Published on: May 13, 2020
Not many of us saw the Pandemic coming. Very few of us thought the world would shut down in response. The deaths and ensuing financial disaster are now upon us. We still have months more of the virus and possibly years to pull ourselves out of the ensuing economic disaster. It is quite difficult to predict when the virus will go away or if it will reappear. Many experts predict a reoccurrence of the virus or other strains as early as the fall.
One thing is for certain. The virus has changed our lives and it will change how we go forward. Social distancing, masks, protocols, zoom meetings and disinfecting will become the new norm. Here is what every condominium and property manager should consider right now in response to this Pandemic and what to consider for future Pandemics.
1. Virtual Meetings and Elections.
The Pandemic has illustrated and emphasized the importance and need to keep up with technology. In 2020, companies that were not technologically advanced had to get on board very quickly or they were left behind. I suspect that there may be legislation to allow all condominiums, HOA’s and businesses whose documents and charters require old fashion in person meetings and elections to accomplish the same remotely. We should not wait for the legislators to fix this, as this is hardly a legislative priority.
Condominiums and HOA’s should immediately undertake and propose document amendments to permit remote meetings and electronic elections in the future. There are any number of variations or circumstance to get this done. Maybe the Board and/or the membership feel this should only be permitted in an emergency (see emergency powers amendment below). Either way, the concept can be varied condominium to condominium, as can the technology. While in person meetings are always better, it is better that condominiums can and do conduct business during an emergency, especially an emergency when in person meetings are restricted.
It is one thing to postpone meetings and elections during one pandemic. It would be shortsighted to think this is not going to happen again. It would also be shortsighted to think that people might not be reluctant to attend in person meetings in the future out of fear. Condominiums should not be restricted going forward by ancient documents that do not contemplate the use of remote meetings and elections. The technology is here and can also be varied by condominium, maybe zoom works for some and old-fashioned telephone works for others. As for elections, there are plenty of good secure options out there. Your condominium should be prepared to conduct business as usual during the next outbreak. The zoom meetings do present challenges because they can be archived and recorded, which on the one hand provides some level of transparency, on the other hand certain measures will need to be taken to protect executive sessions.
Condominiums, Property Managers and quite frankly every industry professional should look at their policies right now. COVID-19 has highlighted the importance of insurance and understanding what is in the policy, what is covered and what is excluded.
When the pandemic first hit, everyone thought about: (i) business interruption insurance and (ii) civil authority coverage. In order for business interruption insurance to kick in, there has to have been property damage. Most think in terms of a fire or a flood. It is an open question, whether the virus constitutes property damage. Whether that has caused a business closure or cleaning or excessive disinfectant cost depends on the factual circumstances. Many insurance policies have specific virus exclusions, but not all do. Virus exclusions are not mold, bacteria or fungus, so don’t let your carrier tell you that that constitutes a virus exclusion.
There is also a question whether a stay at home order can implicate the civil authority provisions of a policy and whether access to the business must be denied. Property damage is also in play on civil authority as well. Stay at home orders also need to be deciphered as to what is essential and what is not, what was closed and what was not and whether they are even orders or “advisory in nature”. Did the business close on its own or because of the presence of virus in the building or as a direct result of an executive order.
Bottom line consult with a lawyer and consider filing a claim. Do not rely on insurance professionals on this one. The insurance industry has been steadily putting out the word that COVID-19 losses are not covered. That is their party line. Even if they are right, and that is not by any means certain, there is more in play than interpretation of policy language. At least five (5) states including Massachusetts have filed legislation to have business interruption/COVIS-19 claims covered notwithstanding the policy language. Putting aside the question of whether that is constitutional, If this legislation passes, it is likely that the states will wind up subsidizing the insurance claims. It is worth exploring and possibly getting in line if your operation or business was shut down or if your condominium expended excessive cleaning costs. It could just be a pressure tactic employed by the states to get insurers to step up to the plate. The New Jersey legislature employed a similar pressure tactic in response to Hurricane Sandy and it got results on otherwise uncovered losses.
Beyond that the Pandeminium hopefully has awakened every property manager, law firm, condominium and all industry business partners to take a look at and understand their insurance policies. This is typically one of our biggest annual budget expenses and we take little time to understand what is covered or likely covered in our policies or even what coverages or exclusions are paramount in our policies. Typically, we just renew whatever we had last year or try to get a better price. Going forward we all should look at our policies immediately to see what our policies cover and don’t and how we can or should protect ourselves going forward. You can bet the insurers are going to come up with even more exclusions for Pandemic 2. I recommend a joint approach with an insurance agent and a lawyer and collaboration with them and the insured on the next policy.
3. Short Term Rentals.
Let’s face it short term rentals, AIR BNB, etc. were controversial in condominiums before the pandemic. They have been regulated in Boston and Cambridge. In a post pandemic world, short term rentals might be considered a matter of life and death. It may sound like fear mongering but we know the virus traveled here from other countries and other states. Travel bans have been enacted globally and locally, but they are for the most part voluntary. Condominiums that are concerned about heavy traffic and should consider amending their Master Deed to prohibit short term rentals going forward as a matter of protecting their residents.
4. Disinfecting Is The New Norm.
I suspect that much like the 9/11 world, the post pandemic world is going to be different. We know about more about the virus and the fact that it can live on surfaces for days. Condominiums, apartments, business are all disinfecting regularly. The smart ones are using professional companies instead of doing it themselves. Condominium managers don’t shovel snow. They should not disinfect either. They should hire professionals, like Servicemaster By Gilmore to do the job for them. Just like condominiums are expected to shovel snow and have potential liability if they fail to do so, the same may hold true for condominiums that fail to adopt disinfectant programs in the future. My prediction is that in 2021 all condominiums should and will have annual budget lines for disinfectant programs.
5. Masks and Other Protocols.
The CDC is recommending that individuals in public wear masks. The use of a mask protects the public from the individual and vice versa as it: (1) reduces the spread of virus droplets and (2) prevents individuals to a certain degree from touching their face. My prediction is we are going to see more and more of this in the future. It will be required in places of public accommodation and heavy traffic areas including grocery stores. Last week Disney re-opened its Shanghai amusement park in China. All visitors in the park are required to wear masks and have their temperatures taken upon entry to the park. So this begs the question, should condominiums adopt rules requiring owners, guests and visitors to wear masks in the common areas of the condominium (remember matters affecting the common areas can be regulated by rule that require Board approval only and must be reasonable, whereas matters affecting the use of units require Master Deed Amendments and a specific vote of owners). I suspect that condominium common area mask rules will become commonplace before 2021. I also think such a rule is reasonable in light of CDC guidelines.
The question may get a little closer when it comes to taking temperatures of residents before they enter the building or certain common elements. I think this is unlikely to be an issue in condominiums, but some vigilant condominiums may want to explore it. However, the practice of taking temperatures is currently permitted in the employment context, so it certainly has application to condominium business partners and may apply to condominiums that have employees. Employers can keep logs of temperatures and send home employees with high fevers. Temperature taking is becoming easier with laser temperature guns. With a back to business roll out on the horizon, some parties are predicting that employers will be permitted to take blood from employees to test for the presence of antibodies. Other employers may be permitted to require testing and proof of negative results prior to coming to work. These certainly raise employee privacy issues, at least they did in the pre-pandemic world. However, my prediction is certain liberties will fall by the wayside in the post pandemic world and society will adapt. Employees and perhaps unit owners will thank the individuals with the thermometer guns for “keeping them safe” as they enter buildings and facilities.
When it comes to facilities, Condominiums may need to re-think keeping certain amenities open, permanently. Temporary closure in response to a pandemic is one thing and likely within a Board’s powers in the midst of any emergency. Permanent closure is another matter entirely. The reasons will be there and they will be virus related and economic. Lets face it, it is going to be a while before people are going to want to use the gym or the pool again. Also, condominiums will be expected to keep those areas safe, clean and disinfected and that may cost more than it is worth. In Massachusetts, permanent closure of an amenity is likely a reverse improvement and may require a unit owner vote, depending on what the plans and/or expenses are with respect to the same. That, like many of the issues above may require a legal consult.
There are numerous other protocols that a Condominium Board may want to consider and adopt rules relating to in response to COVID-19, such as, (1) trash protocols, (2) mailroom protocols, (3) elevator protocols, (4) gym protocols, (5) guest, visitor and delivery, move in-move out, protocols, etc.
6. Emergency/Executive Powers.
In response to the Pandemic, some condominiums are amending their By-Laws to include emergency powers in the event of a future pandemic or disaster. The emergency powers would allow the Board to circumvent certain provisions contained in their condominiums documents during a declared state of the emergency like a pandemic. The powers would not be all encompassing but their use must relate specifically to the particular state of emergency. For example, in a Pandemic with social distancing, it would specifically authorize the Board to: (1) close amenities, (2) hold remote board meetings, (3) hold electronic elections (assuming the board has not amended their documents already), (4) limit guests and visitors to the building including short term rentals, etc. One emergency power that condominiums may want to consider would be using reserves to pay vendors not ordinarily related to the maintenance, repair or replacement of the building or its common elements. Reserves may be needed to cover cash flow caused by excessive emergency responses or just cash flow. Another may be temperature taking or required self-reporting for confirmed or presumed cases. There are of course other powers, which I cannot even think of because I cannot predict the next national emergency or pandemic and there should be some flexibility built in to allow associations to deal with reality. The benefit of an emergency powers amendment is that it would not be as drastic as banning all short-term rentals, etc. and might be easier to pitch to residents for passage. Conversely, some residents might be concerned that it would give the board too much power, although that concern can be addressed in the amendment itself.
7. Pet Restrictions and Policies.
Pets are a wildcard. Animal lovers everywhere have consistently said that animals do not get the virus and cannot transmit the virus. They say this, while at the same time recognizing that the virus, like most coronaviruses crossed over from an animal, in this case, bats. There have been some reports that dogs have contacted the virus and they certainly were susceptible to the earlier SARS virus. Apparently, Lions and Tigers in the Bronx zoo tested positive for Covid-19, which has led some specialists to conclude that cats are susceptible to catching the virus. However, the experts continue to say that there is no evidence that cats or dogs can transmit the virus to humans. Condominiums that want to be safe may want to consider pet bans. Another issue has arisen with pets. Dogs typically need to be walked and it presents a problem for quarantined individuals and Boards or compassion committees that walk the dogs. It is even more problematic if the animals are sick and have the possibility of transmitting the virus to others. Some Condominiums have assisted residents with dog walking, but the Board may want to consider pet restrictions and other protocols.
8. Mosquito and Pest Control.
As of yet there is no evidence that mosquitoes or other rodents can transmit the virus. In order for mosquitoes to transmit the virus it would have to be able to replicate in the mosquito. The same holds true for rodents. However, better safe than sorry. Condominiums may want to step up pest control in response to the pandemic.
Condominium contracts are often overlooked and jotted down on the back of a napkin or are the typical one piece of paper contractor invoice. The pandemic highlights the need for every condominium to pay attention to contracts. The pandemic has brought back terms such as “act of god” and “force majeure”, which for the most part had been long lost law school exam questions. The right contract can give a condominium leverage, including the ability to cancel or delay the contract in the event of a pandemic. Many lawyers are not adding COVID-19 specific language in their contracts, including requiring vendors to take specific pre-cautions while on site. Contracts always need to be reviewed and should be shrewdly negotiated, now more than ever.
10. Federal Disaster Relief Loans.
Business partners are eligible for the PPP SBA loans, which provide for some level of forgiveness for up to 8 weeks payroll. While the consensus is that condominium associations are not eligible for the PPP SBA forgivable loans, there may be circumstances where they could apply (i.e. if they have employees, or are 501©(3) tax exempt organizations and/or are non-profit corporations (most condominiums in MA are Trusts). It still might not hurt to apply. The Federal Government is also offering other low interest emergency disaster loans products, which condominiums might be able to take advantage of, if they need cash.
Hopefully the pandeminium surrounding condominiums and COVID-19 will subside soon and we will all work together to be better prepared next time.