June 5, 2020

MSW Litigation Practice Group: Navigating Lease Disputes in the Era of COVID-19

A key construct taught to young transactional lawyers is that “all words on a page matter.” In other words, there is an underlying intent and purpose behind any phrase, sentence, or section in an agreement. Most often though, the majority of contract or lease provisions do not come into play and they may simply appear to be excess verbiage. However, 2020 has presented us with a series of real life situations and challenges that only law school professors would dream of, thus amplifying the importance of having adequate contracts and leases in place.

COVID-19 has presented the real estate industry with countless examples of situations in which there may be conflicting terms or conditions in a contract or lease that may not have been contemplated when the parties entered into their agreement. Moreover, the crisis has presented our industry with numerous situations in which contract or lease terms may contradict each other (or address at all), requiring the parties to ultimately work outside of the language of their underlying agreement in order to successfully resolve the matter.

COVID-19 constitutes a (hopefully) once in a generation public health crisis. Society has developed a much greater appreciation for health care workers and their businesses, which have been on the frontline of combatting this crisis. How and where their services can be safely provided also matters though.

Many medical providers offer their services in multi-tenanted, mixed use office buildings. As government restrictions continue to lift and workers begin coming back to work, will medical providers be permitted to offer testing and treatment for COVID-19 patients in these buildings given the highly contagious and deadly nature of the virus? Many leases will broadly permit medical tenants to offer “medical” or “primary care” services. However, the same leases will likely provide that the tenants cannot interfere with other tenants’ operations and cannot conduct activities that increase or would void the landlord’s insurance. In such instances, it is incumbent upon both landlords and tenants to attempt to resolve their countervailing equities (i.e., the tenant’s valid public and business interests to offer testing and treatment for COVID-19 patients vs. the landlord’s interests in protecting its building and tenants from COVID-19 exposure and liabilities).

Resolving such cases is by no means simple as there are a number of significant countervailing equities involved that were likely never contemplated when the parties entered into the lease. In such instances, reaching a mutually acceptable resolution may be extraordinarily difficult and the parties must attempt to fully understand and evaluate their numerous legal rights, obligations and potential liabilities. Accordingly, having thoughtful and practical legal counsel is key. MSW’s litigation and transactional attorneys are fully prepared to help their clients understand and evaluate these unprecedented challenges as real estate operators and users continue to re-open from the COVID-19 crisis.

MURPHY SCHILLER & WILKES LLP

Murphy Schiller & Wilkes LLP (MSW) is a boutique law firm servicing the commercial real estate and construction industries. Headquartered in Newark, New Jersey, the firm services the commercial real estate and construction industries. Through the development of comprehensive legal strategies, our team works tirelessly to create a blueprint for success and advance our clients’ interests in every matter.