knowledge | 23 March 2020 |
COVID-19: Considerations for Owners and Occupiers of Commercial Buildings
As COVID-19 throws up challenges and questions for us all, we set out answers to some questions which may arise for owners and occupiers of commercial buildings.
Is there a legal duty to act?
On 12 March 2020 the Taoiseach announced that from 6pm that evening higher education facilities, schools, childcare facilities and cultural institutions would close. The government has also advised that mass gatherings of any kind including conferences, sporting events and religious events should be curtailed to a maximum of 100 people indoors and 500 people outdoors, with implications for venues of all types including hotels, conference facilities, stadiums, theatres and cinemas. Owners, occupiers and managers of all of these building types will need to monitor closely further announcements and the implications for each of them of any additional guidance, orders or directions of the government if and as they are made. Significantly, the State has strengthened its enforcement powers in respect of these emergency measures with the enactment on 20 March 2020 of the Health (Preservation and Protection and other Emergency Measures in the Public Interest) Act 2020.
Legal duties can also arise indirectly. Employers owe particular duties to their employees including under the Safety, Health and Welfare at Work Act 2005 (as amended) (the “2005 Act”), which are discussed in a separate briefing (here). But the 2005 Act also places certain duties on persons in control of a work place or any part of a work place to ensure the place of work is safe and without risk to health. These duties apply beyond those owed directly to employees. Once they apply, they also extend to the requirements under the 2005 Act to undertake a hazard identification, risk assessment and the preparation of a safety statement in respect of the work place. Almost all commercial buildings will also be work places, so that these duties apply to all those in control of shopping centres, offices, hotels and all other places of work even if the persons in control of the work place do not themselves have employees in those buildings. The obligations may be, and are regularly, passed on to property managers, tenants and occupiers by lease, licence or other agreement.
Outside of the unprecedented COVID-19-specific measures and the health and safety legislation, as a matter of general law, each of us owes a duty to each other not to act (and not to fail to act) in a way that causes the other harm. The closer the relationship and more foreseeable the harm, the greater the duty. Aside from it being very much the socially responsible thing to do, it stands to reason that this legal duty of care may place a duty on owners and occupiers of buildings to prevent the harm associated with the spread of COVID-19. There can be no hard and fast rule as to what fulfilment of that duty might look like. Unless a binding legal order is made, owners and occupiers of buildings must decide for themselves what containment measures might be appropriate to the relevant building, its use, its users and other occupiers in light of the relationship which that owner or occupier has to those other users and occupiers.
What actions could be taken?
Appropriate action for all buildings that remain open and operational may include taking some or all of the following:
- increasing cleaning schedules and using more effective cleaning products;
- revising procedures to include routine cleaning of door handles and commonly used touchpoints;
- making liquid soap, hand sanitizer and/ or anti-viral wipes available for use in appropriate areas;
- re-arranging the lay-out of work spaces (seats, desks, tables etc.) to ensure that recommended social distancing parameters can be adhered to;
- restricting non-essential access; and
- placing notices and reminders to promote hand hygiene, social distancing and good personal etiquette when it comes to meeting, greeting and coughing or sneezing.
This list will now be familiar to most of us, but is not exhaustive. Following official guidance from the HSE should go a long way towards meeting the legal expectations.
Landlord and Tenant considerations
Rights and obligations as between landlords and tenants are governed by the terms of the lease agreed between them. There is no legislation that alters how the agreed terms should operate in times of crisis, whether that is a financial crisis, a public health crisis or any other. Unless the lease could be said to be “frustrated” (referred to again below) it is business as usual as between the parties. This means, unless the lease expressly says otherwise, that in respect of those parts of the building for which they each have responsibility under the lease:
- each party must comply with all applicable laws, including health and safety legislation and the government ordered closures and restrictions;
- except where closure is ordered by the government, keep open covenants (particularly relevant in retail leases) and obligations not to leave leased properties unoccupied for any prolonged period (more relevant in office and industrial leases and typically the period is 14 days) must be complied with and have the potential to create dispute if decisions to close, whether temporarily or not, are made unilaterally by tenants;
- the general duty to act to prevent the spread of COVID-19 as discussed above arises for each;
- the right to recover the costs of any actions taken will very much likely be recoverable by the landlord through the service charge (being taken for the benefit of the tenant, possibly among other tenants or occupiers who would share the liability), but the costs of any actions taken by the tenant would be the tenant’s own responsibility (being taken for its own benefit / without recourse to the landlord);
- rent must continue to be paid irrespective of any financial hardship, temporary or otherwise; and
- if the tenant business were to suffer irreparably, no legal right of termination would generally arise (although other avenues may be open to the tenant including exercise of a contractual break option or subject to landlord’s consent, assignment or sub-letting).
It is possible that following a particular cluster of confirmed cases, a building may be the subject of a specific health closure order. At that point, a tenant would likely find that there is an obligation in the lease requiring it to comply with the general law. If it didn’t a landlord could also seek to enforce the tenant’s covenant to ensure compliance We have not seen specific orders such as this in Ireland yet, but it could be that this set of circumstances would pose a question as to the obligation on both parties to continue to perform obligations where there is a fundamental change in overall circumstances affecting the building itself. In exceptional cases the legal doctrine of “frustration” (whereby a truly fundamental matter going to the heart of the contract cannot be performed) or a “force majeure” clause in the lease (excusing non-performance of an obligation on grounds of a major intervening act) could be relevant to assist a tenant but neither of these would be widely available. The fact that any closure is likely to be temporary would hamper any argument for frustration, which is very difficult to prove generally and “force majeure” clauses are not typically agreed in Irish leases. For more information on these issues see our briefing on commercial contracts and force majeure, here.
While the terms of the lease govern the legal relationship, as with any relationship, when things get rocky communication is key to its survival. And the best outcomes for both parties may involve a little compromise on both sides. Consultation and co-operation on virus containment measures would seem to make best sense from everyone’s perspective.
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.