By Marc Pfleging, Scannell Properties
Commercial real estate has been, and will continue to be, deeply impacted by the recent spread of COVID-19. Each time a state implements an Executive Order, real estate developers and general contractors need to take immediate action to evaluate whether jobsites that are under construction constitute essential business that is exempt from the “shelter-in-place” order. Some states will require developers/contractors to file an application for an exemption to continue construction operations. Certain states have imposed deadlines to file those applications, and regardless of whether a deadline applies, it is important to get your application on file due to the volume of submittals being made.
If jobsites are able to continue operations, it is important that the contractors implement appropriate COVID-19 protocol and best practices to keep the jobsites as safe as possible. The Association of General Contractors has helpful resources for best practices. Furthermore, contractors should be sure to have a plan in place in the event that an individual on the jobsite tests positive for COVID-19. Considerations should include, among other things, (i) shutting down the area impacted and performing a deep clean to disinfect the area, (ii) requiring a 14-day quarantine for all other individuals that may have been exposed to the infected area, and (iii) monitoring those individuals that may have been exposed to report any symptoms during the quarantine period. Furthermore, contractors will need to evaluate whether the COVID-19 occurrence is a reportable event under OSHA regulations.
If your jobsite is shut down, the contractor will need to adequately secure the jobsite during the period of closure. All impacted parties will need to review the project agreements (general contract, leases, development agreements, loan documents, etc.) to determine if the COVID-19 delay constitutes an event of force majeure (or other excused delay) and whether any specific notice requirements must be complied with under such agreements. In most jurisdictions, the party claiming force majeure has a duty to use commercially reasonable efforts to mitigate the impacts arising from such delays. Additionally, parties that are impacted will need to evaluate whether a claim or potential claim may exist under any applicable insurance policies. Even if there is not “physical” loss or damage, it may be prudent to make a claim since litigation may ultimately determine whether impacts from COVID-19 are covered risks under certain policies.
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