemingly-reasonable measures to a remote location where she can narios will help ensure that steps are that should be avoided. For example, effectively perform her duties without taken to remedy a scenario as soon increasing rent or collecting security actual face-to-face contact could also as it starts, ultimately reducing costly deposits from COVID-19-positive ten- be accomplished with relative ease. For mistakes sparked by unorganized ants may seem like a viable option for employees who cannot work remotely, decision-making. a landlord—after all, these measures requesting that tenants vacate their would certainly help mitigate the extra apartments for completion of mainte- Keep Up to Date with the Ever- cost associated with sanitizing the nance work, or vacate common areas Changing Law and Stance from property. Though the financial incen- for cleaning, is another option to miti- Government Officials Surrounding tive here is strong, collecting a cleaning gate indoor human contact. the Disease deposit or altering rent solely based on Yet another way to mitigate the Because there have not been any rul- the COVID-19-positive status of a ten- spread of the disease is common area ings directly on point with COVID-19 as ant could be problematic. restrictions. To minimize the risk of it relates to fair housing issues, a lot of Under the assumption, for the sake possible discriminatory claims, any guidance at the moment is purely pre- of caution, that a COVID-19 positive restrictions concerning common areas, cautionary. This will likely not be the tenant would be considered disabled such as a maximum number of people case forever. There will almost certainly or handicapped under the regulations Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 28 January/February 2021 mentioned above, that tenant would while still keeping their tenants safe. nature until there is more certain law be in a protected class. Using the FHA These actions can come in the form of concerning COVID-19 and fair housing as an example, an increase in rent or increased sanitation, social-distancing rules will help ensure lawful practices. collection of a cleaning deposit could measures, putting together crisis teams, The only thing we can do now is to keep be seen as an alteration of the terms and staying apprised of new laws to fighting this heavyweight bout and do and conditions of the rental of a dwell- avoid violations. Additionally, imple- so with caution and careful planning. n ing, and discrimination with respect menting policies that are uniform in to that alteration is unlawful. 42 U.S.C. § 3604(b). Further, the New York City government addressed this issue head- on, stating that “charging the resident additional fees related to cleaning or disinfecting the building” would be a discriminatory action in its eyes. NYC Human Rights, COVID-19 and Human Rights (June 9, 2020), https://www1.nyc. gov/site/cchr/media/covid19.page. It would likely not be discriminatory, however, to attempt to collect a cleaning deposit from all residents, as this would avoid any differing treatment among tenants. Of course, this could be an unpopular decision from a tenant’s perspective given the current economic situation, but this option does allow for a non-discriminatory means of mitigat- ing extra sanitation costs. In general, all policies that are geared specifically BASICS OF DATA CENTER LEASING: toward COVID-19-positive tenants, and do not apply to other tenants, should WHAT YOU WANTED TO KNOW be avoided for the time being. Uniform policies will help to ensure a lack of BUT WERE AFRAID TO ASK discrimination in this uncertain area. Wednesday, January 27, 2021 Although these policies may cost more 1:00 - 2:30 pm ET in the short term, they could lead to Demand for data centers has grown rapidly as many industries mitigation of hefty potential legal costs. and businesses increasingly conduct business in cyberspace. Data centers involve leases, but also other types of agreements, Conclusion each with its own set of issues to be negotiated by owners Burgeoning vaccine news certainly and users and with a significant technical overlay requiring spreads promise, but the outlook on specialized knowledge and provisions. This program will answer COVID-19’s timeline is ultimately your basic questions about data center leasing and agreements. unknown. This means we will be living in a world full of apprehension and • What are the different types of agreements? health safety issues for the foreseeable What is a Colocation Agreement? What is a Master future. For landlords, this future means Services Agreement and Service Level Agreement? needing to know what they can and cannot do concerning their properties • What are the critical concerns of a data center user? and tenants. Whether that is avoiding What is meant by Tier 1, 2, 3, and 4? discrimination barred by the FHA, ADA, • What are the different types of data center facilities? state, or municipal laws, being aware of • How does data center leasing differ from leasing of the relevant regulations is imperative. offices, retail stores, and warehouses? Fortunately, even amid all the uncer- tainty of the present and future, there are concrete steps that property own- Register at www.ambar.org/rptecle ers and landlords can take to avoid acting in a discriminatory manner Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 29 KEEPING CURRENT PROBATE

CASES of the decedent’s pension and IRA and a joint holder of the decedent’s checking AMBIGUITY: Purported devise of account. All three assets passed to Dailey at Keeping Current—Probate property not owned by the testator cre- offers a look at selected recent the decedent’s death. The decedent’s sib- ates latent ambiguity. Spouse conveyed cases, literature, and legislation. lings offered the 2001 will for probate, and a joint one-half interest in farm prop- The editors of Probate & Dailey objected, asserting that under West erty to the other spouse and their child, Property welcome suggestions Virginia’s premarital will statute, W. Va. Code Andy. After the spouses divorced, one and contributions from readers. § 42-3-7 (identical to UPC § 2-301), she was spouse conveyed the one-half interest in entitled to 100 percent of the estate as her the farm that the spouse had retained to intestate share. After a hearing, the county a revocable trust. The beneficiaries of the commission admitted the will to probate. revocable trust were the spouse’s children, On appeal by Dailey, the circuit court found but the ex-spouse was not a beneficiary. decedent’s death, the decedent’s spouse that the statute applied and reversed. The The spouse died and then the ex-spouse was appointed as the personal representa- siblings appealed to the Supreme Court of died with a will that purported to give “my tive and paid off the loan with the funds Appeals which affirmed in Yost v. Yost, No. one-fourth share” of what is described as in the POD account. The POD beneficiary 19-0605, 2020 WL 5269835 (W.Va. Sept. 4, the spouse’s “irrevocable trust” to Andy sued, and the trial court found that the 2020). The court held that Dailey’s unrebut- for life, then to another child for life. Andy personal representative acted reasonably ted testimony that the decedent intended began a construction action, and the trial because the estate did not have the funds Dailey to have all of the decedent’s property, court found that ex-spouse intended to to pay off the loan nor did she breach including the marital home, meant that the give her interest in the spouse’s revocable any fiduciary duty to the beneficiary. On nonprobate transfers were not intended to trust to Andy for life. On appeal, the Geor- appeal, the Colorado intermediate appel- be in lieu of testamentary provisions for the gia intermediate appellate court in Luke v. late court in In re Estate of Treviño, 474 surviving spouse. Luke, 846 S.E.2d 216 (Ga. Ct. App. 2020), P.3d 223 (Colo. App. 2020), reversed. The reversed, holding that the devise to Andy court held that the personal representa- PRO SE: Personal representative may created a latent ambiguity because ex- tive’s authority over the account extended proceed pro se when there are no other spouse had no interest in the trust (the only to the amount necessary to pay off beneficiaries. In Wilbur v. Tunnell, 151 court agreed with the trial court that the the loan after applying the estate’s liquid N.E.3d 908 (Mass. App. Ct. 2020), the Mas- reference to the non-existent irrevocable assets to pay off the debt. When the entire sachusetts intermediate appellate court trust was a scrivener’s error in referring to debt was paid from the account, the per- held that the personal representative of an the revocable trust) and remanded for the sonal representative violated the duties to estate who is not an attorney, but who is the consideration of parol evidence of the tes- exercise powers in a neutral manner and sole beneficiary, may represent the estate tator’s intent. the best interests of all beneficiaries and pro se so long as there are no creditors other interested persons. The court remanded than those involved in the litigation. In this PAY ON DEATH ACCOUNT: POD for a decision on whether the personal situation, the litigation is the personal rep- account subject to paying debt under representative should be surcharged in the resentative’s own suit and its resolution will loan agreement. The decedent had amount of the estate’s liquid assets. not affect anyone who is not a party. pledged a POD account as collateral for a loan. Under the terms of the loan PREMARITAL WILL: Nonprobate REVOCATION: Relationship by affinity agreement, the beneficiary and the dece- property arrangements do not prevent does not necessarily end on divorce. Arizo- dent’s personal representative had no the operation of premarital will statute. na’s revocation on divorce statute, Ariz. Rev. right to any of the funds in the account In 2001, the decedent executed a will leav- Stat. § 14-2508 (identical to UPC § 2-804), until the debt was “paid in full.” After the ing all of the decedent’s estate to Watkins, revokes all provisions for an ex-spouse and whom the decedent later married and sur- the ex-spouse’s relatives, including a nom- Keeping Current—Probate Editor: Prof. vived. Under the will, the estate was given ination as fiduciary, in a wide variety of Gerry W. Beyer, Texas Tech University to the decedent’s siblings if Watkins did instruments and nonprobate arrangements School of Law, Lubbock, TX 79409, gwb@ not survive. At death, the decedent was created by a divorced person, including a ProfessorBeyer.com. Contributors: Claire G. married to Dailey, who survived. The dece- will and a revocable trust. A “relative” of the Hargrove, Paula Moore, Kerri G. Nipp, and Prof. William P. LaPiana. dent had no issue. After their marriage, ex-spouse is defined as a person related the decedent made Dailey the beneficiary to the ex-spouse “by blood, adoption, or Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 30 January/February 2021 KEEPING CURRENT PROBATE

affinity” and who after the dissolution of and the trust property consisted princi- TAX CASES, RULINGS, AND marriage is not related to the divorced per- pally of California real estate. In 2016, one REGULATIONS son “by blood, adoption, or affinity.” In settlor-trustee died, and the surviving set- Matter of Estate of Podgorski, 471 P.3d 693 tlor-trustee moved to Idaho. The surviving IRS SUMMONS: Trustee required to (Ariz. Ct. App.), the Arizona intermedi- settlor-trustee then began a program of respond to IRS summons. As part of an ate appellate court held that a relationship selling the trust property and reinvest- investigation regarding the use of offshore of “affinity” between the relatives of the ing the proceeds in Idaho real estate and bank accounts to conceal taxable income, ex-spouse and the divorced person is deposit accounts in Idaho and registered the IRS issued two summons—one against established by the nature of the personal the trust in Idaho. Also, the surviving set- the taxpayer in his personal capacity and relationship between the relatives and the tlor amended the trust to remove one one in his capacity as trustee. The tax- divorced person. Therefore, a relationship of the settlors’ children as beneficiary. payer controlled several trusts, including of affinity does not necessarily end when That child sued in California, seeking an one with a foreign financial account. The the marriage ends. accounting and removal of the trustees taxpayer objected to the summons in both (the surviving settlor and two other chil- capacities, claiming a Fifth Amendment SPOUSAL RIGHTS: Change of IRA ben- dren). The trial court granted the trustees’ privilege. In a case of first impression, the eficiary is a fraud of a spouse’s rights. motion to dismiss for lack of personal Second Circuit in United States v. Fridman, Missouri law gives a surviving spouse jurisdiction, and on appeal, the Califor- 974 F.3d 163 (2d Cir. 2020), held that the a right of election against the will of the nia intermediate appellate court reversed collective entity doctrine applied and a deceased spouse. Mo. Rev. Stat. § 474.160. in Buskirk v. Buskirk, 267 Cal.Rptr.3d 655 traditional domestic trust could not use The law includes in the property to which (Ct. App. 2020). The court held that the the Fifth Amendment to avoid respond- the elective share applies any gift made by requirements for “case-linked jurisdiction” ing to a document request. The court also the deceased spouse “in fraud of the marital were met: the defendants availed them- ordered that the taxpayer individually rights” of the surviving spouse. In Carmack selves of the jurisdiction by creating the produce the documents, concluding that v. Carmack, 603 S.W.3d 900 (Mo. Ct. App. trust in California and by engaging in land the foregone conclusion doctrine applied. 2020), the intermediate Missouri appeals transactions there, the matter involved The court noted that the government court affirmed the trial court’s judgment real estate transactions in California, and established with reasonable particular- that the deceased spouse’s replacement of the defendants were not able to show ity its knowledge of the existence of the the surviving spouse as beneficiary of the that an exercise of jurisdiction would documents, the taxpayer’s possession decedent’s IRA with the decedent’s sib- be unreasonable, especially because the or control, and the authenticity of the lings was a fraud of the surviving spouse’s settlor-trustee brought four lawsuits in documents. The government provided marital rights. The court held that the stat- California since moving to Idaho. evidence of the account holders, account ute applies to the beneficiary designation numbers, and location by country of because it is concerned only with intent TRUSTS: Power of appointment accounts, and it sought customary docu- and purpose to deprive the spouse of an effective on the execution of will and no- ments such as statements. interest in property. In the absence of a ben- contest clause in trust held to be valid. In eficiary designation in the property, the Ferguson v. Ferguson, 473 P.3d 363 (Idaho LITERATURE IRA would have been part of the decedent’s 2020), the Supreme Court of Idaho ruled estate in which the surviving spouse has an on two novel questions raised by a moth- ADVANCE DIRECTIVES: In their interest. The court also held that both direct er’s exercise of a testamentary power of book, Getting Started with Advance Direc- and circumstantial evidence established appointment, making her child a ben- tives, Michael A. Kirtland and Donna the decedent’s intent: the decedent’s state- eficiary of the trust that granted her the Jackson consider issues and problems ments that the change in beneficiaries was power of appointment. First, the court with advance directives, COVID-19, reli- made to qualify the surviving spouse for agreed with the district court that the gious-based directives, aid in dying, and Medicaid, the lack of consideration for the child became a beneficiary of the trust POLST programs and provide a survey of transfer, the control the decedent retained, when his mother executed the will that advance directives law for all 50 states and the large size of the transfer compared to exercised the power of appointment. Sec- the District of Columbia. the total estate, and the lack of disclosure to ond, the court held as a matter of first the surviving spouse. impression that a no-contest clause in BENEFICIARY DEFECTIVE INHER- a trust is enforceable subject to various ITOR’S TRUSTS: In their article, BDIT TRUST JURISDICTION: Personal juris- common law limitations. One limitation 2701: Avoiding Section 2701 by Selling Car- diction over non-resident trustees held to forbids enforcement that interferes with ried Interest Directly to Beneficiary Defective be proper. In 2005, two settlors in Califor- the proper administration of the trust Inheritor’s Trust, 47 Est. Plan. 04 (2020), nia created a revocable trust in which they such as in this case when it would prevent Joe Higgins and Angelo F. Tiesi offer a new were trustees. The settlors were residents the beneficiary from obtaining records solution to accomplish the objective of of California, the trust terms made Cali- to which a beneficiary is entitled under transferring a private equity fund prin- fornia law the governing law of the trust, Idaho Code § 15-7-303(b). cipal’s carried interest to a beneficiary Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 31 KEEPING CURRENT PROBATE defective inheritor’s trust without having Prewett, and Gaurav Kumar in IRS Issues that may negate any income tax bene- to transfer a vertical slice. New Guidance on Tax Treatment of Crypto- fit from deducting investment expenses currencies, 47 Est. Plan. 27 (2020). of the family office” in Deducting Family CHARITABLE GIFTS: In American Office Investment Expenses AfterLender, 45 Charitable Bequest Transfers Across the ELDER FINANCIAL ABUSE: In his ACTEC L.J. 179 (2020). Centuries: Empirical Findings and Implica- article, Elder Financial Abuse: Fiduciary Law tions for Policy and Practice, 12 Est. Plan. and Economics, 34 Notre Dame J.L. Ethics FUNERAL PLANNING: An incon- & Comm. Prop. L.J. 235 (2020), Russell N. & Pub. Pol’y 307 (2020), Ben Chen argues sistent patchwork of state statutes has James III “comprehensively reviews and that orthodox fiduciary law is too strict on complicated and frustrated the funda- summarizes results from past empiri- most guardians and agents who manage mental common law right to choose your cal analyses of charitable estate transfers property for the elderly. Mr. Chen proposes burial place or to be cremated. In her arti- using U.S. tax and probate records” and a substituted-judgment defense to permit cle, You Can’t Always Get What You Want: explains their implications for practice. those departures from strict fiduciary law Inconsistent State Statutes Frustrate Decedent that the incapable individual would have Control Over Funeral Planning, 55 Real Prop. CHOICE OF LAW: Mary LaFrance authorized if he were mentally capable. Tr. & Est. L.J. 147 (2020), Tanya D. Marsh argues that determining the best choice of examines these problems and provides a law principle for right of publicity claims, ELDER FINANCIAL EXPLOI- comprehensive appendix listing and sum- and persuading courts to adopt this prin- TATION: Jesse R. Morton and Scott marizing each state’s “personal preference” ciple, will enhance predictability for Rosenbaum illustrate how financial insti- and “designated agent” laws as an aid to potential plaintiffs and defendants in the tutions fail to uphold the legal obligations practitioners. foreseeable future in Choice of Law and the imposed on the industry in their article, Right of Publicity: Rethinking the Domicile An Analysis of Elder Financial Exploitation: FUNERAL PLANNING FRAUD: Rule, 37 Cardozo Arts & Ent. L.J. 1 (2019). Financial Institutions Shirking Their Legal In his Note, Giving up the Ghost: How the Obligations to Prevent, Detect, and Report Funeral Rule and State Licensing Boards Are COMMON-LAW MARRIAGE: Avery This “Hidden” Crime, 27 Elder L.J. 261 Failing to Protect Consumers from Under- Rios discusses community property (2019). They also provide recommenda- handed Undertakers, 27 Elder L.J. 423 and common law systems and how the tions on how to better prevent, detect, and (2019), Adam Gottschalk details why and tremendous increase of unmarried mil- report elder financial exploitation. how funeral providers continue to use lennial couples cohabitating has brought unfair and deceptive practices despite an increase of issues when these cou- ELDER PHYSICAL ABUSE: In strong protective language in federal and ples seek recovery in property interests her Comment, Florida Needs to Protect state law and recommends solutions to through the judicial system, in her Com- Grandma & Grandpa, 32 St. Thomas L. solve this dire problem. ment, Divorce Destroys the Community: An Rev. 31 (2019), Jessica A. Alvarez argues Examination of the “Texas Method” Commu- that Florida should amend its law to allow GIFTS IN CONTEMPLATION OF nity Property Principles Upon Divorce and its nursing home residents and their family DEATH: Stephanie J. Willbanks “pro- Effects on Informal Marriage, 12 Est. Plan. & member to conduct electronic moni- poses that Congress repeal the three-year Comm. Prop. L.J. 437 (2020). toring. Ms. Alvarez writes that doing so inclusion rule for gifts of retained interests would ensure that the elderly population and further integrate the estate and gift CROSS-BORDER INHERITANCE: living in these nursing homes are pro- taxes by making the gift tax tax-inclusive” Eva Saulnier’s Note, Disinheriting Your Chil- tected and their loved ones can keep an in Gifts in Contemplation of Death: Why dren: A “Non” “Non” in France; an Accepted eye on them from afar. Can’t Section 2035 Simply Die?, 45 ACTEC Use of a Testamentary Freedom in America, L.J. 143 (2020). 52 Case W. Res. J. Int’l L. 669 (2020), exam- ELECTRONIC WILLS: In his arti- ines cross-border inheritance through the cle, Technology Adrift: In Search of a Role GROUNDWATER RIGHTS: In his lens of a current multinational inheritance for Electronic Wills, 61 B.C. L. Rev. 827 Comment, Preserving Groundwater Rights battle. Ms. Saulnier proposes a different (2020), Adam J. Hirsch addresses the law for Your Beneficiaries in the Face of the Texas approach where a set of model laws would and public policy of electronic wills and Water Crisis with the Private Water Trust, 12 be agreed upon for cases that would proposes a new approach: to bar elec- Est. Plan. & Comm. Prop. L.J. 309 (2020), qualify under the Multinational Family tronic wills in general but to permit them Cal Dunagan “outlines a brief history definition. Such a solution would further for estate plans made under emergency of water trusts in the United States and a more equal and fair system. conditions. [provides] guidance for estate planners interested in creating private groundwater CRYPTOCURRENCY TAXATION: FAMILY OFFICE EXPENSES: Rob- trusts for their clients.” A discussion of the IRS’s latest attempt ert Daily explains that “[i]mplementing a to clarify the tax treatment of cryptocur- family office structure may create adverse ILLINOIS—COVID-19: Richard Hirsch- rencies is led by Roger W. Dorsey, Kyleen income tax and gift tax consequences tritt explores “the unique post-death tax Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 32 January/February 2021 KEEPING CURRENT PROBATE planning opportunities for the estates exacerbated in substantial part by the fed- TRUST BENEFITS: In his article, Trusts of Illinois taxpayers who have died eral government’s incentivizing a new in Wealth Preservation—Not Only for the within six months before the onset of the form of “perpetual trust.” The trusts will, Super Rich, 47 Est. Plan. 8 (2020), Louis COVID-19 outbreak” in COVID-19, Death, through “dead hand control,” extend enor- A. Silverman discusses the use of trusts and Taxes, Ill. B.J., Sept. 2020, at 34. mous wealth to unknown generations and for clients with young children, children accumulate income and capital without with financial issues, children who have IMPACTFUL GIVING: In The First Rule distribution to the economy for as long as divorce history, and dysfunctional family of Impactful Giving: Give the Right Asset, 47 1,000 years or even for perpetuity. members. Est. Plan. 34 (2020), Ryan Boland argues that donors may often realize a sizable PERSONA RIGHTS: In his Comment, TRUSTEES: In Inside the Mind of a increase in the amount that they can give, Bringing the Dead Back to Life: Preparing the Trustee: The Importance of Understanding a and therefore the impact they have, by Estate for a Post-Mortem Acting Role, 12 Est. Trustee’s Perspective, 12 Est. Plan. & Comm. simply donating the best asset at the right Plan. & Comm. Prop. L.J. 349 (2020), Ben Prop. L.J. 185 (2020), Katherine C. Akinc time. Laney reviews the legal history of persona explains that understanding the role of rights, explains the science and ethics of a trustee will allow attorneys to better INHERITANCE FORGERY: Reid bringing dead actors back to life, and then advise clients and prepare trusts. Kress Weisbord and David Horton offer provides “the reader with direction as to a fresh look at inheritance-related forg- how an individual might prepare or pre- WILLS: In her article Wills Speak, 85 ery using reported cases, empirical vent their likeness from one day returning Brook. L. Rev. 647, Katheleen Guzman research, grand jury investigations, and to the silver screen.” explains that a will not only is effective at media stories. They reveal that courts the time of death as a conveyance but also routinely adjudicate credible claims that PRISONERS: Zayne Saadi advocates speaks while the testator is alive. This may wills, deeds, and life insurance benefi- for providing a framework for prisoners give rise to beneficiaries having “stand- ciary designations are illegitimate. Their to have access to estate planning services ing to challenge some conduct, or reject article, Inheritance Forgery, 69 Duke L.J. in her Comment, Born Sinners Versus Born the rejection of revival, or sue to protect an 855 (2020), outlines reforms needed to Winners: The Need for Estate Planning Inside expectancy.” modernize succession while remaining Texas Prisons, 12 Est. Plan. & Comm. Prop. sensitive to the risks of forgery. L.J. 471 (2020). LEGISLATION

LIFE INSURANCE: In Why Billion- RETIREMENT: David A. Pratt reviews DELAWARE updates the provisions aires Acquire Life Insurance, 47 Est. Plan. the US private retirement system, evalu- governing statutory trusts. 2020 Del. Laws 15 (2020), Richard L. Hartmann explains ates the extent to which it is successful, Ch. 264. the reasons why billionaires acquire and makes recommendations for reform life insurance. The article finds billion- concerning access to coverage, level of HAWAII enhances the law determining aires will use the insurance plans to both contributions, investment returns and when abuse of a corpse occurs. 2020 Haw. offensively preserve their wealth multi- fees, insufficient accumulations, porta- Laws Act 43. generationally and defensively to protect bility, leakage, drawdown of benefits, and the assets they want to preserve long employer involvement in Too Big to Fail? NEBRASKA adopts the Uniform Trust term in bad economic times. The U.S. Retirement System in 2019, 27 Decanting Act. 2020 Neb. Laws L.B. 808. Elder L.J. 327 (2019). NON-MARITAL COUPLES: In NEBRASKA enacts the Uniform Wills Marital Versus Nonmarital Entitlements, REVOCABLE TRUSTS: Richard C. Recognition Act. Neb. Laws L.B. 966. 45 ACTEC L.J. 79 (2020), Raymond C. Ausness provides a discussion of the O’Brien discusses how intimate non- rights of remainder beneficiaries to a NEBRASKA passes the Advance Men- marital cohabitants should be treated revocable trust both before and after the tal Health Care Directives Act. Neb. Laws by taking into consideration “the settlor’s death in A “Mere Expectancy”? L.B. 247. ascendency of privacy, liberty, and What Rights Do Beneficiaries of a Revocable self-determination.” Trust Have Prior to the Death of the Settlor?, UTAH is the first state to enact Uniform 32 Quinnipiac Prob. L.J. 376 (2019). Electronic Wills Act including the lan- PERPETUAL TRUSTS: Robert H. guage authorizing remote witnessing. Freilich, in Eliminating Perpetual Trusts Is STANDBY GUARDIANSHIP: Joshua 2020 Utah Laws 6th Sp. Sess. Ch. 1. a Critical Step towards Alleviating America’s S. Rubenstein provides a detailed analysis Devastating Income Inequality, 88 UMKC of existing legislation authorizing standby VERMONT enacts the Enhanced Life L. Rev. 65 (2019), argues that the grow- guardianships in Standby Guardianship Estate Deed Act. 2020 Vt. Laws No. 145. n ing problem of inequality of income and Legislation Summer 2019, 12 Est. Plan. & disparity of wealth in America has been Comm. Prop. L.J. 287 (2020). Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 33 THE COVID-19 ISSUE

The Impacts of the Coronavirus Pandemic on Real Estate Contracts Force Majeure, Frustration of Purpose, and Impossibility

By George P. Bernhardt and Jack Fersko

any are calling the current majeure clauses may be stated very Div. 2007). As such, understanding the pandemic “an unprecedented broadly, such as “any event neither law of your particular jurisdiction and Mevent of force majeure” or caused by nor reasonably foreseeable then precise drafting are critical. “the very definition of force majeure.” by the parties,” or may list very specific This article reviews the concepts of Before reaching that conclusion, how- events, in which case an occurrence will force majeure, frustration of purpose, ever, a closer examination of the issues not be considered a force majeure event and impossibility in the context of is required. unless it meets the specific contract lease, construction, and purchase and Force majeure is not a common law definition. sale agreements. It offers some draft- doctrine, but rather a creature of con- When a force majeure clause con- ing strategies to consider as the real tract. Consequently, force majeure is tains specific events, followed by very estate sector continues to navigate the only what a contract expresses—if it general language, some courts invoke pandemic. provides a force majeure clause at all. the rule of ejusdem generis, under which If it does, then most courts will nar- principle the catch-all language is not Force Majeure and Common Law rowly construe the clause. Some force to be construed to its broadest extent; Remedies rather, such language is to be nar- Before the 9/11 attacks in 2001, most George P. Bernhardt is managing counsel- rowly interpreted as contemplating force majeure clauses did not include global real estate at Baker Hughes Company in Houston, Texas, a member of only events or matters of the same gen- terrorism. Before 2020, most did not the Section’s Council, co-chair of the Leasing eral nature or class as those specifically cover epidemics or pandemics. The Group, and member of the Continuing enumerated. In contrast, some courts question is whether a broadly worded Legal Education Committee. Jack Fersko is a have held that a force majeure clause force majeure provision—for example, partner at Greenbaum, Rowe, Smith & Davis that includes acts of God will be more a clause that includes “all events out- LLP in Roseland, New Jersey, a member expansively interpreted when followed side the control of the parties”—will of the Section’s Council, and vice chair of by the phrase “or other unforeseen be interpreted to cover the COVID-19 the Groups and Substantive Committees Committee. events or circumstances.” See, e.g., Facto pandemic. v. Pantagis, 390 N.J. Super. 227 (App. Generally, to be construed as a force Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 34 January/February 2021 majeure, the event must be covered by storms, perils of the sea, earthquakes, Similarly, California has codified com- the language of the clause, not have inundations, sudden death, or illness. mon law impossibility, providing that a been foreseeable, be outside of the con- This expression excludes all idea of “condition in a contract, the fulfillment trol of the contracting parties, and be human agency.” Ga. Code Ann. § 1-3-3. of which is impossible or unlawful, the proximate cause preventing per- The Georgia definition focuses primar- within the meaning of the Article on formance, which is an objective rather ily on physical damage. Although it the Object of Contracts, or which is than subjective determination. If a con- does refer to “sudden death, or illness,” repugnant to the nature of the interest tract does not contain a force majeure it may be difficult to apply the statute created by the contract, is void.” Cal. Civ. clause, however, there still may be relief to the pandemic, particularly because Code § 1441. if the jurisdiction has a statutory force Georgia case law provides that an “Act If neither the contract nor the juris- majeure provision, such as California of God” must not be human-caused. An diction’s statutory scheme provides (Cal. Civ. Code § 1511) and Georgia (Ga. argument may be crafted, however, that for force majeure, then a contracting Code Ann. § 13-4-21). closure resulting from a government party may find refuge in the common Section 13-4-21 of the Georgia order issued because of the pan- law doctrines of frustration of purpose Code (Acts of God) provides: “If per- demic qualifies. The case law is sure to and impossibility or impracticability. formance of the terms of a contract develop to address this and many other Frustration of purpose applies when becomes impossible as a result of an arguments. performance is technically possible, but Act of God, such impossibility shall The California provision excuses a change in circumstances frustrates the excuse nonperformance, except where, performance when the performance is essential purpose of the contract. The by proper prudence, such impossibility delayed or prevented by operation of event must not be reasonably foresee- might have been avoided by the promi- law, or by “an irresistible, superhuman able and must be so severe that it is not sor.” The Georgia Code defines “Act of cause, or by the act of public enemies to be regarded as a risk allocated by the God” to mean “an accident produced of this state or of the United States, parties or assumed by any one party. by physical causes which are irresist- unless the parties have expressly agreed Depending on the jurisdiction, the doc- istockphoto ible or inevitable, such as lightning, to the contrary.” Cal. Civ. Code § 1511. trine will be narrowly applied and must Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 35 be proved by clear and convincing provision that specifically includes evidence. the circumstance where the govern- The classic case on frustration of ment preempts the right of the firm to purpose is Krell v. Henry [1903] 2 KB One must examine whether use and occupy its office space in con- 740 (Eng.). This case arose out of a connection with a national or other public tract to rent a flat of rooms in London the event complained of— emergency, thereby entitling the firm to view the coronation of King Edward the COVID-19 pandemic, to a rent abatement. Simpson Thacher VII. Although a deposit was paid, Henry & Bartlett v. VBGO 425 Lexington LLC, refused to pay the balance due after the for example—renders Index No. 653415/2020 (N.Y. Sup. Ct. coronation was postponed because of filed July 27, 2020). In June 2020, Vic- the king’s illness. The court determined performance impossible toria’s Secret filed a complaint seeking that there was an implied condition, rescission of its New York City Herald and when that condition did not occur, or frustrates the essential Square lease on the theories of frustra- the contract was voided. The decision tion of purpose and impossibility due was based on analogy to an earlier case, purpose of the lease. to the COVID-19 pandemic and related Taylor v. Caldwell [1863] 122 Eng. Rep. government-mandated shutdowns. Vic- 309 (Eng.), which relieved the parties toria’s Secret Stores, LLC v. Herald Square from performance of a contract related Owner LLC, Index No. 651833/2020 to the rental of a concert hall after the (N.Y. Sup. Ct. filed June 8, 2020), https:// concert hall burned down. bit.ly/3mBylnA. A similar action was The doctrine of impossibility arose not found in leases or, when they are filed by Bath and Body Works. Bath & to excuse performance when it is made present, tend to be landlord-oriented. Body Works, LLC v. 304 Pas Owner LLC, impossible because of an intervening It is common, for example, for a force No. 651833/2020 (N.Y. Sup. Ct. filed occurrence not caused by the parties. majeure clause in a lease to expressly June 8, 2020). Lawyers will have to To prevail, the event must not have exclude the tenant’s rent obligations. await the outcome of these and many been reasonably foreseeable by either See 476 Grand, LLC v. Dodge of Engle- other cases, but several courts have ren- party and performance must be objec- wood, Inc., A-2048-10T1, 2012 WL dered decisions that are instructive. tively impossible—a personal inability 670020 (N.J. Super. App. Div. Mar. 2, In Lantino v. Clay LLC, 2020 WL to perform is not sufficient. For exam- 2012) (force majeure clause concluded 2239957 (S.D.N.Y. May 8, 2020), the ple, the destruction of the concert hall with: “Nothing herein shall be deemed court examined whether a government in the Taylor matter made it impossible to relieve Tenant of its obligation to pay order issued as a result of the COVID- to hold a concert at the hall. Modern Rent when due”). 19 pandemic, resulting in the closure courts typically do not require strict When considering a force majeure of a gym, would justify nonpayment impossibility, having adopted a doc- defense, one must be mindful of the under a settlement agreement on the trine of impracticability. Thus, if a remedy available under the lease (or theory of impossibility. The court deter- contractual obligation becomes exces- other contract): Does the clause sim- mined that economic hardship, even sively burdensome because of the ply toll the time for performance, such if resulting in a party’s ultimate bank- occurrence of an unforeseen event not as the payment of rent, excuse perfor- ruptcy, does not render performance caused by one of the parties, the parties mance for the period of interference, impossible. In contrast, the court in are excused from performing. or permit outright termination of the In re Hitz Restaurant Group, 616 B.R. Typically, force majeure and the lease? Similarly, one must examine 374 (Bankr. N.D. Ill. 2020), determined common law doctrines of frustration of whether the event complained of—the that a government order suspend- purpose, impracticability, and impos- COVID-19 pandemic, for example— ing on-premises dining because of the sibility are not often applied to real renders performance impossible or COVID-19 pandemic fell within a force estate contracts outside of construction- frustrates the essential purpose of the majeure clause in the lease. Although related contracts. Instead, in either a lease, thereby excusing the obligation, the clause included a provision that a purchase and sale agreement or a lease, such as the payment of rent. lack of funds will not be deemed a force an event that might otherwise be con- Several actions have been filed by majeure, the court, in a Rube Gold- sidered a force majeure, resulting in tenants concerning whether a ten- berg sort of analysis, reasoned that the physical damage to the property, would ant has a right to terminate a lease and debtor did not argue it lacked funds be covered by a lease casualty clause or avoid its rent obligations due to the to perform, but rather that the govern- a damage and destruction clause in an COVID-19 pandemic and related cir- ment order prohibiting on-premises agreement of purchase and sale. cumstances. The law firm Simpson dining was the proximate cause of the Thacher & Bartlett LLP has filed an tenant’s inability to generate revenue in Lease Issues action against its landlord on the basis order to pay rent. Often, force majeure clauses either are that the lease included a force majeure A case that is instructive from a Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 36 January/February 2021 drafting perspective is Backal Hospital- assumes a physical defect in the prem- requirements; and (vii) the potential ity Group LLC v. 627 West 42nd Retail ises, the court held that the mere fear of filing for bankruptcy by the current LLC, No. 154141/2020, 2020 N.Y. Misc. contagion does not justify voluntarily tenant and the consequences of such a LEXIS 4050 (Sup. Ct. Aug. 3, 2020). abandoning the premises or excuse filing. Here, the tenant argued impossibility payment of rent. Additionally, although When considering a tenant’s request because of a government order prohib- public health officials initially were (whether for a deferral, abatement, or iting large gatherings at facilities due extremely concerned about COVID- termination), a landlord should require to the COVID-19 pandemic, thereby 19 spreading through contact with the tenant to enter into a pre-negotia- allowing the tenant to terminate its contaminated surfaces, more recent tion agreement that (i) confirms that lease. The court, however, determined studies have indicated that this is not there is no agreement unless and until that the event (the government order) a major factor in spreading the virus. there is a writing signed and delivered was foreseeable based on the fact that Press Release, Ctrs. for Disease Control by both landlord and tenant; (ii) con- the parties addressed the situation by & Prevention, CDC Updates COVID-10 firms there is no obligation on the part the inclusion of a clause in the lease Transmission Webpage to Clarify Infor- of either to continue to negotiate; (iii) obligating the tenant to enter into mation About Types of Spread (May 22, confirms the tenant’s continuing obli- agreements and take such action as 2020), https://bit.ly/30askpc. gation to abide by the lease terms; (iv) may be legally permissible to enable the In a more recent case, the Texas confirms the agreement is not to be landlord to collect the maximum rent Supreme Court found in Davidow v. deemed an amendment to the lease (so due in the face of a government order Inwood North Professional Group, 747 that the landlord does not run afoul of or regulation affecting the collection of S.W.2d 373, 377 (Tex. 1988), that the loan requirements for lender consent to rent. Consequently, the tenant was not implied warranty of fitness for a par- lease amendments); (v) includes estop- permitted to unilaterally terminate its ticular purpose “means that at the pel language confirming that there are lease based on impossibility. inception of the lease there are no no defaults by the landlord under the latent defects in the facilities that are lease and no present rights of set-off, Other Possible Theories of Relief vital to the use of the premises for their abatement, or claims; and (vi) imposes Another possible theory that has been intended commercial purpose and that confidentiality so that the tenant does discussed in connection with the pan- these essential facilities will remain in not divulge the discussions, or results of demic is the implied warranty of a suitable condition.” Consequently, a those discussions, to third parties—par- habitability or suitability for a partic- post-commencement date event will ticularly other tenants at the property. ular purpose. This warranty generally not excuse performance. In addition, the landlord should request relates to the physical condition and a business plan from the tenant in repair of the premises and typically is Issues When Structuring a order to know that the tenant has a plan focused on latent defects. When evalu- Landlord-Tenant Deal to emerge from the crisis and should ated in respect of commercial tenancies, As we continue to face the effects of the assess the viability of that plan, includ- the condition arguably must have COVID-19 pandemic, there is a host of ing the repayment of any outstanding existed at the time the lease is signed. issues that landlords and tenants will loans to the tenant from secured and There is case law supporting the prop- need to evaluate as they wrestle with unsecured creditors. osition that a tenant can offset against declining tenant revenues, requests for If the landlord does decide to abate rent the cost to correct or decontami- rent deferral or abatement, and lease rent, then the landlord also should nate a facility if the landlord fails to termination. consider a lease extension so that the do so. See Marini v. Ireland, 56 N.J. 130 A landlord that contemplates a hard economic value of the lease remains (1970). But that is of little solace to a stance should examine closely the lease constant for purposes of future financ- tenant forced to continue to pay rent and its current mortgage loan terms to ing or sale. Further, whether granting without the full benefit of the premises determine its rights and responsibili- a deferral or abatement, the landlord during the pandemic. ties. In particular, the landlord should should consider whether to require Even if this doctrine is found to evaluate (i) whether tenancy courts added security (cash or guaranty) and apply with regard to contamination by are open for business and, if not, back- whether any tenant “give-backs” are the COVID-19 pandemic, it is unlikely logs once courts are back in business; appropriate, including the deletion or that the tenant would have any rights (ii) the ability to evict a tenant and on- modification of existing termination beyond requiring the landlord to going eviction moratoria; (iii) the pool rights, extension or expansion rights, decontaminate the premises. In Majes- of replacement tenants; (iv) the cost set-off rights, going dark and co-ten- tic Hotel Co. v Eyre, 65 N.Y. Supp. 745 of a new tenancy in terms of free rent, ancy provisions, purchase options, and (N.Y. App. Div. 1900), a tenant tried to tenant fit-up costs, and new broker- so on. cancel his residential lease because of age fees; (v) the likely replacement rent From a tenant’s perspective, the ten- an outbreak of scarlet fever. Because rate; (vi) the effect on current mortgage ant should evaluate (i) the lease terms, the implied warranty of habitability loan financial covenants and reserve its financing arrangements, and the Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 37 in the completion of construction and thus delivery because of force majeure but also expressly resulting from the COVID-19 pandemic, including equipment and material supply delays or shortages and any other supply chain delays, labor shortages, government orders delaying or stopping performance, delays by utility companies, including delays in bringing utility lines to the premises, and other matters outside a party’s control because of the COVID-19 pandemic; (iv) the right of a tenant to expand into the adjoining parking area in order to accommodate outside dining or curbside delivery (although query whether such space effect of any lease action on its finan- notice, the passage of a specific time is included in the tenant’s insurance cial covenants; (ii) whether occupancy period before a party can claim the ben- coverage as being a part of the “Prem- is affected, and to what extent, because efits of the force majeure event (e.g., a ises” or meets standards required under of health concerns, government orders, specific number of days and whether the Americans with Disability Act); (v) or employee concerns, and the rights they need to be consecutive), and mit- modified notice provisions if parties are and responsibilities each situation pres- igation obligations; (iv) whether to not in their office or place of business ents; (iii) whether an SNDA was signed expressly carve out certain responsi- and cannot gain access to overnight with the landlord’s mortgage lender bilities under the lease, such as the delivery or certified mail; (vi) time of and if lender consent is required before payment of rent and additional rent; essence provisions; and (vii) the effect any lease amendment, termination, and (v) what remedies will be available of the COVID-19 pandemic and related or other lease-related activity can be in the case of a covered force majeure— government orders, or temporary validly taken vis-à-vis the lender; (iv) suspension of performance or lease building closures resulting from “deep whether there is a viable business plan termination. Because matters will be cleaning” requirements, on the obliga- to emerge from the economic conse- evaluated on a case-by-case basis, clar- tion to pay rent. quences of the COVID-19 pandemic, ity in drafting each force majeure In situations where a build to suit and what is necessary for the successful provision is critical. is involved or a major tenant improve- implementation of the plan; (v) whether Because foreseeability is an element ment project is required and the tenant tenancy courts are open for business of each of the contract and common has a right of early occupancy, consider and, if not, backlogs once courts are law remedies, a lease signed after the the effect of the pandemic, including back in business; and (vi) the ability of pandemic should expressly address social distancing and other work-related the landlord to evict because of ongoing the parties’ intent with respect to the guidelines that currently exist and may eviction moratoria, inasmuch as “cash effect of the COVID-19 pandemic on hereafter be required. is king” and ongoing eviction moratoria performance. Even without a specific Consider providing for the general may provide the tenant with the prac- requirement that the event be unfore- contractor to serve as the final arbiter tical ability to hold onto its cash for a seeable, a court may decide that the in determining whether any work that period of time. pandemic is not covered by a new con- the tenant desires to perform or have tract, even if the force majeure clause performed during early occupancy may Drafting Factors to Consider specifically calls out epidemics and delay substantial completion, includ- When evaluating whether to include pandemics. ing whether the number of workers to a force majeure clause in a lease (or Some of the other issues to con- perform any work will affect any pan- any other contract), the parties need sider include (i) a landlord’s inability demic-related work guidelines. If the to examine (i) whether the result of a to deliver the premises resulting from general contractor determines that force majeure event will excuse perfor- a holdover tenancy because the cur- the tenant’s work may delay substan- mance of both parties; (ii) what events rent tenant cannot move out; (ii) a tial completion, then the tenant should will constitute a force majeure event landlord’s inability to evict a current not be allowed to perform such work and whether to include a detailed list tenant because of a moratorium on until after substantial completion. of events or simply general descrip- evictions resulting in a holdover of a If the general contractor determines tive and nonexclusive language; (iii) current tenant; (iii) delivery dates for that the work will not delay substan- whether to impose conditions such as premises—provide not only for a delay tial completion but will add to the cost Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 38 January/February 2021 of the work, then the tenant shall be that the contractor shall act to prevent In addition to legal requirements, required to execute and deliver to the threatened damage or injury and may the parties also should consider best landlord a change order and pay the be entitled to compensation. Presum- practices for maintaining a safe work additional costs as a condition prece- ably, this will permit the contractor to environment during the pandemic. dent to the performance of such work. be reimbursed for increased expenses For example, the American Industrial If, at any time during the performance needed to comply with laws and Hygiene Association provides indus- of any work by the tenant (and its ven- directives for social distancing, disin- try-specific guidance to maintain a dors and contractors) during such early fecting, additional personal protective safe work environment. Am. Indus. occupancy, the general contractor deter- equipment, and otherwise prevent- Hygiene Ass’n, Returning to Work: Con- mines the work may delay substantial ing the spread of the coronavirus at the struction Environment (July 8, 2020), completion, then the tenant should be worksite. https://bit.ly/3cvctXn. Various chapters obligated to cause all work to stop. The AIA documents are often heav- of the Associated General Contrac- ily negotiated, and contracts may have tors of America also have published Construction Issues very different language or additional Recommended Practices for Construc- Contrary to the situation in leases clauses not found in the standard tion Jobsites, such as the information and purchase agreements, it would be A-201 form. For example, a contract published by the Houston chap- unusual to see a construction contract may provide for additional compensa- ter: COVID-19: Construction Industry without some type of force majeure or tion because of a change in laws after Resources, Associated Gen. Contrac- similar clause, though it may be called the contract is signed or provide for tors of Am.: Hous. Chapter, at https:// a “delay” clause or something similar. additional costs, rather than just time, bit.ly/3mTtkYM. The parties will want Delay is a standard risk in construction, in connection with a work stoppage. A to consider these guidelines both to whether from adverse weather, strikes, contract may provide for contingency avoid potential liability and to mini- material delays, or government permit- funds to cover unexpected expenses. mize down time due to jobsite virus ting issues. For example, probably the A contractor will want to look at all its outbreaks. most common construction document options to determine whether it makes An outbreak will always be possi- in the United States, the AIA A-201- the most sense to proceed as a simple ble, even when the parties employ best 2007 General Conditions, includes delay under § 8.3, to make a claim for practices, and so the contract should § 8.3 Delays and Extensions of Time, additional cost under a change in law consider how to deal with potential which provides, “If the Contractor is clause, or to just terminate after 30 days problems arising from an outbreak and delayed at any time . . . (3) by labor dis- of stoppage under § 14.1.1. with other pandemic-related issues. putes, fire, unusual delay in deliveries, Where stay-at-home or similar clo- These issues include short- and long- unavoidable casualties, adverse weather sure orders are in place, some or all term job shutdowns, shortages of labor conditions . . . or other causes beyond construction may be permitted to con- and materials (and the resulting effect the Contractor’s control . . . or (5) by tinue as an essential activity. These on pricing), the effect on timing because other causes that the Contractor asserts, orders vary widely from state to state of smaller crews or the inability to stack and the Architect determines, justify and even from city to city and must crews, and costs for personal protective delay then the Contract Time shall be be carefully reviewed to determine equipment and otherwise complying extended for such reasonable time as whether a project may continue. Some with work-safe orders. the Architect may determine.” The con- ordinances will permit all construction, Because the COVID-19 pandemic tractor also has the right to terminate while others will only permit construc- is a known condition and not unfore- the contract if the delay continues more tion related to essential businesses. seeable, best practice is to include a than 30 consecutive days because of a If parties are commencing a new specific coronavirus clause in the con- court order or a government-ordered project or restarting after a closure, tract. This allows the parties both to be work stoppage. AIA A-201-2007, they will need to review carefully any specific in their handling of foresee- § 14.1.1. local safe work orders, both specific able issues and to avoid any argument Note that the standard agreement to construction and more general, about whether a delay or force majeure says nothing about additional com- to determine what restrictions and clause applies. Typical issues to cover pensation arising from a delay. Many requirements may apply to the project. would include costs of demobilization contracts even include a specific “no Typical examples include social dis- and remobilization, treatment of any damages for delay clause” expressly pro- tancing requirements that limit the unexpected increase in labor or mate- viding that the contractor’s only remedy number of workers at a jobsite, restric- rial costs, costs of compliance with for a delay (typically excluding delays tions on common water coolers, mask changes in law, permitting and inspec- caused by the owner) is an extension of requirements, availability of sanitizer, tion delays, determination of whether time to complete the work. The contrac- maintenance of personnel records for the contractor will receive damages tor may be able to claim an emergency contact tracing, and provision of an for delays, determination of how to under § 10.4 of the A-201, which states onsite safety monitor. deal with an outbreak within the work Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 39 crews, and any requirements for per- services, or any other transporta- the potential COVID-19 pandemic sonal protective equipment. Costs of all tion facility, (x) any third party effects on due diligence and closing and expected expenses such as a COVID-19 act for which the Contractor is expressly address those effects in the safety monitor and personal protective not responsible, (xi) any [unfore- contract. Failing to address COVID-19 equipment should be included in the seeable] shortage in materials or pandemic effects head-on may pre- contract price. labor or [(xii) any other condition clude any argument of impossibility or The COVID-19 pandemic could also or circumstance, whether similar frustration of purpose. See Martorella v. affect financing and insurance aspects to or different from the foregoing Rapp, 2020 WL 2844693 (Mass. Land of the project. Among the issues that (it being agreed that the forego- Ct. June 1, 2020) (rejecting impossibil- the parties should consider are: the ing enumeration shall not limit ity defense where prospective buyer’s consequences of a lender or municipal or be characteristic of such con- wife contracted COVID-19 and the official being unable to inspect a site ditions or circumstances) beyond buyer was unable to secure financing and the effect on draw requests, pro- the Contractor’s control,] Contrac- but the purchase agreement contained ceeding along the construction phase, tor shall [promptly notify Owner] no financing contingency clause or delays in completion, and the effect of or [notify Owner within __ days] evidence that the agreement was con- such delays on the term of a builder’s after the commencement of such tingent upon the health of the wife, who risk policy or construction loan. delay and shall be entitled to an was not a party to the agreement). extension of the Contract Time. Due diligence may be affected in A Suggested Clause Any such notice shall be effective the following ways, among others: (i) A suggested general force majeure as of the date of the event caus- title searches and access to public title clause (as opposed to a specific COVID- ing such force majeure. [No such records may be limited; (ii) access to 19 clause) that might be used by a notice shall be required in the government offices may be limited contractor or subcontractor follows: event that a disaster or emergency or government offices may be closed, is declared by any state or local affecting open public record reviews Should Contractor be obstructed government or by the U.S. govern- and code violation reviews; (iii) site or delayed in the prosecution of ment.] An event of force majeure access may be limited, affecting the or completion of the Work for a shall be deemed to have ended at performance of surveys; and (iv) physi- time period equal to or greater such time as the event in question cal and environmental investigations than ____ days, as a result of no longer reasonably obstructs or may be affected, particularly interior [unforeseeable causes] or [causes, delays Contractor’s performance inspections because of precautionary whether or not foreseeable], beyond of the Work. [Contractor may also measures instituted by existing ten- the control of Contractor, and not submit a claim to the Architect for ants. Also, if the transaction involves a due to its fault or neglect, includ- additional costs actually incurred tenancy that will soon renew at a fair ing but not limited to (i) act(s) of for any documented increase in market rental value, how does the pur- God, (ii) war or wars, (iii) govern- the cost of labor and materials, chaser underwrite the potential fair ment regulation (including, but uninsured damage to the Work, market rental value of the premises con- not limited to, any law, rule, order, demobilization and remobiliza- sidering the COVID-19 pandemic? proclamation, regulation, ordi- tion expenses, costs due to delays Consideration also needs to be given nance, demand or requirement in permitting and approvals and to the potential effect on lender under- of any governmental agency), (iv) expenses to comply with required writing and lender due diligence, and act of terror, (v) disaster (includ- or recommended personal protec- whether a financing contingency is ing, but not limited to, hurricane, tive equipment and practices.] appropriate; whether document execu- flood, [ice storm,] tornado, tion may be affected by shelter-in-place tropical or other major storm, Purchase and Sale Agreement orders or illness of critical signatories, earthquake, or earth movement Issues including document execution, wit- or subsidence), (vi) any pandemic, As mentioned earlier, it is not usual to nessing, and notarization; whether epidemic, pestilence, plague, or include a force majeure provision in a title run-downs can be accomplished; outbreak, (vii) strike or work stop- purchase and sale agreement because and what the requirements are for gap page (excluding strike or work the parties normally address such indemnities by sellers in favor of the stoppage of the Contractor’s own circumstances in a casualty clause. title company. If your jurisdiction per- employees), (viii) civil disorder, Depending on the nature of the trans- mits remote notarization, does the riot, or disturbance of the peace, action, certain of the landlord-tenant jurisdiction in which the property is (ix) any unreasonable restric- issues discussed above may be relevant located also accept remote notarization tion of any airports or airlines, where a seller is required to deliver a and, if so, how do the requirements of buses or bus terminals, railroads property free of a current tenant. In each jurisdiction jibe? Also, what effect, or trains, taxicabs, rental car addition, the parties need to evaluate if any, should the COVID-19 pandemic Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 40 January/February 2021 have on time of essence provisions or proposed transaction due to clo- and the Closing and (2) otherwise the right of the seller or landlord to sures or reductions in staffing of amend this Agreement as may be address tenant requests for rent defer- certain governmental services and reasonably necessary to account for ral or abatement? These issues are even private businesses, as well as cer- such COVID-19 Delays[; provided more challenging if the transaction tain other restrictions (e.g., travel however, that no such extension of involves a multijurisdictional acquisi- and contact restrictions) that may the Closing shall extend beyond tion or sale. cause performance under this _____ , 20___, unless mutually Finally, if the property acquisition Agreement to be delayed for these agreed to by the parties in each such involves a joint venture, the par- reasons, which are beyond the rea- party’s sole discretion]. ties should examine the effect of the sonable control of Purchaser or COVID-19 pandemic on performance Seller, as applicable. If, during the Conclusion obligations of the partners—whether term of this Agreement, Purchaser The COVID-19 pandemic has forced us all the return waterfall may be reduced or or Seller is delayed or unable to to take a new look at our lease, construc- a limited holding period may diminsh perform due to COVID-19-related tion, and purchase and sale agreements, value and resulting returns for either or closures, travel restrictions [(other with respect to an issue that previously both of the partners. than by Purchaser or Seller)], staff- was given little attention—force majeure. ing reductions [(other than by Perhaps more than anything, the les- A Suggested Clause Purchaser or Seller)], or other son to be learned is that each clause of a A suggested COVID-19 clause is as restrictions (each a “COVID-19 document merits careful scrutiny, notwith- follows: Delay”), then such affected party standing the remoteness of the triggering shall give notice to the other party event or circumstance. As lawyers, we owe Purchaser and Seller acknowl- within two (2) Business Days of our clients the responsibility to evaluate edge and agree that the current the event, and Purchaser and all provisions of an agreement and provide COVID-19 pandemic may have Seller shall work, in good faith, to a degree of protection consistent with the an impact on the timing of the (1) extend the Inspection Period circumstances of each transaction. n

ince mid-March 2020 it seems passed the CARES Act, which included tenants in a difficult-to-navigate system every day that we have been faced a moratorium on evictions and foreclo- that offered little support before the Swith more crises than we ever sures, evictions were suspended in New pandemic and was certainly not set up thought possible. Those of us who Orleans when the judges chose to stop to provide support in the face of a pub- work in the housing justice space were hearing evictions. Louisiana’s governor lic health emergency. Just as the legal immediately concerned about what the subsequently issued a statewide evic- profession has had to adjust its prac- pandemic, and the necessary stay-at- tion moratorium. tices and adapt to some new realities, home orders, would mean for the nearly With these local, state, and national policymakers in some communities 45 million renting families living in the measures in place, tenants were some- proposed rules, ordinances, and other United States. This article discusses the what protected for a short time. The laws that might keep tenants housed. In lack of clarity around evictions because CARES Act moratorium, however, did the absence of federal legislation to stop of the state-by-state approach of land- not protect all renters. It extended only all evictions, states and local govern- lord-tenant law across the United to renters who lived at properties that ments created protections and systems States, with a particular emphasis on participated in federal subsidy pro- to protect tenants from being forced the crisis in Louisiana, and explores grams, had federally backed mortgages, into homelessness. It is important to potential solutions and ways that law- or received federal funding. See Corona- note, however, that any new policies yers can become involved in keeping virus Aid, Relief, and Economic Security passed because of the pandemic are renters housed. Act, Pub. L. No. 116-136 § 4024 (2020). layered on top of the existing landlord- Further, many judges interpreted the tenant law in any particular state. Thus, Moratoriums—Limited in Scope CARES Act as applying only to evic- any policies passed as a result of the The author leads a nonprofit fair hous- tions for nonpayment of rent, and it pandemic are only as good as the sys- ing advocacy group based in New was unclear whether tenants or month- tem they join. Orleans. In the early days of the pan- to-month leases whose leases were not demic and the resulting quarantine, renewed were protected. Though the Variations in Landlord-Tenant this group partnered with housing CARES Act moratorium ended in July, Laws attorneys at the local legal aid office to the Centers for Disease Control sub- Landlord-tenant laws vary from state to ask eviction court judges and elected sequently issued a moratorium, still state. In a 2017 article, Cleveland State officials to close eviction courts and halt temporary, that extended through University Professor Megan Hatch iden- foreclosure sales. Even before Congress December 31, 2020. Temporary Halt in tified the three types of landlord-tenant Residential Evictions to Prevent the Fur- laws found in states today. See Megan ther Spread of COVID-19, 85 Fed. Reg. E. Hatch, Statutory Protection for Renters: Cashauna M. Hill is an attorney and 55, 292 (Sept. 4, 2020). Classification of State Landlord-Ten- executive director of the Louisiana Fair Although evictions were stopped, ant Policy Approaches, Housing Policy Housing Action Center, known before 2020 Debate, 27:1, 98-119 (2017), https://bit. as the Greater New Orleans Fair Housing Louisiana’s leaders could have chosen Action Center, in New Orleans, Louisiana. to anticipate the needs of renters across ly/3i9eslf. According to Dr. Hatch, pro- istockphoto the state. Instead, they chose to leave tectionist states adopt legislation that Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 43 tenant’s security deposit. Id. § 9:3252. Both victories came about after years of sustained advocacy by community- based organizations and renters across Practitioners working with tenants often the state. must counsel clients that any habitability Impact on Tenants complaints may lead to the landlord taking So how does this play out for tenants in retaliatory action. New Orleans? The Jane Place Neighbor- hood Sustainability Initiative (JPNSI) recently released a report of the findings from the first six months of JPNSI’s eviction court monitoring program. Those findings illustrate the tie between strongly protects tenant rights, pro- housing—rather than from some form fair housing—the ability of individuals business states adopt legislation that of discrimination—must look to state to choose the housing that works best strongly favors landlords, and contra- law. In Louisiana, however, the statu- for them, without interference from dictory states have policies that benefit tory code offers no practical way for discriminatory actions and policies— both landlords and tenants. See id. at a renter to hold the renter’s landlord and landlord-tenant laws. According to THE COLOR OF LAW 99. accountable. Some Louisiana courts JPNSI, “[d]ata from the first six months A Forgotten History of According to Dr. Hatch’s research, have recognized that a retaliatory evic- of the [eviction court monitoring] proj- How Our Government protectionist states make up the small- tion might provide a defense as an ect shows that renters who are evicted Segregated America est group. See id. at 110. Twenty states “abuse of right,” but the tenant bears by court order in Orleans Parish are: take contradictory approaches, and the the burden of proving that a no-cause Wednesday, February 24, 2021 remaining 17 states take pro-business nonrenewal is retaliatory. See Capone • Predominantly Black, with Black 12-1 PM CT approaches. The pro-business states are v. Kenny, 646 So. 2d 510, 512 (La. women disproportionately mostly concentrated across the Mid- App. Ct. 4th Cir. 1994). This is next to impacted by evictions; west and in the South, and Louisiana impossible to prove unless the land- • Primarily evicted for owing one falls squarely within this camp. See id. at lord happens to put a retaliatory reason month’s rent or less; and 110-11. for a no-cause nonrenewal in writing. • Mostly appearing without an For renters in Louisiana, the pro- Indeed, as of 1994, the Capone court attorney.” business approach means the state was unable to find any cases in which lacks even a prohibition on landlords a landlord was preventing from termi- Jane Place Neighborhood Sustainability evicting tenants in retaliation for a com- nating a lease based upon the abuse of Initiative, Unequal Burden, Unequal Risk: plaint or asking for repairs. Because right doctrine. Id. That trend appears Households Headed by Black Women Louisiana law converts written leases to continue to this day, as Capone is one Experience Highest Rates of Eviction to month-to-month tenancies at the of only a handful of reported cases that Data from Six Months of JPNSI’s Evic- end of a lease term (unless the par- even mention the doctrine in relation to tion Court Monitoring Project, https://bit. ties execute a new written lease), the retaliatory evictions. ly/30e3WDl (last visited Oct. 27, 2020). majority of renters in Louisiana have Practitioners working with tenants The effect on Black women in New month-to-month tenancies. Louisiana’s often must counsel clients that any hab- Orleans is striking: In a city that is 59 landlord-tenant laws do not require itability complaints may lead to the percent Black, more than 80 percent of just cause for evictions or for nonre- landlord taking retaliatory action. Given the eviction proceedings observed by newals of month-to-month tenancies. the relative lack of laws that govern court monitors with a tenant present No-cause nonrenewals are common- landlord-tenant relations in Louisiana, were filed against Black renters, “with place and perfectly legal in Louisiana. it is not surprising that the landlord- 56.8% of eviction proceedings being Therefore, any tenant who complains tenant laws are rarely updated. Within against Black women.” Id. at 6. is vulnerable to no-cause nonrenewal the last five years, very few changes New Orleans is a community that with as little as 10 days’ notice at the have occurred. In 2015, the Louisi- struggled with affordability and hous- end of the month, per Louisiana law. ana state legislature agreed to protect ing instability well before the COVID-19 Although federal fair housing laws domestic violence survivors from fac- pandemic. More than half of New prohibit landlords from retaliating ing eviction and other negative housing Orleanians are renters, rather than against tenants who exercise their fair consequences because of an abuse inci- homeowners. Id. As is true across Amer- housing rights (42 U.S.C. § 3617), ten- dent. La. Stat. Ann. § 9:3261.1. A 2019 ica, the percentage of African-American ants who raise issues strictly related update established clear penalties for homeowners in New Orleans is much to the physical conditions of their landlords who unlawfully withhold a lower than the percentage of white Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 44 January/February 2021 The large number of south Louisi- need. The program was overwhelmed anans who work in the tourism and with more than 40,000 calls in less hospitality industries—in jobs that are than 72 hours and was shut down as a traditionally not well-paid—has led to result. Chad Calder, Louisiana Coronavi- large numbers of New Orleanians who rus Rental Assistance Program Suspended spend more for housing than the US after Being Slammed with 40,000 Applica- Department of Housing and Urban tions, nola.com, https://bit.ly/38BXVFB. Development (HUD) recommends. In Similarly, a program administered by 2018, more than one in three renters the City of New Orleans with approx- were spending more than half of their imately $1 million in funding was monthly income on housing costs. The terminated after the funding was Data Center, Who Lives In New Orleans exhausted in a few days. As of mid- and Metro Parishes Now? (Oct. 9, 2020), October 2020, Congress had failed to https://bit.ly/30l0C9k. agree on a federal rental assistance The toll that the COVID-19 pan- program. demic has taken on the economy, and specifically on the hospitality and tour- Conclusion ism industries, is well-documented. In addition to continuing to ring the THE COLOR OF LAW According to data analyzed by the Cen- alarm about the need for rental assis- A Forgotten History of ter for Planning Excellence and Urban tance, lawyers can positively affect How Our Government Footprint, up to 130,000 Louisiana fam- the fight to ensure that everyone can Segregated America ilies who lost income because of the stay housed during the pandemic. pandemic are at risk of eviction without Those who represent housing provid- Wednesday, February 24, 2021 a substantial rental assistance pro- ers should consider asking them to lend 12-1 PM CT gram in place. Joe DiStefano & Joshua their voices to the calls for rent assis- Goldstein, Is the U.S. Headed Toward an tance. Additionally, practitioners can Eviction Crisis?, Medium.com (June 23, help in the following ways: 2020), https://bit.ly/2GhEOEH. Despite the dire situation that rent- • Consider volunteering with a legal ers are forced to navigate, there are aid organization or handling evic- several options available that would tion defense cases on a pro bono turn the tide. Specifically, a large-scale basis. There may be protections rental assistance program at the federal available at the local level, and level is necessary to ensure that rent- tenants will need skilled attor- ers can cover their housing costs and neys to help them navigate the that landlords are compensated for pay- declaration process necessary ments that tenants have been unable under the Center for Disease Con- to make. Although certain states and trol’s recently announced eviction localities have implemented such pro- moratorium. grams, this scattershot approach means • Donate money to organizations that renters are subject to homelessness representing tenants in court. if they are unlucky enough to live in a • Support right-to-counsel laws. ambar.org/ community that has not made rental Data shows that tenants repre- rptebookclub assistance resources available. sented by lawyers are much less In addition, although every dollar likely to be evicted than unrep- helps, state and local rental assistance resented tenants. Having an Americans who own homes. Nearly 60 programs are not even close to meeting attorney increases the likeli- percent of African-Americans in New the need; the federal government is the hood that a tenant will keep her Orleans are renters, but about 45 per- only entity with enough resources to home or that a resolution can be cent of white New Orleanians rent meet this unprecedented challenge. In reached without an eviction judg- rather than own homes. U.S. Census Louisiana alone, up to nearly $500 mil- ment appearing on her record. See Bureau, 2018 American Community Sur- lion is needed to keep families housed. DeDecker and JPNSI at 9-12. vey, 1-Year Estimates. Id. In July 2020, Louisiana’s governor • Support legislation that ends the Generally speaking, renters in New announced a statewide rental assis- practice of considering eviction Orleans and across Louisiana earn less tance program funded with $24 million history when deciding eligibility than their homeowner counterparts. intended to help 10,000 families in for housing. n Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 45 THE COVID-19 ISSUE

he COVID-19 virus has sealed a place in American history as a disease along the lines of the Spanish Tflu of 1918 and the smallpox epidemic between The Effect 1775 and 1792, along with the annals of world history such as the bubonic plague in the Middle Ages in Europe. What is striking in this age of 21st century technology and advanced medicine is that we are still at its mercy and are adapting daily to its spread, using, in part, steps of COVID-19 and precautions that border on primitive common sense. What is unusual about this pandemic is its effect on leasing practices and payments and the snowball effect on real estate relations among tenants, landlords, and lenders and the economy generally. The pandemic has on Lease brought to the spotlight several rarely-used lease clauses and common law theories in dealing with the current issues among tenants, landlords, and their lenders. Since the beginning of 2020, when COVID-19 cases were first being identified in the United States, there has Negotiations been a disparate course of actions by the various states in shutting down, reopening, and then shutting down again

Alan M. DiSciullo is the retired director of Global Real Estate for Shearman & Sterling LLP and is an adjunct professor at New By Alan M. DiSciullo York University’s Schack Master’s in Real Estate program in New York, New York. istockphoto

Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 46 January/February 2021 as a first wave of the virus took hold in also been affected. Nonpaying tenants a common law, theory. Thus, courts the country with fears of a second wave have placed landlords with outstand- will likely reject a force majeure claim occurring. Even in states such as New ing loans on their property in jeopardy if the parties’ agreement does not con- York, New Jersey, Connecticut, Vermont, with their lenders, and foreclosures tain a force majeure clause. See, e.g., and a few others, where the virus has and bankruptcies will be a part of our Gen. Elec. Co. v. Metals Res. Grp. Ltd., 293 seemingly been brought under control environment in the coming months A.D.2d 417, 418 (N.Y. App. Div. 2002) and there has been an easing of shelter- and years. It is safe to say that once we (holding that “[t]he parties’ integrated in-place restrictions, tenants are still emerge from this crisis, commercial real agreement contained no force majeure looking for relief from their landlords, estate will have a different look than it provision, much less one specifying insurance companies, and state and had before this pandemic hit. the occurrence that defendant would bankruptcy courts. A number of issues have arisen in now have treated as a force majeure, Landlords are being stretched thin or lease relations as tenants struggling and, accordingly, there is no basis for a are at the end of their rope. Insurance to make payments are presented with force majeure defense”). Force majeure companies have been generally denying the possibility of triggering default clauses are not frequently found in claims for business interruption losses clauses in their leases. Landlords have leases, and where they are present, they on the rationale that they are not stem- been reluctant to bring default actions tend to be landlord-oriented and specif- ming from damage to property. This against otherwise good-paying tenants ically exempt payment of rent from the argument found support from at least for several reasons, including the lack of tenant obligations excused by a force one court, which confirmed that there is substitute users to step into the shoes majeure event. no coverage for COVID-19 losses when of these tenants, governmental orders There is a high bar for invoca- the insured could not demonstrate a requiring limited openings and prohib- tion of a force majeure clause. Courts direct physical loss. Rose’s 1 LLC v. Erie iting landlords from bringing default look to several elements, including: Ins. Exch., No. 2020 CA 002424B (D.C. and eviction actions, and the unusual “(1) whether the event qualifies as Super. Ct. Aug. 6, 2020), and hopefully temporary circumstances force majeure under the contract, (2) The virus, various stay-at-home under which these issues are occurring. whether the risk of nonperformance orders, and a drop in business generally As a result, tenants and landlords have was foreseeable and able to be miti- have resulted in a significant number been focusing on other means, such as gated, and (3) whether performance of bankruptcy filings, primarily in the workouts, rather than exercising what is truly impossible.” Paul Weiss, Force retail and hospitality industries. As of would be black letter contractual rem- Majeure in the Wake of Coronavirus (Mar. this writing, Brooks Brothers, Tailored edies. These alternatives are not always 3, 2020), https://bit.ly/3qoRegg; see Brands, 24 Hour Fitness, J Crew, JCPen- available or fruitful, however, so this also Shearman & Sterling, COVID-19: ney, Neiman Marcus, Hertz, Gold’s Gym, article examines the legal alternatives Force Majeure Event?, Perspectives (Mar. and several other entities have filed that the parties may navigate in dealing 12, 2020), https://bit.ly/3j50XVd (ana- petitions under chapter 11. This wave with commercial leases of properties lyzing force majeure provisions under may continue into 2021, as more com- affected by the virus. English law and PRC law). mercial retail tenants and restaurants Force majeure clauses are typically are unable to pay rent, creating a snow- Force Majeure Claims “construed narrowly and will generally ball effect of additional bankruptcy During the past year, a number of only excuse a party’s nonperformance filings from landlords, mall owners, national tenants sent out blanket if the event that caused the party’s non- property management companies, notices to their landlords stating that performance is specifically identified.” contractors, and vendors, among oth- they are not paying rent because of In re Cablevision Consumer Litig., 864 F. ers. A number of state governors have the “recent coronavirus force majeure Supp. 2d 258, 264 (E.D.N.Y. 2012). As imposed moratoriums on residential event,” or similar language. Because a result, a force majeure clause would and commercial evictions, but there force majeure is based in contract, a most likely need to define a “pandemic” could be a surge in new eviction cases tenant cannot just send out a blanket as a covered event or to have broad lan- as these moratoriums end, as well as notice without seeing whether the lease guage covering “Acts of God” or “other continuation of the thousands of cases even has a force majeure clause and, if causes beyond the control” of the par- that have already been in process but it does, reviewing it for applicability to ties who are without fault. were paused and can resume. the tenant’s circumstances. If there is a A clause specifically mentioning Since the pandemic arrived in the mandatory government order to shelter “pandemics” or “viral outbreaks” would United States, landlords have scur- in place and the tenant is not an essen- offer the best defense as a result of the ried to handle the rent payment issues tial business, that is more likely to be World Health Organization’s classifi- resulting from lost revenues from covered, as discussed below. But tenants cation of COVID-19 as a “pandemic.” space users. Retail and restaurant ten- still need to review the lease language Force majeure clauses that expressly ants have been hit especially hard, carefully. mention pandemics are rare today but istockphoto but office and medical tenants have Force majeure is a contractual, not are likely to become more common in Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 47 the future, similar to the way insur- majeure clauses permit complete ter- ance contract language evolved after mination of a contract, others excuse the September 11 terror attacks. Ter- nonperformance only for the duration rorism was very uncommon in force of the force majeure event. It is also majeure clauses before 9/11, and those notable that some force majeure clauses who were involved in the legal and lia- Force majeure clauses cover only physical damages to the bility aftermath of that disaster looked premises, so an attorney would need to more to commercial “All Risk” property look to the lease’s casualty clause rather policies, which, at that time, covered all that expressly mention than the force majeure clause for clients events except for specifically excluded suffering COVID-19-related impacts. occurrences, of which terrorism was not pandemics are rare today If the lease does not contain a force one of them. Given this hindsight, pan- majeure clause, the attorney may look demics will probably be covered a lot to see if the forum state may have an more frequently in future drafting than but are likely to become applicable state common law or stat- they are now. utory force majeure law. See, e.g., Ga. Broad language such as “acts of more common in the future. Code Ann. § 13-4-21 (“If performance God” or “other causes beyond the con- of the terms of a contract becomes trol of the party” may be interpreted to impossible as a result of an act of God, include virus outbreaks, government such impossibility shall excuse non- stay-at-home orders, closures of nonperformance, except where, by proper essential businesses, and supply and prudence, such impossibility might labor shortages. But that depends upon have been avoided by the promisor.”); how narrowly or broadly the courts see also Cal. Civ. Code § 1511. The Geor- interpret such language. In Whole Foods If a force majeure clause clearly cov- gia Code defines “Act of God” to mean Market Group, Inc. v. Wical Limited Part- ers COVID-19 as a qualifying event, “an accident produced by physical nership, 2019 U.S. Dist. LEXIS 182086 parties seeking to invoke the provision causes which are irresistible or inevi- (D.D.C. Oct. 22, 2019), the court found will need to satisfy the second and third table, such as lightning, storms, perils there was a genuine issue of material requirements by showing that they took of the sea, earthquakes, inundations, fact as to whether a rodent infesta- steps to mitigate the damage and per- sudden death, or illness. This expres- tion constituted an “act of God” under formance is truly impossible (or meets sion excludes all idea of human agency.” the force majeure clause in a grocery any other standard the force majeure Id. § 1-3-3. This definition focuses pri- store lease. On the other hand, in Kel clause clearly requires). As a result, marily on physical damage. Although it Kim Corp. v. Central Markets, Inc., 519 companies need to continue to closely does refer to “sudden death, or illness,” N.E.2d 295 (N.Y. 1987), the court found monitor COVID-19 developments and performance must be made impossi- that the triggering event (inability to their potential effect on contractual ble as a result of the Act of God, and so procure liability insurance) was not performance, and take and document it seems difficult to apply the statute to specifically listed in the contractual all reasonable steps to mitigate, where the pandemic unless the party trying provision and did not fall within the possible, their effect on business oper- to be excused actually has contracted catchall “or other similar causes beyond ations. These mitigation steps may the virus. An argument might be made the control of such party.” include requiring a supplier to use that closure as a result of a government Another possibility is a force alternative manufacturing lines in a dif- order issued because of the pandemic majeure clause that excuses nonper- ferent location or maximizing online could qualify, though that seems to be formance when government orders or sales for a retailer that can be attribut- a stretch. regulations make performance impos- able to the premises or pickup service sible, such as the clause in In re Hitz for a restaurant. Common Law Remedies Restaurant Group, 616 B.R. 374 (Bankr. The parties also need to examine the There are several common law reme- N.D. Ill. June 3, 2020) discussed below. specific language of the force majeure dies that have been argued along with This type of clause might be triggered clause to determine if there are limits the contractual theory of force majeure. by the expansive governmental restric- on the tenant’s remedies or if the clause These common law remedies include tions on travel, movement, and large has procedural requirements, such as a frustration of purpose, impractica- gatherings that have resulted in sig- duty to notify the other party of a force bility, impossibility, and, rarely, quiet nificant business interruptions and majeure event. As indicated above, it enjoyment. As presented in a webi- widespread event and travel cancel- is not uncommon for force majeure nar from the American College of Real lations, particularly in the tourism, clauses in leases to require the tenant Estate Lawyers, these remedies may be events, restaurant, airline, venue rental, to continue to pay rent despite a force pleaded separately or together and in and sports and entertainment sectors. majeure event. And while some force conjunction with force majeure if the Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 48 January/February 2021 lease language in the force majeure (1) an unexpected intervening event interference with the tenant’s use and clause does not limit remedies to the occurred, (2) the parties’ agreement enjoyment of the property. This breach contract and preclude the common assumed such an event would not typically occurs when the landlord law remedies. G. Bernhardt, J. Fersko occur, and (3) the unexpected event lacks legal title to transfer possession & S. Green, The Impacts of the Corona- made contractual performance impos- of a property (such as when the land- virus Pandemic on Real Estate Contracts: sible or impracticable. See Island Dev. lord has leased property to a new tenant Frustration of Purpose, Impossibility, Corp. v. District of Columbia, 993 A.2d before a prior lease has ended) or has Impracticability and Force Majeure, Am. 340, 350 (D.C. Ct. App. 2007). When it interfered with the tenant’s possessory Coll. of Real Estate Law. Webinar (July is applied, impossibility must have an right (e.g., improperly evicted a tenant). 9, 2020). objective impossibility, namely destruc- The theory does not apply when events tion of the property—such as in 2001 are beyond the landlord’s control. Frustration of Purpose when the World Trade Center in New Under this standard, courts are One common alternative in the absence York was destroyed—death of a party, unlikely to find a breach of the cov- of a force majeure clause is the doctrine governmental action, or natural causes enant simply because a tenant is of frustration of purpose. This principle beyond the control of the parties. prevented from using leased prem- focuses on whether the event at issue Impracticability, by comparison, may ises as a result of circumstances or has obviated the purpose of the con- occur when performance is excessively government directives outside of the tract, rather than whether it has made a burdensome and not caused by one of landlord’s control. “However, to the party’s contractual performance unvi- the parties. extent a landlord acts gratuitously to able. The prima facie case requires that A party’s nonperformance will exclude a tenant from property where (1) an event substantially frustrating a not be excused under these princi- it was not otherwise required to do so, party’s principal purpose, (2) the non- ples, however, if the event preventing using COVID-19 or government orders occurrence of the event was a basic performance was expected or was a as a mere excuse, tenants may be able assumption of the contract, and (3) the foreseeable risk at the time of the con- to argue a breach of the covenant.” Marc event was not the fault of the party tract’s execution. Thus much of the J. Gurell, Eddie Salcedo, Owen R. Wolfe, asserting the defense. See Restatement litigation spawned by COVID-19 will Applicability of the Covenant of Quiet (Second) of Contracts § 265. focus on whether the disruption caused Enjoyment to the COVID-19 Pandemic, The overarching question is whether by this pandemic was foreseeable. Seyfarth (Mar. 30, 2020), available at the unforeseeable event significantly Moreover, even if the event was unfore- https://bit.ly/3g548eH. altered the circumstances of the agree- seeable, courts may still assess whether ment such that performance would the “nonoccurrence” of the event at Implied Warranty of Habitability no longer fulfill any aspect of its origi- issue was a “basic assumption on which or Fitness nal purpose. There are two primary the contract was made.” See Restatement Other possible lease remedies that have obstacles to successfully invoking this (Second) of Contracts § 261 (Am. Law been discussed in connection with the defense. First, the courts must inter- Inst. 1981) (addressing the impracti- pandemic are the implied warranties of pret a party’s “purpose” broadly, and cability of performance). Mere market habitability or suitability for a particu- the mere fact that an event has pre- shifts or financial inability to perform lar purpose. These warranties generally vented a party from taking advantage of generally do not meet this test. “[S]itu- relate to the physical condition and the agreement in an expected manner ations of extreme impracticability of repair of the premises, however, and may be insufficient. Second, frustration performance may properly be regarded typically are focused on latent defects. must be nearly total. It is not enough as having the same effect as strict In N.Y. Majestic Hotel Co. v. Eyre, 65 N.Y. that a transaction was previously impossibility of performance, and per- Supp. 745, 746 (N.Y. App. Div. 1900), for expected to be profitable but is now formance is considered impossible in example, a tenant was unsuccessful in unprofitable. the legal sense when . . . it can only be canceling his residential lease in a scar- done at an excessive and unreasonable let fever outbreak because the implied Impossibility or Impracticability cost, for which the parties had not bar- warranty of habitability required a As implied by the name, the doctrine gained.” 17A Am. Jur. 2d Contracts § 643 physical defect in the premises. of impossibility arose to excuse perfor- (2020). With commercial tenancies, the mance when it is made impossible as standards for breach of the implied war- the result of an intervening occurrence Quiet Enjoyment ranty are stricter than they would be not caused by the parties. Over time, The implied covenant of quiet enjoy- with residential leases, and the defec- this was softened by some courts to ment may give rise to a defensible tive condition must have existed at the require only that performance become theory in certain unusual circum- time the lease is signed. In Davidow v. impractical, not impossible. stances. It may have strictly limited Inwood North Professional Group, 747 These doctrines excuse nonperfor- application, however, because breach S.W.2d 373, 377 (Tex. 1988), stated mance when a party establishes that of the covenant requires landlord that the implied warranty of fitness Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 49 majeure clause. Initially, the court held that the lease’s force majeure clause did not excuse payment of March rent because the order was enacted on March 16 and March rent was due on the March 1. Next, the court considered the application of the force majeure clause on rent for April, May, and June. The court found that Governor Pritz- ker’s order created a force majeure event under the lease and excused the tenant from having to pay 75 percent of its rent. The court rejected the landlord’s argument that the debtor’s inability to pay rent resulted from a “lack of money.” Thus, the last sentence of the clause quoted above was inap- for a particular purpose “means that at on or before the first of each month, the plicable. However, the court noted that the inception of the lease there are no court deemed February rent as pre-peti- Hitz conceded that 25% of the restau- latent defects in the facilities that are tion and March and subsequent months rant’s square footage (consisting of vital to the use of the premises for their post-petition. As the court noted, the the kitchen) could have been used for intended commercial purpose and that Bankruptcy Code “would ordinarily carry-out, curbside pickup, and delivery these essential facilities will remain in a require full payment of the March 2020 purposes. Thus, the court required that suitable condition.” rent and all rental payments falling due Hitz pay 25 percent of its rent, common thereafter.” Id. at 376. The lease con- area maintenance (CAM), and property Guidance from Bankruptcy Courts tains the following force majeure clause, taxes for April, May, and June. Recent decisions from bankruptcy however, which was different from a Bankruptcy courts appear to be more courts in Illinois and Kansas provide a typical clause in its last sentence (“Lack lenient than law courts in agreeing to way to navigate through these issues. A of money shall not be grounds for Force debtors’ arguments for assistance in case that received considerable atten- Majeure”): relief from COVID-19 economic hard- tion was In re Hitz Restaurant Group, ship. While many landlords have been 616 B.R. 374 (Bankr. N.D. Ill. June 3, Landlord and Tenant shall each willing and able to offer tenants rent 2020), in which the bankruptcy court be excused from performing its deferral and even abatement, most partially excused the restaurant ten- obligations or undertakings pro- concessions were limited to 90 days. ant’s (Debtor) obligation to pay full rent vided in this Lease, in the event, Landlords are in similar straits with while Illinois Executive Order 2020-7 but only so long as the perfor- their lenders for only a limited period restricted the Debtor’s ability to fully mance of any of its obligations are before the lender takes action to realize operate due to the virus. See, e.g., Joshua prevented or delayed, retarded or upon its collateral. Moreover, stays on Stein, Pandemic Closure Means an Illi- hindered by . . . laws, governmen- eviction proceedings have been expir- nois Restaurant Doesn’t Have to Pay Full tal action or inaction, [or] orders ing in mid- and late-2020. Rent, Court Says, Forbes (June 18, 2020), of government. . . . Lack of money In the Kansas case, a group of debtor https://bit.ly/2G6Afgm. shall not be grounds for Force restaurants operating in the Kansas The Hitz case might give other busi- Majeure.” City area filed chapter 11 in November nesses a roadmap for similar relief in 2019. See In re Bread & Butter Concepts, the same or similar circumstances out- Under an executive order effec- LLC, Case No. 19-22400 (DLS) [Docket side of bankruptcy. Hitz Restaurant tive on March 16, 2020, by Governor J. No. 219] (Bankr. D. Kan. May 16, 2019). Group operates a restaurant in Chi- B. Pritzker, restaurants were required According to the court, “[b]efore the cago and on February 24, 2020, filed a to halt service for on-premises con- coronavirus pandemic struck, Debt- small business chapter 11 after receiv- sumption. But the order allowed and ors [had] demonstrated potential for a ing a five-day lease termination notice. encouraged restaurants to serve food successful reorganization.” On March Shortly after filing, the restaurant’s and beverages via delivery, take-out, 17, 2020, however, the debtors and all landlord brought motions to (i) com- and curbside pickup so that they may other area restaurants were ordered to pel payment of post-petition rent under be consumed off-premises. cease operations. Roughly one month Bankruptcy Code § 365(d)(3) and (ii) The Hitz court analyzed whether later, the debtors filed an emergency modify the automatic stay under the governor’s order (like that in many motion to suspend certain Bankruptcy § 362(d)(1). As rent payments were due other localities) triggered the force Code requirements, including, without Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 50 January/February 2021 limitation, the need to (1) pay post-peti- physical damage to the building or tion rent to landlords and (2) assume space.’” Id. at 4. The answer asserts that or reject unexpired leases prior to a The Hitz and Bread & “Mr. Stein also confirms that COVID- May 5 deadline. The debtors’ landlords 19 is the kind of event from which the objected. Abatement Provisions were designed The bankruptcy court stated that Butter Concepts decisions to protect Jenner & Block.” Id. As of this “no reasonable alternative” exists and writing, the case is still pending but can the relief sought offers “a short-term have opened the door provide a better guide to interpreting allocation of those scarce resources to a force majeure clause in a pure leas- meet immediate needs and preserve the ing situation than In re Hitz and other value of the Debtors’ estates for all cred- for tenant-friendly court cases that have been recently decided itor constituencies.” Moreover, the court by bankruptcy courts. specifically cited to its equitable pow- opinions and should be In the second case involving a law ers in overriding the black letter of the firm, Simpson Thacher Bartlett (Simp- Code: son) alleged that it had to vacate its closely considered when premises on March 22, 2020, at 425 These unprecedented cir- Lexington Avenue in New York City cumstances require flexible engaging in lease-related under governmental orders and, application of the Bankruptcy because of Governor Cuomo’s phased Code and exercise of the Court’s reopening approach, it has not been equitable powers under 11 U.S.C. negotiations. able to “continue the reasonable opera- § 105 to grant further relief, tion of its business.” See Complaint at including extension of time to 7, Simpson Thacher Bartlett LLP, supra, assume or reject the Debtors’ available at https://bit.ly/32FOh0R. nonresidential leases, notwith- Thacher Bartlett LLP v. VBGO 425 Lex- Simpson’s lease gives it a right to rent standing the absence of written ington LLC, No. 653415/2020 (N.Y. abatement when the premises are consent of the lessors under 11 App. Div., filed July 27, 2020). Jenner & not usable for 60 consecutive days U.S.C. § 365(d)(4)(B)(ii). Section Block (Jenner) stopped paying rent as because of a force majeure that “has 105(a) is understood as providing of March 16, 2020, when it found that not been caused by Tenant’s negligence courts with discretion to accom- it could not use 89 percent of its prem- or improper acts.” Id. at 6. Simpson’s modate the unique facts of a case ises because of the virus. The landlord, lease includes “governmental preemp- consistent with the policies or successor in interest to the original tion of priorities or other controls in directives set by the other applica- landlord, 351 Mortgage Borrowers, LLC connection with a national or other ble substantive provisions of the (351 Mortgage), which negotiated the public emergency . . . or any other Bankruptcy Code. original lease with Jenner, sued the law cause, whether similar or dissimilar, firm for alleged past due rent. beyond Landlord or Tenant’s reason- Essentially, the bankruptcy court Jenner’s response is interest- able control” as a triggering event for a exercised its equitable power to over- ing in that its answer claims that its force majeure event. Id. Simpson had ride the landlords’ statutory right to rent abatement provision allowed submitted its rent payments under payment of post-petition rent in favor it to abate rent for “any event (Force protest while demanding that the land- of maintaining (1) the debtors’ per- Majeure or other),” which would cover lord acknowledge its right to a full rent ceived going-concern value and (2) all events, including the current pan- abatement under the lease. Its landlord prospects for recovery to all creditors, demic. See Answer, Hart 353 North denied the requests, resulting in Simp- even though this case had been filed Clark LLC, supra, available at https://bit. son’s lawsuit. more than four months before entry ly/3nvcBdV. Jenner’s answer includes of the shelter-in-place orders. As such, an exhibit from Richard Stein, the chief Insurance Protection the Hitz and Bread & Butter Concepts negotiator for 351 Mortgage, showing Companies expecting potential busi- decisions have opened the door for ten- that Jenner “expressly negotiated for ness interruption should review ant-friendly court opinions and should rent reduction as a result of ‘any event’ potentially applicable insurance poli- be closely considered when engaging in that ‘caused Jenner to reasonably deter- cies and provisions, including business lease-related negotiations. mine that it could not use and occupy interruption and contingent business Two other cases worth following, a material amount of its space as it interruption insurance. Business inter- involving large prestigious law firms, intended in the normal course of busi- ruption insurance is intended to cover are Hart 353 North Clark LLC v. Jenner ness, regardless of whether that event losses resulting from direct interrup- & Block LLP, No. 2020L005476 (Ill. Cir. was the Landlord’s responsibility and tions to a business’s operations and Ct., filed May 20, 2020), and Simpson regardless of whether that event caused generally covers lost revenue, fixed Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 51 expenses such as rent and utilities, or foreclosure, among other things, for a expenses from operating from a tem- 60-day period from March 18, 2020. porary location. Similarly, contingent Under section 4023, borrowers with business interruption insurance is a federally backed multifamily mort- intended to cover lost profits and costs gage loan may request a forbearance for that indirectly result from disruptions Insurers have largely up to 30 days, with two 30-day exten- in a company’s supply chain, includ- sions. A tenant renting a dwelling unit ing failures of suppliers or downstream taken the position that within such property cannot be evicted customers. for nonpayment of rent or charged with Although these policies frequently late fees, penalties, or other charges dur- require physical property damage, busi- communicable diseases not ing the forbearance. nesses have been submitting claims for Section 4024 provides eviction coverage of losses due to business inter- expressly defined in protection for residential tenants occu- ruptions resulting from COVID-19. See, pying a covered property, which is e.g., Cordish Co., Inc. v. Affiliated FM Ins. defined as any property that partici- Co., Case No. 2N-1-20-002952 at 9 (Balt. the policy at issue pates in a covered housing program as City, Md., Cir. Ct., filed July 9, 2020) defined in section 41411(a) of the Vio- (alleging that the effects of COVID-19 are not covered. lence Against Women Act or the rural constitute “physical loss or damage to housing voucher program under sec- the property” because the virus “renders tion 542 of the Housing Act of 1949 or the property dangerous and potentially has a federally backed mortgage loan fatal”), at https://bit.ly/33F0Ols.The via- or a federally backed multifamily mort- bility of these claims depends on the gage loan. During the moratorium terms of the insurance policy at issue, Foreclosure and Eviction period, landlords cannot charge fees, but the historical trend, based on prior Moratoriums penalties, or other charges for nonpay- viral epidemics, has been against cover- The current situation has had a snow- ment of rent, and, after the moratorium age for business interruptions related to ball effect with tenants unable to period expires, the landlord cannot a pandemic like COVID-19. operate and thus pay rent resulting evict a tenant without at least 30 days’ In the wake of the SARS outbreak of from government actions because of the notice. This does not affect eviction pro- 2002–2003, many insurers excluded pandemic and with property owners ceedings already filed. viral or bacterial outbreaks from and borrowers unable to make sched- standard and contingent business inter- uled mortgage payments. See Daniel Conclusion ruption policies. Insurers have largely Q. Orvin, Foreclosure and Eviction Mora- As the world anxiously waits for a vac- taken the position that communicable toriums Under the CARES Act, Womble cine to help end this pandemic, those diseases not expressly defined in the Bond Dickinson (Apr. 20, 2020), in the commercial real estate industry policy at issue are not covered, although https://bit.ly/335hP8O. The Coronavi- are faced with a unique set of cases with there may be some coverage in an envi- rus Aid, Relief and Economic Security rarely-used theories to try to resolve ronmental claim for cleanup of the Act (CARES Act), enacted March 27, the issues in these cases. We hope building to allow tenants to safely enter 2020, attempts to mitigate these prob- that science will have been able to dis- and use their premises. Some insurance lems through moratorium provisions cover a remedy to kill off this deadly policies already specifically disallow that permit borrowers and tenants to virus while we wrestle with the issues coverage for events such as COVID-19. remain in their dwellings without fac- in interpreting these leases for insight The endorsement “Exclusion of Loss ing the immediate threat of foreclosure into how to address rent defaults and Due to Virus or Bacterium, CP 01 40 and eviction. the rolling effect of nonpayment on ten- 07 06,” specifically excludes coverage Section 4022 of the CARES Act pro- ant-businesses, landlords as borrowers, for loss due to “any virus, bacterium or vides a moratorium on residential lenders, and the economy in general. other microorganism that induces or is foreclosures for borrowers with feder- These cases will establish precedent for capable of inducing physical distress, ally backed mortgage loans. Borrowers future judges and case studies for future illness, or disease.” The endorsement who affirm they are experiencing law students. The important issue now applies to property damage to build- COVID-19-related hardship can request is controlling this virus to reduce and ings or personal property and covers forbearance from their loan service of eliminate the illness and deaths it is business interruption, extra expenses, up to 180 days, which can be extended causing us, an issue that, unfortunately, or civil authority actions, although it for up to another 180-day period. does not get ample examination in a excludes loss or damage due to fungus Except for vacant or abandoned prop- judicial matter or classroom analysis. n or wet or dry rot. erty, service providers cannot initiate a

hen the COVID-19 pandemic forced real estate and RPTE Advocates for trust and estate attorneys to work remotely from Whome and many authorities advised sheltering at home for the elderly and others with health issues, the stan- Remote Ink Notarization dard practice of face-to-face meetings and ink signatures before an in-person notary public became at best difficult and and Remote Witnessing in many cases impossible. The protection of clients, attorneys, and staff members from COVID-19 became the focus of the legal industry while it still tried to meet the legal needs of cli- During the Pandemic ents to execute enforceable estate and health planning and real estate documents.

Jo-Ann Marzullo is an attorney at Ligris in Boston, Massachusetts, immediate past chair of the Section, advisor to the Section’s Planning By Jo-Ann Marzullo Committee, and Section representative to the ABA Coronavirus (COVID-19) Task Force. istockphoto

ith a sense of balance that a balle- rina would envy, the American Bar WAssociation’s Task Force on Legal Needs Arising Out of the 2020 Pandemic (the Pandemic Task Force), the King County (WA) Bar Association, and the RPTE Section were instrumental in the rapid crafting of an ABA resolution urging protections for affordable housing. The House of Delegates overwhelm- ingly passed ABA Resolution 10H at the ABA Annual Meeting in early August 2020. ABA, Resolution 10H, available at https://bit. ly/37RMGs7. Before the ABA can advocate for legislation, there must be ABA policy in place. The ABA adopts policies by resolution passed by the ABA House of Delegates, the ABA’s only policy-making body; that ABA body meets at the ABA Annual and Midyear Meetings. istockphoto

ABA RESOLUTION 10H Placating Landlords, Protecting Tenants By Jo-Ann Marzullo, Orlando Lucero, and Jo Ann Engelhardt

have instituted a patchwork of relief istockphoto Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 58 January/February 2021 programs that do not address the public instability due to pandemic cir- need to support renters hit hard by the cumstances outside their control. pandemic. When renters might wish to These interventions will also challenge an eviction, and their juris- help to address increased racial diction provides that protection, there With many courts disparity in eviction during the may be no venue open and operational closed and pivoting to COVID-19 pandemic. in which to bring a defense. With many courts closed and pivoting to electronic electronic proceedings, Id. at 14. proceedings, low-income tenants with- low-income tenants out reliable Internet access may be Effect of Resolution 10H denied any access to justice. without reliable Internet It is difficult to quantify the effect of the To provide insight into the scope access may be denied resolution. Shortly after its adoption, of the eviction crisis, the investment however, a rash of articles and news firm Stout Risius Ross has compiled any access to justice. stories appeared that advocated the resources that highlight the extent of approach it suggests, and several states the crisis, the costs of eviction, and such as Maryland, Massachusetts, and legal resources to tenants facing evic- Texas implemented rent payment relief tion. Eviction Right to Counsel, https:// programs. The National Low Income bit.ly/3mA110p. As of July 29, 2020, Housing Coalition has assembled a it estimates, based on Census Bureau can even result in exclusion from fed- spreadsheet of rent relief programs in data, that there are approximately erally assisted housing. Id. Some states, response to COVID-19. See https:/docs. 17,330,000 households unable to pay like New York, have banned the practice google.com/spreadsheets/d/1hLfybfo9 rent and at risk of eviction, which of refusing to rent to someone based on NydIptQu5wghUpKXecimh3gaoqT7LU- equates to 42.56 percent of total renter his or her rental or eviction history, but 1JGc8/edit#gid=79194074. households. It estimates there could many states have not taken that step by be as many as 11,697,000 potential legislative action. Conclusion eviction filings over the following four The Resolution 10H report con- The Section and the ABA are indebted months. cludes with a powerful summary of the to the work of immediate-past Section A number of states have taken steps benefits the drafters expect from the Chair Jo-Ann Marzullo, on the Pan- to seal eviction records universally or adoption of the resolution and the sup- demic Task Force, in marshalling the under certain circumstances to pre- portive ABA lobbying work that can support of both divisions of the RPTE vent a landlord from considering the take place once a resolution has been Section to co-sponsor the resolution. tenant’s prior rental history. Resolu- adopted by the ABA House of Delegates. The resolution, as passed, reflects a rea- tion 10H Report, at 12-13. In other It states: sonably balanced approach that seeks jurisdictions, new legislation bars to address the various competing inter- landlords from considering a tenant’s This resolution, if adopted, will ests among tenants, landlords, lenders, rental or credit history after a certain help prevent eviction and its col- and mortgage investors. It shows what time period. Id. at 13. The Report doc- lateral negative outcomes during can be accomplished, even in a very uments the many detrimental effects the COVID-19 state of emer- short period of time, when people are that eviction causes, including such gency and preserve affordable willing to listen to each other and work obvious issues as disruption of employ- housing at a time of extraordi- with each other in a cooperative way to ment and education and several health nary risk to tenants and small address a shared goal. n and social issues including a negative property owners. In addition impact on long-term health, depres- to stabilizing renters and rental sion, and increased mortality. Id. at 5. property owners, public funds for These long-term effects are felt most rent will support credit unions, keenly by children, who may suffer community banks, and local residual health and social impediments governments, who rely on prop- for many years after the event. The erty tax for revenue and school Report states: “Eviction is a legal record budgets. Precluding the use of that permanently scars a tenant’s rental nonpayment of rent and evic- history, plummets credit scores, and tion records to screen tenants for prevents families from relocating to safe housing will mitigate long-term Id istockphoto and healthy housing.” . at 7. Evictions hardship for renters who suffered Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 59 TECHNOLOGY PROPERTY

“The Room Where It Happens” Guidelines for Working from Home

On March 10, 2020, New York Governor over the dining room or kitchen table Andrew Cuomo mandated a one-mile Technology—Property and claim it as your office, but don’t do containment zone in the City of New provides information on current it! Find a quiet part of the house that Rochelle, then the epicenter of the first technology and microcomputer is in a low traffic area. You will need a major coronavirus outbreak in the software of interest in the real place where you can work for long peri- United States. The containment zone property area. The editors of ods uninterrupted. Phone calls need to was 32 miles from my home. Probate & Property welcome be quiet. Video conferences need to be In short order, my ability to travel information and suggestions free of distracting movements in the safely to visit clients at their offices in from readers. background. Work in a room with a New York City and elsewhere ended. door that can be locked. Set boundaries I was left to work in my home office, with your roommates or family. If they a large windowed room, just off the law firm’s resources from home, lawyers need to reach you during office hours, kitchen. Soon, I was joined by millions can be more productive in the evenings they can send you a text or IM. Make it of lawyers and other office workers. As (after dinner), in the early mornings, clear—you are working, not hanging out of publication, likely many of you are and on the weekends. In the long term, at home. still working predominantly from your law offices can save money by reduc- If you don’t have a desk, purchase home office; it is the “room where it ing the square footage of office space a table where you can spread out and happens.” allocated to each attorney and staff work. I highly recommend getting a In a paradigm shift, lawyers who member. Even more, valued employ- quality docking station for your laptop were already going mobile before the ees who are forced to move because of equipped with an ethernet and HDMI pandemic are now required to do the family commitments can be retained port, audio ports, and multiple USB majority of their work from remote as employees by simply allowing them ports. If your desk is anywhere near locations. Lawyers working from home to resume work from their new loca- your wireless router, you should run an are expected to collaborate with their tion without the cost of a new office. ethernet cable directly from the router colleagues securely and professionally. New employees can be recruited from to your docking station. Otherwise, We have all been forced to adjust to the distant locations without incurring invest in a Wi-Fi router that connects new normal. Even with the end of for- expensive moving fees and benefits. to several access points around the mal lockdowns, the work-from-home This article is a summary of lessons house. Google Nest and Ubiquiti UniFi option will be preferred by many. In an learned from my nine months in lock- have joined the home market long August 6, 2020 article, Vox.com indi- down. What follows is a curated guide dominated by LinkSys, NetGear, and cated that Facebook had extended its for lawyers on working effectively from TP-Link. work-from-home policy until July 2021. a home office while maintaining a pro- Connect all your peripherals to the This is not necessarily a bad thing. In fessional connection with your clients docking station, including a large LCD its May 20, 2020 issue, Forbes Magazine and effectively collaborating with col- monitor, USB adapters for a wireless reported on a survey that showed a 47 leagues. Much of what I will discuss—to keyboard and mouse, a noise-canceling percent increase in worker productivity. steal a phrase from the musical Hamil- headset, a high-definition camera, and With a shorter commute time, work- ton—concerns knowing what happens a cellphone charging stand. Invest in a ers can spend more of their day doing “in the room where it happens”: how to comfortable ergonomic office chair. The actual work. With quick access to all the set up your room, choose your camera chair will look good on camera (and and microphone, select your meet- your back will thank you). If your home Technology-Property Editor: Seth Rowland ing software, and choose a platform for office budget allows, I would also get (www.linkedin.com/in/sethrowland) sharing documents. some high-quality computer speakers, has been building document workflow a speakerphone, and a standup micro- automation solutions since 1996 and is an Setting Up Your Space phone. Sometimes you may want to sit associate member of 3545 Consulting® (3545consulting.com). You must have a dedicated permanent back to view a video presentation and office space. It may be tempting to take hear the full sound on your Logitech Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 60 January/February 2021 TECHNOLOGY PROPERTY speakers. Other times, you may want Products like 3CX (www.3cx.com), Nex- streaming your nostril hairs in jittery to include multiple people in a con- tiva (www.nextiva.com), 8x8 (www.8x8. low resolution. Also, if you have the ference call as you relax on the family com), and Ring Central (www. laptop in a docking station (see recom- couch. The Jabra Speak 410 Personal ringcentral) offer business-quality PBX mendation above), the camera will be USB Speakerphone is a good value. If phone services that run completely running a perpetual profile view of your you want your voice to resonate like a over the internet. The caller ID is your face and it will look like you are talking podcaster, you might look at a line of business line. You get the same quality to some stranger off-camera. semi-professional microphones from phone experience wherever you have a My recommendation is to buy an Blue (bluemic.com) like the Yeti or the decent internet connection. Using the HD webcam. I use the Logitech C922 Snowball Ice. 8x8.com service, I spent a month in Pro. For a little more, you can get Ultra Did I mention getting fiber? By that, Paris, France, and a month in Tel Aviv, HD or 4K streaming video quality. The I mean, get a fiber-based internet con- Israel. My clients never knew I was out higher quality cameras include soft- nection. Verizon, AT&T, Xfinity, and of the country, and I never had to pay ware-based features such as “follow my Google Fiber have gigabit-speed inter- international rates for cellphone calls. face” which will keep your face cen- net. The cable companies may promise The VOIP applications work on any tered on the video even if you move, a gigabit connection, but that promise computer. They can be included as apps auto-focus, and auto-blur, as well as the is often limited to download speed. If on your cellphone. You will want to get ability to zoom in and out and adjust you are going to be streaming multiple a wireless headset that has a good rat- for changes in the light. Then, add a video conferences from home, you need ing for noise cancellation. I am partial screen-cover for your laptop’s web- a high-speed connection on the upload. to the Plantronics W02 headset. The cam. Those cameras are a security risk Otherwise, while your children are powered W02 base-station includes the that can be hacked to spy on you. See attending their Zoom classes, you will ability to switch from computer to cell- https://bit.ly/3kfdOUk. see a notable degradation in the quality phone to a landline with the click of a Camera placement in your work- of your video conference as you com- button, and it includes a spare recharge- space is just as important as video pete for limited bandwidth. able battery. You can use AirPods, but quality. External cameras can be I find that they constantly disconnect mounted on the top-center of your LCD Cellphone or VOIP Application from the computer and connect to monitor or placed on a small tripod. with Headset the nearest cellphone. One more con- You want the camera lens to be just When the coronavirus pandemic first sideration, if you have a noisy work above eye-level to best enhance your emptied the law offices of New York, environment, is a new artificial intel- features. Place the camera in the center most lawyers were sent home with ligence-powered service called Krisp of your line of vision. If you are going to their business lines forwarded to their (www.krisp.ai), which promises extreme be looking at something on your com- cellphones. This was a bad idea for noise cancellation. It can identify your puter screen, place the camera so that many reasons. First, cellphone batter- voice and the voice of the user at the when you look at that screen, you are ies were not designed for continuous other end of the call and block out all looking almost directly at the lens of the use throughout the day. Second, cell- other sounds. camera. If you have ever visited a telephone reception in residential areas is vision news studio, you will learn that poor and spotty. Third, cellphone audio The Home-Based Recording the teleprompters scroll the text for the quality is generally poor, compared Studio reporter right in front of the lens of the to a landline or direct VOIP connec- When I first started practicing law back camera so that anchors always look as if tion. Fourth, the shape of a cellphone, in the 1990s, law firms would spend they are talking to you directly. unless you use AirPods or a headset is upwards of $50,000 to set up a special Be aware of the background behind not conducive to work at a desk. Fifth, conference room with cameras, televi- you that is visible from your camera. cellphone software is not configured to sion screens, and duplex phone systems A messy room with rumpled bed- make it easy to make conference calls to “meet” with clients and colleagues in sheets gives the impression that you or put someone on hold while you pick other cities. A staff of AV specialists was don’t take your work seriously. Set the up a second line. Finally, the cellphones employed to manage these conferences. stage. The best approach is to find a are personal with cutesy messages and In our new paradigm, we are expected place where the background is unclut- a caller-ID that does not indicate where to bring the same capabilities to our tered by objects or people. If that is not you work. home office. possible, as is often the case, there are The solution is a VOIP phone (Voice Most laptops come with a built-in some software solutions built into the Over Internet Protocol). The VOIP camera. However, many of the angles video conferencing platforms. Google phone can be a physical device, like caught by the laptop cameras are less Hangouts offers a blur-the-background a Polycom phone that is connected than flattering. One laptop manu- feature. Zoom offers the option to put to your router, or it can be a software facturer built their webcam into the a JPG picture as your background. application that runs on your computer. keyboard, providing a perfect angle for It is tempting to put a picture of your Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. January/February 2021 61 favorite scene from Fear The Walk- the speaker outputs, and the choice of the staff from allowing their family ing Dead (pandemic humor), but this camera. members to use these computers. The may be perceived as unprofessional. Popular video conferencing plat- firm would have tools to remotely mon- Unfortunately, the technology is poorly forms include Zoom (www.zoom. itor and support these computers, just implemented on Zoom and often us), Zoho (https://www.zoho.com/ as they would inside the office. Also, or causes you to appear to fade in and out meeting/), GoToMeeting (www. in the alternative, the law firm could of the background. Consider getting a gotomeeting.com), Webex Meeting set up secure remote access to the law retractable screen to go behind your (www.webex.com), and Join.me (www. firm’s central file system. A secure tun- chair. You can get one with a pretty join.me). You don’t want to ignore the nel via a virtual private network (VPN) background or one that is green-screen options that come with your cellphone when combined with high-speed inter- compatible. There are several vendors including Apple Inc.’s FaceTime, Face- net access, can allow a remote user to of custom retractable banners, includ- book’s Messenger, Microsoft Skype, access files almost as if the user were in ing Anyvoo (www.anyvoo.com) and which has now been rolled in Micro- the office. Vistaprint (www.vistaprint.com). If you soft Teams, or Google Hangouts. If you A more secure option, but one that choose the green-screen option, experi- are hosting the meeting, you will have requires more infrastructure, is to set ment with lighting placement and the to make a choice. More often, you will up a terminal server or individual vir- appropriate green-screen software. receive an invitation via email, with a tual machines that the remote user Do all this work and set up in link to join the meeting. Be prepared to can access. This technology presents a advance. Click the link in the web meet- present yourself professionally on all of computer desktop that can be identi- ing invite that lets you practice with the above platforms. cal to the desktop used by a lawyer in the meeting software in advance of the the office. Additional overhead may meeting. Check the lighting, the back- Turn Off the Camera When You be required to configure printers and drop, the level of zoom on the camera, Need to Work peripheral devices. The advantage of the camera placement, and most impor- I spend, on average, four hours a day in this last approach is that nothing is tantly the audio quality (more on that meetings. I use the meeting to review transferred to the home-based laptop or below). Learn how to turn off the cam- written materials with my colleagues, computer. One disadvantage of working era and mute the audio; you may have discuss strategy for client meetings, with a remote virtual machine is that it to take a break sometime during these negotiate terms of deals, and market can suffer from lagging performance if long meetings. Be sure to turn off your my skills. Just as in a face-to-face meet- the size of the internet pipe to and from video and mute your microphone ing, the real focus is on the work being the office is not big enough to handle before you do anything that could be done. I always start the meeting with the demand. viewed as inappropriate or unprofes- my camera on so that I can show who I An alternative is to secure the docu- sional. Google “Jeffrey Toobin” and am to the others on the call and so that ments and the confidential emails in “Zoom” for a cautionary tale. I can see who I am talking to so I may such a way that the documents can be gauge their reactions and their interest accessed over the web but edited on the Choice of Video Conferencing level. Once it is clear that we are ready local computer. Options like Dropbox Platform to work, I turn off the camera and turn (www.dropbox.com) and Box.net (www. There are several viable video confer- on screen-sharing. Often, I will enable box.net) offer a local synchronization encing platforms. They range in price participants not only to see my com- option that allows the storage of confi- from free to freemium to premium. As puter screen but also to interact with dential documents on each user’s local you go up in price, there are more man- the documents I am presenting on the hard drive. They enable collaboration at agement and scheduling features as screen. In the case of a docking station, the expense of security if that local com- well as privacy commitments. Check I put the video meeting controls and puter is ever infected with a virus or a whether the service includes end-to- the video feeds on my laptop screen but root-kit. A better option would be to end encryption of the video stream. then share my external screen with the use a cloud-based document manage- Find out if you can record and play- participants. When the meeting draws ment system like NetDocuments (www. back the video. Check whether you can to a close, I end the screen-sharing and netdocuments.com). The documents require a password to join the meet- turn the cameras back on as I wrap up are stored with end-to-end encryption ing. Check whether your administrative and schedule the next meeting. in a repository controlled by the firm, controls include the ability to mute a which has the exclusive encryption participant (or all participants), as well Secure Workspaces keys to those documents. An end-user as dismiss a disruptive participant from I do not want to underestimate the with a secure login, however, can work the meeting. Whatever you choose as security risks of working from home; in Outlook, Word, or Excel on his lap- your platform, understand the controls. they are very high. One option is for the top with no degradation in speed or Run through the tutorials. Figure out law firm to issue and configure busi- performance. When he completes the how to select the microphone inputs, ness laptops for their staff and prohibit document, it is automatically sent up to Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 62 January/February 2021 TECHNOLOGY PROPERTY

NetDocuments and removed from the local computer.

A Space to Collaborate Collaboration takes many forms. For example, I send and receive messages via Microsoft Teams throughout the day. If a request is urgent, I click the call button in Teams and speak. I can enable video in the call, or I can share my desktop with the other user. If I need others to join in the discussion, I simply add them to the meeting. We also use Con- nectWise Control (www.connectwise. com) to allow the entire team to take control of a remote computer. Other teams might use Slack (www.slack. com) and set up a Slack channel for discussions. Further alternatives include NetDocuments ndThread, Salesforce Chatter (www.salesforce.com), and Google Hangouts Chat. For collaborations on documents within our organization, I use Net- Documents. I will send a link to the document I wish to discuss (rather than sending the document itself) to ensure SAVE THE DATE we are all working on the same page. I will use NetDocument’s SetBuilder feature to build a bundle of documents from different sources into something 33rd Annual RPTE usable. And to share documents with people outside our organization, I will set up a NetDocuments Collabo- Virtual National CLE ration Space. I will invite users to join the space. All users can receive a noti- Conference fication when documents are added to that space. External users can upload documents securely, and I will receive April 21-23, 2021 notifications when they do so.

The Room Where It Happens This article just scratches the surface of how to turn your home office Building Bridges Together space into a professional office space. Although you are physically at home, you are really at work. With that atti- in the Practice of Law tude, address what steps will make your work environment more work-friendly. Use some of the money you are saving from commuting to work (car maintenance, gas, parking, mass transit, etc.) to invest in your home office. You will be happier, more productive, and more professional. n

The Four-Letter F-Word and the Pandemic

In lease negotiations, the four-letter obligations were excused by the Illinois 2,000 retail leases by reason of COVID-19. F-word “fair” has little application. Con- Governor’s March 16, 2020, order pro- In re Gap, Inc., COVID-19 Lease Payment tract terms are generally dictated by the hibiting businesses from offering food Litig., No. MDL 2960, 2020 WL 5884789 parties’ business needs and relative lever- and beverages for on-premises consump- (U.S. Jud. Pan. Mult. Lit. Oct. 2, 2020). In age, not by principles of fairness. When tion. In this case, the lease’s force majeure In re Gap, a multi-district federal panel contract disputes are litigated, however, language excused the parties from per- refused to consolidate a number of these “fair” is often the deciding factor. forming their obligations when the actions, citing reasons that included “the COVID-19 raises enormous issues performance was prevented or “hindered” trend of quick settlements.” Id. at *2. of fairness. Many consumers and office by “governmental action or inaction” or Of course, there’s a trend of quick set- workers have stayed at home—for many “orders of government.” Id. at 376–77. tlements. If a case is litigated to judicial months now—out of concern for their Even though the provision also stipulated resolution, landlords and tenants alike health, even after governments lifted that lack of money would not trigger risk incurring litigation fees and costs in stay-at-home orders. Consequently, many force majeure, the court held that the force addition to the business and rental losses office and retail tenants can’t or don’t want majeure clause was “unambiguously trig- they may suffer. In most cases, it’s better to pay their rent or want to terminate their gered” by the governor’s order because it for the landlord to keep the tenant afloat leases, leaving landlords and their mort- “hindered” the tenant’s ability to perform with a fixed period of rent deferrals or gagees in the lurch. There can’t be a fair and was the “proximate cause” of the ten- abatement than to seek a new tenant in result in these COVID-19 situations. ant’s inability to pay rent. Id. at 377. The the current dismal market. Then again, Tenants assert that COVID-19 is a force court did observe that the tenant could tenants must consider whether it’s best majeure event or creates frustration of have reduced its income losses by per- to seek a buy-out, thereby freeing them- purpose that excuses the performance forming the permitted curbside pick-up selves from future rental obligations, of the tenant’s obligation to pay rent and delivery operations; consequently, when things may not be any better (or because the tenant can’t occupy the space. the court limited the rent reduction to 75 space may be less expensive). See Restatement (Second) of Contracts: Dis- percent of the amount otherwise due. Id. Additionally, when negotiating new charge by Supervening Frustration § 265 at 379. leases, our tenant clients must be advised (1981); Marie A. Moore, Catching Drafting The debtor-tenant in In re Pier 1 to consider pre-negotiating rent relief and Tips from COVID-19, 34 Prob. & Prop. 64 Imports, Inc., 615 B.R. 196 (Bankr. E.D. Va. termination rights in a pandemic, likely (Jul./Aug. 2020). But landlords can also 2020), does not appear to have sought resulting in landlord reluctance to fund— make strong arguments that they relied a COVID-19 rent reduction, but only a and lender reluctance to finance—the on the on-going rent payments to satisfy delay in its payments. The court granted large tenant improvement allowances their lenders—and that the banks are still this temporary relief based on the ten- that have become customary in retail open and COVID-19 has not made pay- ant’s commitment to make catch-up and office leases. In the future, landlords ing rent impossible. payments in July and on the assumption could act more like lenders by requiring Only a few reported cases provide that it would re-open in June. Id. at 203. tenants to pay the unamortized tenant guidance so far. Bankruptcy decisions on Instead, Pier 1started liquidating in May. improvement allowance regardless of post-petition rent relief are the first off By contrast, in Palm Springs Mile Asso- rent abatement or lease termination. the (reported) block. ciates, Ltd. v. Kirkland’s Stores, Inc., No. None of this is fair. With luck, a vac- In June 2020, the bankruptcy court in 20-212724-CIV, 2020 WL 5411353, at *2 cine and (please) an insurance product In re Hitz Restaurant Group, 616 B.R. 374 (S.D. Fla. Sept. 9, 2020), a non-bankruptcy addressing pandemics, business will go (Bankr. N.D. Ill. 2020), accepted a res- case, the court rejected the tenant’s argu- on. But we and our clients must under- taurant tenant’s argument that its rent ment that “the governmental regulations stand that we face—and have always themselves actually prevented Kirkland faced—risks that we do not anticipate. n The Last Word Editor: Marie Antoinette from making rent payments.” Moore, Sher Garner Cahill Richter Klein Many suits remain undecided, includ- & Hilbert, L.L.C., 909 Poydras Street, Suite Editor’s Note: The Last Word column in ing a number of landlord actions 2800, New Orleans, LA 70112, (504) 299- the November/December 2020 issue was 2100. pending across the country against Gap, incorrectly attributed. It was written by Marie Inc., for its failure to pay rent under its A. Moore. Published in Probate & Property, Volume 35, No 1 © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 64 January/February 2021 RPTE LAW JOURNAL

Don’t forget to check out the latest articles from the Digital RPTE Law Journal

Fall/Winter 2020 Articles

THE ELECTRONIC WILLS ACT: FACING THE INEVITABLE Susan N. Gary

TWO RESTATEMENTS OF CONFLICT OF LAWS CONCERNING EXERCISES OF SPECIAL POWERS OF APPOINTMENT James P. Spica

BILLBOARDS, SIGNS, FREE SPEECH, AND THE FIRST AMENDMENT Daniel R. Mandelker

To review the latest Digital RPTE Law Journal visit www.ambar.org/rptejournal RPTE Member Benefits

Bringing New Appeal to Your Practice

MODIOLEGAL

ambar.org/rptebenefits