Who Is Responsible for Property Alterations Due to Coronavirus?

Many landlords are updating property health and safety requirements to comply with new local and state regulations. In most cases, interior property alterations will be the tenant’s responsibility, but some leases require that costs be split between the landlord and the tenant. When adding new requirements to the lease, Dan Villalpando, a partner at Cox, Castle & Nicholson LLP, says that landlords should be clear who is responsible.

“While some leases provide that any alterations made in the premises are the tenant’s responsibility, others split the responsibility between the parties based on the nature of the alteration, whether it is required by law and whether it applies just to the tenant’s space or to retail spaces in general,” says Villalpando. “In light of the general uncertainty following COVID-19, landlords should make sure that their leases require tenants to make at the tenants’ expense any and all alterations required by law, including those borne out of force majeure events.”

This includes exterior changes to accommodate social distancing that might fall into a common area space, which can be a gray area. “From a landlord’s perspective, the cost of any barriers within the premises required to force customers to social distance or to further separate customers from employees should be the responsibility of the tenant,” says Villalpando. “If such barriers are structural in nature, a landlord will also want approval rights over the location of, and materials used for, such barriers.”

Existing rules and regulations could also be impacted by the coronavirus and new regulations regarding health and safety. “Some leases provide specific lists of rules and regulations that a tenant must follow, while others give landlords the right to impose reasonable rules at any point during the term,” says Villalpando. “Either way, a landlord may want to impose various rules to protect against the potential spread of COVID-19 and to comply with relevant governmental—like the CDC or WHO—requirements or recommendations.”

This could include a wide range of things, like temperature checkpoints within the property, including staff or limiting the number of people on the property. “It may make sense for landlords to have the express ability to limit the number of customers present at one time,” says Villalpando. “Building off of these rules, landlords may also want the specific ability to eject or remove people from the shopping center who refuse to comply with the rules and regulations or relevant government requirements. For instance, if a customer of a tenant refuses to wear a mask in the common areas of the shopping center, the landlord would have the right to remove that person from the project.”