Can a Lease Force a Tenant's Insurer to Defend the Landlord?
October 10, 2022 —
Kerianne Kane Luckett - Saxe Doernberger & Vita, P.C.Can an indemnification clause in a commercial lease obligate a tenant’s insurer to defend a landlord? Recently, the United States District Court for the Northern District of New York said, “Yes!” On August 9, 2022, the district court issued a decision in ConMed Corp. vs. Federal Insurance Company, holding that the indemnification clause in a policyholder’s lease triggered the insurer’s duty to defend the landlord in an action arising out of the tenant’s negligence.
Facts of the Case
ConMed is a medical technology company that leases warehouse space in Georgia from Breit Industrial Canyon (“the Landlord”) to sterilize its medical equipment. ConMed’s employees filed suit against ConMed and a contractor that performed the sterilization, alleging injuries caused by exposure to excessive amounts of chemicals used in the sterilization process (the “ConMed Action”). Thereafter, ConMed’s employees filed a separate lawsuit against the Landlord, alleging that the Landlord permitted storage of unsafe levels of the chemicals at the warehouse without adequate ventilation (the “Landlord Action”). The lease agreement required ConMed to indemnify the Landlord “except in the event of, and to the extent of, Landlord’s negligence or willful misconduct.”
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Kerianne Kane Luckett, Saxe Doernberger & Vita, P.C.Ms. Luckett may be contacted at
KKane@sdvlaw.com
There’s Still No Amazon for Housing, But Fintech’s Working on It
February 14, 2022 —
Patrick Clark - BloombergIt’s hard to imagine a better scenario for real estate technology than the one that played out in 2021. Low interest rates and pent-up demand ignited the hottest housing market on record, while the pandemic gave buyers and sellers new reasons to conduct business virtually.
And yet the year will be better remembered for the way some of the biggest names in the industry struggled. The highest-profile flop was Zillow Group Inc., the online listings giant that pulled the plug on its nascent instant homebuying operation in the face of mounting losses. Compass Inc., the tech-driven real estate brokerage, saw its shares plummet 50% as part of a broader selloff in property-related technology stocks. Better, an online mortgage company, fired 9% of its staff.
The bumpy year underscored a problem that’s been holding back the adoption of technology in real estate for the past two decades. Each sale of a home involves hundreds of thousands if not millions of dollars, and no two properties are exactly alike. Silicon Valley-backed companies have gone a long way in making searching for homes and advertising them simpler and faster. But it’s a difficult process to move fully online and involves a lot of people such as agents, appraisers, brokers, and contractors, as well as entrenched interests. For example, Zillow’s house buying business—billed as a way for customers to get out of their homes quickly and speed the moving process—faltered in part because the company couldn’t find enough contractors to fix up those homes to resell them.
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Patrick Clark, Bloomberg
Traub Lieberman Attorneys Named to Hudson Valley Magazine’s 2022 Top Lawyers List
January 24, 2022 —
Traub LiebermanTraub Lieberman is pleased to announce that nine Partners from the Hawthorne, NY office have been named to the 2022 Hudson Valley Magazine Top Lawyers List.
2022 Hudson Valley Magazine’s Top Lawyers:
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Traub Lieberman
Some Coastal Cities Are Sinking Even Faster Than Seas Are Rising
June 20, 2022 —
Ditas B Lopez - BloombergRising seas have long been a threat to coastal cities. New research suggests that cities—particularly in Asia—are sinking as well, compounding the risks of frequent and severe flooding.
In Karachi, land is sinking five times as fast as the sea level is rising, according to the study published this month in Geophysical Research Letters. Manila and Chittagong, Bangladesh’s second-largest city, are sinking at 10 times the rate of the rising waters.
In China’s Tianjin, a coastal city about 150 kilometers southeast of Beijing, the ground is giving way at 20 times that speed.
In those four cities alone, the phenomenon could affect roughly 59 million residents.
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Ditas B Lopez, Bloomberg
Colorado Mayors Should Not Sacrifice Homeowners to Lure Condo Developers
September 17, 2014 —
Jesse Howard Witt - The Witt Law FirmFor the past two years, Colorado’s Metro Mayors Caucus has been aggressively lobbying the state legislature to strip away consumer protections in construction defect disputes, in the hope that more lax construction standards may attract condominium developers to their cities. Although the General Assembly voted down their proposals in the 2013 and 2014 sessions, Denver Mayor Michael Hancock raised the issue again during his recent State of the City address, and it is likely that proponents will sponsor another bill during the upcoming 2015 session.
The mayors would do better to protect their constituents’ rights and work to correct the underlying problems that have hampered condominium construction in recent years. Eliminating consumer protections is not the right way to help their communities grow.
Should developers build apartments to rent or condominiums to sell?
At the core of this debate is the recent trend favoring apartments over condominiums. According to an October 2013 report from the Denver Region Council of Governments (DRCOG), the construction of new condominiums around Denver has not rebounded from the Great Recession as quickly as the construction of apartments or single-family homes. Many of the new attached-housing projects currently in development are expected to be offered as apartments for rent rather than condominiums for sale. This concerns some mayors, who feel that apartments promote a more transient population, with fewer permanent ties to the their communities. To encourage developers to build condominiums instead of apartments, the mayors have argued that Colorado should repeal or limit laws that currently protect condominium owners from shoddy workmanship and construction defects.
In April 2013, DRCOG had urged the Colorado General Assembly to pass Senate Bill 13-52, which would have given immunity for environmental hazards to builders of multi-family communities located near bus stops or light rail stations. The bill would also have given these builders an unfettered right to choose what repairs were appropriate if any homeowners complained of other defects, and it would have prohibited homeowners from seeking relief in court for unsatisfactory repairs; if builders did not offer reasonable repairs, homeowners’ only option would have been to pursue costly private arbitration. During judiciary committee hearings, a number of mayors and homebuilders testified in favor of the bill, and expressed a belief that it was virtually impossible to build a condominium project without being sued over defective work, and that this was the reason why apartrments had become more popular. There were few data to support their anecdotes, however, and the DRCOG report had not yet been published. As a result, the committee rejected the bill.
Just what the “Doctor” ordered.
Several months later, DRCOG made its report available. Not surprisingly, portions of this document supported the type of legislation that DRCOG had promoted earlier in the year. The report’s authors acknowledged, in fact, that the subjective sections of their report were limited to the opinions of the development industry, and “should be recognized as one side of the discussion.” The authors also conceded that they had relied primarily on interviews with homebuilders, contractors, and defense lawyers in preparing their findings; they had spoken to “very few” plaintiff attorneys, and it does not appear that they spoke to any homeowner association representatives.
Nevertheless, local politicians immediately seized on the report as evidence that laws should be changed. “God bless DRCOG,” joked one member of the Denver Metro Chamber of Commerce in an interview with Westword. “I think it’s devastating,” Lakewood Mayor Bob Murphy said in a separate interview with the Denver Business Journal. “I see this as a verification of what I’ve been talking about… I’m not aware of a single member of the 41-member Metro Mayors Caucus who is opposed to some kind of reform.”
At the January 2014 meeting of the Metro Mayors Caucus, Mayors Murphy and Hancock cited the report when arguing for changes in the law. Other mayors echoed their concerns and voted to support legislation that would take away homeowners’ access to the courts, limit the power of homeowner associations to advocate for their members, and impose difficult administrative barriers to taking legal action against developers.
Senate Bill 220
The mayors eventually found a receptive ear in Commerce City Senator Jessie Ulibarri. In the final days of the 2014 session, Ulibarri broke ranks with fellow Democrats and introduced Senate Bill 14-220.
Ullibarri’s bill would have addressed the mayors’ concerns by making it illegal for homeowner association boards to speak with attorneys, consult experts, or request that builders repair construction defects, unless the board first obtained the votes of at least half of the community. The bill would have required that the board obtain votes from a majority of the entire membership—not just those who appeared at a meeting or participated in the election—and forbid the use of proxies to meet this total. In practice, this would have made it effectively impossible for large communities to hold a builder accountable for negligent construction, code violations, or breaches of warranty. In addition, even for communities that would be able to overcome these voting hurdles, the bill would force many disputes into binding arbitration with whatever service the builder had selected to resolve disputes. In theory, these changes would have made it so difficult for communities to enforce their legal rights that developers would have enjoyed de facto immunity from claims for defective work. Senator Ulibarri and the mayors hoped that giving this immunity to developers would spur them to build more inexpensive condominiums, without fear of liability for ignoring the building code or delivering low quality work.
Ultimately, the late introduction of SB 220 proved fatal. Democratic leadership expressed frustratation that Ullibarri had put forth the bill without allowing sufficient time to discuss potential amendments to preserve consumer rights, and the 2014 session ended before the bill could pass through committee hearings. The mayors, however, seem intent on introducing similar legislation in 2015, repeating the mantra that it is impossible for developers to build quality condominiums at a reasonable price. Mayor Murphy, in particular, has been vociferous in his support for laws curtailing homeowner rights: He recently proposed a local ordinance that would deny Lakewood residents the consumer protections available to other Colorado homeowners in construction disputes.
Litigation is not the only factor favoring rentals.
This approach is fundamentally misguided. Although many apartment builders have cited the fear of litigation as a factor affecting their decision to avoid the condomium and townhome market, there is little in the DRCOG report, or elsewhere, to support the theory that eliminating consumer protections will cause these developers to start erecting condominiums.
In reality, the DRCOG report itself (which was recently taken off the DRCOG’s website without explanation), identified multiple factors that have slowed condominium construction, not just the perceived legal risks of litigation over defective work. These factors included more stringent lending requirements from banks, surplus inventory from foreclosures, homebuyers’ inability to afford down payments, and overall economic and market conditions that have recently favored apartments. Giving builders immunity for defective work will not change any of these economic circumstances.
In addition, the DRCOG report noted that some Millennials may simply prefer to rent rather than buy; it acknowledged the existence of a vigorous ongoing debate in academic circles over whether the “Gen-Y” and “Millennial” populations have the same desire to own property as their parents in the “Boomer” generation, though the report’s authors ultimately concluded that generational preferences have only had a minor effect on condominium construction. The report further noted that demand for condominiums may increase on its own over time, as older Boomers seek to downsize and move to smaller houses. These issues are also independent of any concern over construction defects.
Moreover, one should not overlook a factor that received little attention from the DRCOG report: Colorado’s strong rental market. Recent reports show that rents are at all-time highs across the state, and many individuals are willing to pay a premium for desirable rental property in this tight market. It should therefore come as little surprise that homebuilders have started constructing more apartments to meet this demand.
Mayors should concentrate on why apartments cost less to build.
On the subject of construction and construction defects, the DRCOG report did identify three reasons why it may be less expensive to build apartments than condominiums in today’s market.
One was quality control. For condominium projects, prudent developers often choose to retain a third-party inspector to visit the site and verify that subcontractors are performing their work correctly. This is a wise step to ensure that any defects are identified promptly and corrected on the spot; making such repairs during construction, while the responsible subcontractors are still on site, and before other trades have covered up their work, is typically far less expensive than taking a house apart and fixing mistakes years later. On an apartment project, however, a developer may choose to omit this step and wait to see if renters complain about defects or demand repairs. By eliminating this quality control expense, the DRCOG report found that a developer could save an estimated $1,800 per unit during construction.
A second reason was the use of less-expensive subcontractors. The report found that general contractors who build condominium projects may demand a “premium” of between four and six percent of overall job costs to pay for subcontractors who have the necessary credentials and insurance to do the most challenging phases of the work. This is deemed crucial for condominium projects, because the eventual homeowners may seek redress in court if their homes contain construction defects. By contrast, those who lease apartments are thought less likely to insist on quality workmanship, and builders may therefore be able to get by with a cheaper workforce when constructing rental properties. The report found that using less-qualified subcontractors could save developers an estimated $9,300 per unit.
The third reason was lower insurance costs. The report assumed that condominium communities would not have the same level of on-site maintenance as apartment complexes, and that condominium owner associations would “introduce an element of risk for litigation that apartment properties do not have.” As such, developers of apartment projects often pay between $3,674 and $3,952 less per unit for liability insurance than developers of condominium projects.
Adding these three figures produces a total savings of $14,774 to $15,052 per unit for apartments. Developers interviewed for the DRCOG report stated that the only way they could make sufficient profits on “entry-priced” condominiums (those with a sales price under $450,000) was to use the cheaper construction methods associated with apartments. These developers were reluctant to cut such corners on condominiums, however, because of the fear that buyers might sue for the cost of repairing defects and code violations.
Lowering quality standards will not help the industry.
Although the DRCOG report helped explain why the perceived fear of litigation may have made some developers hesitant to build condominiums, this perception does not justify laws that would strip away consumer protections or lower quality standards in the industry.
Overall, the DRCOG report described a market saturated with poorly-built condominiums, many of which have been the subject of multi-million dollar construction defect lawsuits and foreclosures in recent years. Although several national builders have now pulled out of the Colorado attached-housing market, the report noted that a lingering oversupply of condominiums has held sales prices down. The report stated that this oversupply would likely diminish within a few years, but it may take time before the market fully normalizes and returns to the point where local, honest contractors can compete with those who have been peddling cheap, substandard products. The last thing that Colorado lawmakers should do now is encourage more low-quality workmanship by limiting homeowner rights.
Likewise, while high insurance rates remain a valid concern, the DRCOG report suggested that this increase is actually the result of 2010 legislation that the homebuilders themselves sponsored. Senate Bill 10-1394, now codified at Colo. Rev. Stat. § 13 20-808, protects builders from unfavorable policy interpretations by creating a rebuttable presumption of insurance coverage for property damage from construction defects. This is good for developers, but has made some insurance carriers nervous. According to the DRCOG report, roughly a dozen carriers have left the state in recent years, and insurance brokers “attribute their departure to the passage of the 2010 legislation.” The report also noted that new insurance providers have since entered the market, but these carriers tend to specialize in the “high cost/high risk” arena, and charge premiums that are twenty-five to forty-five percent higher. Developers likely did not intend this result when they sought insurance reform in 2010, but that does not mean that homeowners should be penalized in 2015.
In sum, these data do not support curtailing consumer rights. If Senator Ulibarri and the mayors truly want condominium construction to become more economical for developers, they should direct their attention to the real issue: How did it become impossible for quality builders to earn a profit on condominiums? The DRCOG report suggests that construction defects are part of the problem, but politicians should be thinking about ways to prevent the defects, not penalize the consumers who end up stuck living in defective houses. If poor workmanship and code violations have become so commonplace that a developer can only make money by eliminating quality control and hiring unqualified workers, then steps should be taken to stamp out negligence and level the playing field for quality builders. Politicians should not create even more incentives for builders to cut corners.
Moreoever, one should note that Colorado, unlike many states, does not license its general contractors at the state level; some cities require contractors to pass a local examination, but a statewide licensure program could help weed out builders with a history of defective work.
Temporarily providing grants to offset quality control and insurance costs could also help condominium developers stay competitive until the economic conditions improve. In fact, Senator Ullibarri proposed a separate bill in 2014, SB 216, that would have done just that, but Republicans killed the measure shortly before SB 220 was heard in committee.
Arbitration and HOA restrictions are not the answer.
Unfortunately, however, many of Colorado’s mayors and legislators insist that eliminating consumer protections is the only way to create an incentive for builders to construct more condominiums. Thus, their ideas have largely ignored the underlying problems of cheap, substandard work; they have instead focused on concepts such as requiring private arbitration of disputes and limiting the power of homeowner associations to represent their members in lawsuits. Although these concepts may seem neutral at first glance, they could actually tilt the balance heavily in favor of the homebuilding industry.
With regard to arbitration, one should recognize that the process is unlike mediation or other forms of alternative dispute resolution, in which the parties meet and try to reach a mutually acceptable compromise. Arbitration is more akin to a private lawsuit, wherein the parties give up their right to an impartial jury and, instead, pay a panel of lawyers or retired judges to hear their evidence and award monetary damages. This tends to make arbitration much more expensive, and to create a financial incentive for arbitrators to favor the large companies that are likely to give them future business, not the occasional consumer who is unlikely to need a professional dispute resolution service again.
With regard to homeowner associations, individual homeowners often lack the resources to litigate claims against well-funded developers and insurance companies, and the only way they can protect their property values is to join together in an association with their neighbors. A united association of homeowners can often persuade a builder to make reasonable repairs; a divided group of individuals can rarely achieve such a result. Limiting this right of association would merely encourage developers to build more substandard units.
Likewise, while homeowner voting requirements may seem innocuous, they often penalize communities with large numbers of military, absentee, or out-of-town owners, all of whom may be difficult to reach in the event that the community needs a quick vote on legal action. If nothing else, the hypocrisy of these arguments should anger the mayors’ constituents. Homeowner associations and cities both rely on the same model of representative government. But when a municipality hires a contractor to build a new city hall or erect a new bus stop, it does not let the contractor unilaterally dictate the terms of dispute resolution, nor does it promise to abandon all legal rights unless a majority of its entire population votes to act. Imagine if Mayor Hancock had to obtain affirmative votes from half of Denver’s 483,000 registered voters before he could ask the City Attorney to enforce a construction contract; DIA would be a defect-riddled nightmare for taxpayers.
Despite such facts, however, many of the mayors at the January 2014 meeting seemed confused or naïve about what really happens when a homeowner gives up his or her legal rights. Some, for instance, did not seem to understand the different forms of alternative dispute resolution available, or to appreciate the difference between voluntary mediation (in which both sides meet and agree on appropriate repairs or solutions) and binding arbitration (in which the builder selects a private service to decide if the homeowners are entitled to money damages). Cherry Hills Village Mayor, Doug Tisdale, meanwhile, encouraged the other mayors to use talking points, such as arbitration being “faster, cheaper, more effective, and more efficient” than proceeding in court, precisely because neither side can appeal if the arbitrator misinterprets the law. He failed to offer any real facts or statistics to support this opinion, however, or to explain why homeowners should feel good about forfeiting their right to appeal an erroneous decision.
Mayor Tisdale went on to suggest that mayors tell their constituents that homeowners of limited means could always find an attorney willing to represent them individually on a contingent fee, even if legislators took away the ability of homeowner associations to advocate on behalf of their members. No such statement should ever be part of a mayor’s talking points; anyone who actually practices in this field knows that construction attorneys will rarely agree to represent a single condominium owner on a contingent fee basis, because of both the high investigation costs and the reality that the owners’ association almost always has exclusive responsibility for maintaining and repairing the community’s structures and other common elements.
An honest debate
This is not to say that the homebuilders’ concerns about the increased costs of condominium construction are entirely without merit.
The DRCOG report suggested that the prevalence of cheap, low quality work across Colorado forced many developers to cut back on quality control and hire inexperienced subcontractors in order to remain competitive and earn a profit in recent years. The resulting poor workmanship led to construction defects and litigation, and the insurance carriers responded by raising rates on builders across the board. The passage of SB 10-1394 appears to have exacerbated the problem and pushed insurance rates even higher. The combination of low sales prices and high insurance rates, coupled with a dip in demand for owner-occupied attached housing, has made it very difficult for local developers to make money on condominiums.
As the DRCOG report confirmed, a key underlying cause of this problem has been defective work. Stripping away consumer protections will not encourage condominium developers to invest in more quality control or premium subcontractors, however; stripping away consumer protections will merely encourage more of the same mistakes that contributed to the condominium shortage in the first place. If the mayors truly want to address the lack of new condominiums, they should look at why substandard construction has become acceptable and ways to improve code compliance and overall quality. Mayors are in a unique position to direct their cities’ building departments, and they should take advantage; instead of lobbying for weakened consumer protections, mayors should invest their tax dollars in hiring and training more building inspectors, and they should establish a clear policy prohibiting approval of substandard construction. Once communities stop tolerating shoddy workmanship, good developers will again be able to build quality condominiums without fear of incompetent competitors undercutting their prices.
Legislators may also want to revisit the option of providing temporary tax credits or other financial assistance to developers who hire their own quality control inspectors and take other steps to avoid building homes with construction defects. The DRCOG report concluded that the developers could shave about $15,000 off the construction cost of an entry-level condominium unit by eliminating quality control, using less-qualified subcontractors, and saving on insurance premiums, and the government could act to eliminate this incentive. Licensing contractors at the state level could help in the long term, but politicians may also wish to consider supporting tax credits or other incentives of up to $15,000 per unit to developers who agree to build quality condominiums instead of cheap apartments. This would allow the developers to offset the higher costs of building for-sale properties, avoid litigation over substandard work, maintain adequate insurance, and still earn an attractive profit.
Obviously, some taxpayer advocates might object to the subsidization of real estate developers’ profit margins in this manner. Others might conclude that encouraging owner-occupied housing is a worthwhile investment of a community’s tax revenue. Regardless, this would at least be an honest debate about the real question: Who should bear the cost of building condominiums without defects? The mayors’ current plan to make homeowners pay for repairing a builder’s poor workmanship is the wrong answer.
Jesse Howard Witt is an attorney with The Witt Law Firm in Denver. He focuses on construction law and represents homeowners, associations, developers, and contractors. He welcomes comments at www.wittlawfirm.net.
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COVID-19 Information and Resources
May 04, 2020 —
Richard H. Glucksman, Esq. & Brian D. Kahn, Esq. – Chapman Glucksman Dean & Roeb BulletinINTRODUCTION
The current COVID-19 health crisis has greatly impacted nearly every aspect of our business and personal lives. The constant flow of rapidly evolving, and often contradictory information creates its own challenges for those who are responsible for ensuring compliance with relevant regulations and best practices while still moving forward with their business and family activities.
This bulletin differs from most Chapman, Glucksman, Dean & Roeb bulletins in that it does not highlight a recent case, statute or a single development, but rather acts as a resource and “links” to provide you with needed information and to simplify your search for critical information during this unusual and challenging time.
CIVIL LITIGATION: CLOSURES AND RESTRICTIONS
The State and Federal Court systems in California have drastically reduced their operations. The Governor issued Executive Order N-38-20, this suspends certain limitations on the Chief Justice’s authority, making it possible for orders to be issued adapting the Court’s operations to address the COVID-19 health crisis. As of this time, the most recent statewide order from the Chief Justice is the March 30, 2020 Order which allows Courts to utilize remote technology when possible. The March 30, 2020 Order also clarifies a prior Order suspending all trials for 60 days. As many of you are aware, civil trials in California must commence within five years of the initiation of the action, this is commonly referred to as the “five year rule”. While the five year time period was initially extended by the Chief Justice for 60 days, the Judicial Council subsequently adopted a series of Emergency Rules, including one which extends this to six months for all civil actions filed on or before April 6, 2020. The Judicial Council also adopted rules tolling the statutes of limitation for civil causes of action are tolled from April 6, 2020 to 90 days after the state of emergency has ended.
In addition to the statewide orders and rules, counties have enacted their own rules. Los Angeles Superior Court, for instance, has closed some locations while others remain open on a limited basis. On March 17, 2020 an Order was issued limiting the Court to “essential functions” through April 16, 2020. However, on April 15, 2020, a further Order extended the closure through May 12, 2020. While truly urgent Ex Partes may go forward, all regularly set hearings will be continued until after June 22, 2020. Trials will begin after June 22, 2020 with non-priority trials anticipated to start in later August or September. Notably, any deadlines imposed by current trial or hearing dates still stand until the specific dates are continued.
As with other aspects of the COVID-19 health crisis, the impact upon Civil Litigation continues to evolve, for the most up to date information we include the following links to the California Courts. The first page includes links to all the State and County Orders, the second page is for the Judicial Council Rules.
Links:
https://newsroom.courts.ca.gov/news/court-emergency-orders-6794321
https://newsroom.courts.ca.gov/news/judicial-branch-emergency-actions-criminal-civil-and-juvenile-justice
STATE AND LOCAL STAY AT HOME ORDERS
The State of California declared a state of emergency on March 4, 2020. On March 13, 2020 the President declared a national state of emergency. On March 19, 2020 Governor Newsom issued Executive Order N-33-20, also known as the “Stay at Home” order. This orders all Californian’s to stay at home, unless they are part of an essential businesses are exempt which generally includes construction and insurance. Generally, Californians are allowed to run essential errands, but they are not to congregate with those outside of their household.
In addition to the State, many cities and counties have enacted additional orders regarding whether certain types of businesses can remain open, use of parks, trails and other public amenities as well as what type of protective measures must be adhered to such as covering your face in public. As with Civil Litigation, the State and Local Government regulations continue to evolve. A link to the State’s COVID-19 page is below and we also encourage you to check your local City and County sites for additional information.
https://covid19.ca.gov/
BUSINESS AND FINANCIAL GUIDELINES
The impact of COVID-19 is unprecedented. While “essential businesses” may remain open for customers, steps must be taken to protect the health of both employees and customers. There are both State and, in many instances, Local Government regulations addressing these precautions. In addition to taking safety measures to protect the health of all involved, there are a multitude of financial concerns to be addressed. While most people have already heard about the moratorium on residential and commercial evictions, this does little to address how property owners will receive funds to pay their financial obligations, how tenants can pay their other obligations, how either can make payroll and most importantly, how employees who can no longer work due to their “non-essential” business being closed can put food on their tables.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES” act) may provide financial relief for many business by means of loans, some of which may be forgivable, and tax credits. The CARES act also modifies the Family Medical Leave Act (“FMLA”) to provide paid leave for those who cannot work due to COVID-19 as well as other benefits. The IRS has extended the deadline to file and pay taxes to July 15, 2020. Additionally, there are other Federal and State benefits which may be available for those whose jobs are impacted.
The financial impacts of COVID-19 are far reaching and continue to evolve. The Department of Insurance ordered insurance companies to return premiums for at least the months of March and April. This applies to certain lines of insurance where the risk of loss has fallen substantially. However, business interruption, environmental and pollution claims have increased exponentially. While most such policies require some physical damage in order to trigger an occurrence, there has been some discussion of legislation deeming the COVID-19 pandemic to fulfill the physical damage requirement.
If your business has been closed or impacted by COVID-19 we encourage you to review your insurance policies and key contracts to ascertain what your rights and obligations are as well as whether you may have any coverage for your losses. Just as importantly, speak with your business partners including vendors, customers and employees to ascertain their capabilities and willingness to work through this crisis.
US Department of Labor OSHA Guidelines:
https://www.osha.gov/SLTC/covid-19/
California Labor & Workforce Development Agency Resource Page:
https://www.labor.ca.gov/coronavirus2019/
California Employment Development Department:
https://www.edd.ca.gov/about_edd/coronavirus-2019.htm
CONSTRUCTION GUIDELINES
Many of our clients are involved in the construction industry. Construction has been deemed an essential activity and is exempt from many of the “stay at home” orders but certain protections and regulations still apply. In addition to the general workplace guidelines discussed above certain jurisdictions are providing guidance as to how to provide a safe construction site workplace. We have included a link the Los Angeles Department Building and Safety guidelines below.
However, in some instances work on a project may be delayed or may not be able to progress due to the project owner stopping work or the inability of subcontractors or suppliers to continue as originally intended. In this case one should review their contracts to see what justifies delay and inability to perform by either party and the impact thereof. Contracts should also be evaluated to ascertain whether the costs associated with compliance with the new COVID-19 regulations are a recoverable cost under the contract. As with the general business discussion above, contractors should review all available insurance, including builder’s risk to ascertain the existence of possible coverage.
LA DBS guidelines:
https://ladbs.org/docs/default-source/publications/misc-publications/construction-site-guidance.pdf
SUMMARY
The COVID-19 health crisis has had and, for the foreseeable future, will have a broad and severe impact on our society. The variety of evolving regulations on the Federal, State and Local Government levels make it challenging to comply, especially for businesses in operation. There are also a variety of resources available to help ensure compliance with these regulations as well as the financial and physical viability of our communities’ companies and employees. Please do not hesitate to contact us if you need any assistance in navigating these rules and resources.
Reprinted courtesy of
Richard H. Glucksman, Chapman Glucksman Dean & Roeb and
Brian D. Kahn, Chapman Glucksman Dean & Roeb
Mr. Glucksman may be contacted at rglucksman@cgdrlaw.com
Mr. Kahn may be contacted at bkahn@cgdrlaw.com
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Termination of Construction Contracts
November 30, 2020 —
Stuart Rosen - Construction ExecutiveLately, in view of the COVID-19 pandemic, there is a heightened concern that some construction projects will not proceed as planned. Therefore, it is important to review each party’s right to terminate a construction contract and to examine some of the resulting consequences.
While the parties to a construction contract can, as always, agree to other mutually acceptable terms and provisions, in broad terms, a typical construction contract includes four triggering events that can lead to termination.
First, an owner can terminate a construction contract if the contractor defaults and thereafter fails to cure such default, which may include, without limitation, the failure to remediate deficient work, the failure to meet the construction schedule, the failure to pay subcontractors and the failure to comply with applicable law. A contractor must be mindful of the fact that in the case of such termination by the owner for cause, the vast majority of construction contracts provide that the contractor will not be entitled to receive any further payment for work performed by the contractor until the work is finished.
Reprinted courtesy of
Stuart Rosen, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Mr. Rosen may be contacted at
srosen@proskauer.com
Cerberus, Blackstone Loosening Credit for U.S. Landlords
July 09, 2014 —
Heather Perlberg and John Gittelsohn – BloombergU.S. property owners with just one rental house can now get cash from Wall Street to buy more.
Cerberus Capital Management LP, which initially targeted landlords with multimillion-dollar loans, is financing low-volume deals for small investors through its FirstKey Lending, with looser terms than government-backed mortgages from Fannie Mae and Freddie Mac, said Randy Reiff, the business’s chief executive officer. Blackstone Group LP (BX)’s rental lending arm, B2R Finance LP, is making a similar push to mom-and-pop landlords.
“Our premise has always been to be able to lend to the middle market and entrepreneurial borrowers in the space, not just the institutional borrowers,” Reiff said. “The biggest guys have always enjoyed access to capital. The largest part of this market is really the entrepreneurial owners.”
The companies are competing to lend to owners of the almost 14 million rental houses in the U.S. at a time when many Americans are struggling to get a mortgage and homeownership is declining. Cerberus and Blackstone, along with Colony Capital LLC, also are racing to package debt on homes managed by separate landlords for the first multiborrower bond sale.
Ms. Perlberg may be contacted at hperlberg@bloomberg.net; Mr. Gittelsohn may be contacted at johngitt@bloomberg.net
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Heather Perlberg and John Gittelsohn – Bloomberg
