COVID-19: Impact of Outbreak on Residential Leasehold Obligations

However, this was not the case in the late 1800’s and early 1900’s, when outbreaks of scarlet fever, tuberculosis, smallpox and other infectious diseases were serious, and sometimes widespread, problems. And so, we find ourselves looking backwards – way backwards – for guidance on the impact of an infectious disease outbreak on many legal obligations, include those found in real property leases.

Consider this example from the New York Court of Appeals (the state’s highest court) in 1890.  In Edwards v. Mclean,  a prospective tenant signed a lease for a house in New Jersey.  After the lease was signed but before the tenant took possession, the prior tenant, who had not yet vacated, contracted scarlet fever.  The court held that the prospective tenant could not void his lease by reason of the outbreak of a contagious disease, reasoning:

“Had anything occurred from which the lease of the premises had been made more valuable, the gain and profit would have been his; and, if in the mean time the rental value had depreciated, he would have been compelled to have sustained the loss. The breaking out of a disease in the house very likely impaired and depreciated its rental value for the time being, but we must bear in mind that this occurred after the lease had been executed and delivered, and after the interest of the defendant in the premises had vested. It is not claimed that the plaintiff was guilty of any fraudulent concealment of facts, or is chargeable with any negligence in reference thereto, or that it was a matter subject to or within his control…In the absence of an express covenant, a lessor cannot be understood to undertake that the premises embraced in the lease will remain free from infectious diseases during the term. The disease may break out in the tenant’s family after he has taken possession, or it may spread upon the premises from neighboring residences. To hold that a tenant under such circumstances would be relieved from paying rent would, in times of an epidemic of a contagious disease in a populous city, nullify a majority of the leases.”

Ten years later, in 1900, the New York Appellate Division rejected a tenant’s attempt to abandon a leasehold during its term in the wake of another scarlet fever outbreak. In Majestic Hotel Co. v. Eyre, the tenant was one of 400 residents in a large apartment building. After the fever broke out, “the usual precautions known to science were taken to isolate the cases and prevent the spread of the disease.” Still, the tenant “abandoned his apartments on account of the fear of the contagion to himself and family.” The court knew “of no ground upon which the payment of rent can successfully be resisted.” The outbreak had no effect on the tenant’s rental or other obligations pursuant to his lease.

History therefore tells us two important things. First, property owners, operators and managers should take those preventative measures advised by government and health officials, especially with respect to common areas. And second, tenants remain responsible to fulfill their obligations under their leases. These are challenging times for all of us. There may be circumstances requiring a deeper analysis based on specific factual scenarios. As a starting point, however, it seems quite clear that the present pandemic is not grounds to invalidate residential leases or abate rent.

Please note, on April 5, 2020, the Pennsylvania Secretary of Health issued an Order mandating enhanced cleaning and disinfecting requirements for owners of large buildings. The Cleaning Order applies to owners of buildings of at least 50,000 square feet used for commercial, industrial or other enterprises, including but not limited to facilities for warehouses, manufacturing, commercial offices, airports, grocery stores, universities, colleges, government, hotels, and residential buildings with at least 50 units.

The Coronavirus Task Force at Klehr Harrison stands ready to assist you in your business and legal needs. We will continue to provide additional information and guidance as the COVID-19 situation develops.

Author Jordan Rand is a partner in the Litigation Department at Klehr Harrison.