WHAT ARE THE RISKS OF COVID “REOPENING” FOR MULTI-RES LANDLORDS?

On May 14, 2020 the
Province of Ontario announced a 3 phased plan for the reopening of the Ontario
economy and a return to a “new normal”. Each phase of the plan has
direct impact on the operations of multi-residential operations and is
accompanied with multiple documents related to protecting the health and safety
of workers; and, for multi-res operators, the health and safety of residents.
The clear risk of reopening multi-res operations is that, regardless of whether
the recommended regulatory and “suggested” protocols are followed, if
a worker or resident or visitor to a multi-res building contracts COVID-19, the
landlord will be the likely target of a lawsuit alleging the landlord is at
fault and therefore liable for damages.

One key to mitigating
risk is to ensure that the recommended protocols are followed for each
component of re-opening. For example the province has now clarified that
workers in multi-res construction projects, or in occupied multi-res buildings,
may engage in construction, maintenance and repair, painting, cleaning and
“pool maintenance”. The province has created over 90 documents
setting out detailed health and safety protocols to be followed in relation to
the permitted activities. The onus will be on landlords to research those
documents; accurately determine which protocols apply to which activity; ensure
the protocols are communicated to workers and occupants at buildings; and,
ensure that there is compliance by workers and residents with those
protocols…leaving a paper trail at each step to lay the groundwork for a
defence in future potential legal action.

Landlords with limited
resources to conduct and implement recommended protocols will be most
vulnerable to risk: typically “small” landlords or those who are
largely indifferent to risk mitigation. For landlords who are concerned about
risk mitigation, the reliance on designated staff members to develop and
implement COVID-compliant reopening policies, including staff training, are key
components of a risk mitigation process which, in turn, should be rigorously
documented.

Compliance by workers,
residents and occupants with the direction given by landlords will, in our
view, be among the greatest challenges. When it comes to workplaces, landlords
are legally required to ensure some level of supervision to monitor and enforce
compliance with health and safety protocols. Landlords have a legal right to
exercise a level of control over employees and contractors, so that challenge
should be manageable. The greater challenge will come with managing compliance
by residents and occupants with the provinces recommended health and safety
protocols. Landlords have far less control over tenants and occupants than they
do over workers.

One option for landlords
who use the standard industry lease or other professionally drawn leases is to
introduce new Rules which set out the protocols which tenants and their
households must follow during the reopening process. Such Rules would direct
compliance, for example, with social distancing relative to each other and
employees; contractors; delivery personnel; and visitors. Many such Rules are
effectively in place now, although not necessarily formalized as a term of the
tenancy agreement under the “Rules and Regulations” section of the
agreement. Where a more formal approach is likely to be required is in
connection with the opening of on-site “facilities” such as activity
rooms, party rooms, fitness rooms and, as specifically foreshadowed in the May
14 announcement, the re-opening of swimming pools. In such cases there will be
an expectation (aka. “demand”) by tenants that such facilities will
reopen and, if they don’t reopen, landlords are likely to be exposed to rent
reduction applications by tenants based on “withdrawal of a
facility”.

At present, with the
closure of common area facilities (other than laundry rooms) there is minimal
exposure. Section 39 (7) of the Regulations to the RTA make it clear that where
a withdrawal of a facility is temporary and its duration is reasonable, then
there shall be no rent reduction awarded to a tenant. It is clear that the
risks of COVID-19 have warranted the closure of indoor and outdoor common area
amenities and so the test for avoiding a rent reduction is easily met.
Mitigation of risk of rent reductions will rise considerably with the
provincial authorization for the reopening of “swimming pools”, and
this is clearly anticipated with the phase 1 authorization of “swimming
pool maintenance”. The same may be said for the reopening of other
amenities, although, for example, as long as public gym facilities remain
closed, landlords have a precedent to support continued closure of gym
facilities in their multi-res buildings.

What about in the next
phase, assuming authorization is given for reopening swimming and exercise and
“party room” facilities? In our view landlords will be faced with the
grim challenge of balancing the liability risk inherent in reopening facilities
with the risk of rent reductions. The liability risk of reopening arises when
there is a failure by tenants to comply with protocols and an inability of the
landlord to constantly monitor and take action against those who breach
protocols. At this time, a landlord’s primary responsibility and ability to
enforce COVID protocols arises upon receipt of very specific complaints of
incidents of breach where the detail is sufficient to generate an N5. With
re-opening, there should not be a greater onus on landlords to ensure tenants
are following strict rules, but there may be an expectation that the landlord
do so.

In our view, one option
is for landlords to create clear Rules, as permitted by tenancy agreements,
requiring compliance by residents, their households and guests at each stage of
reopening of current closed on-site facilities. Some internal physical changes
and time of use/occupancy restrictions will likely be necessary, as will
enhancements to cleaning protocols. A requirement that tenants using the
reopened facility sign a waiver agreeing to comply with posted protocols;
assuming the risks inherent in the use of the facility; and, releasing the
landlord from liability in the event the person becomes ill (alleging the
illness resulted from landlord negligent implementation of safety protocols at
the facility), is another option to mitigate risk.

There is no doubt
that there are substantial administrative burdens that will be placed on
landlords as the reopening of business and facilities in the province unfolds.
Like government, landlords must turn their minds to implementation of measures
which, first and foremost, are designed to protect the health and safety of all
persons at their multi-res buildings, but secondly, to minimize risk of
liability in the event such persons suffer foreseeable harm when at the
building. The establishment of clear Rules for health and safety and
implementation of protocols together with the use of waivers provide mechanisms
for mitigating risk to workers, residents and landlords. If you require legal
assistance in developing Rules, waivers or an appropriate set of COVID-19
policies relative to health and safety of workers and residents, our legal team
can help; otherwise, we wish you all the best with risk management and
surviving the “new normal”.