Addressing Real Estate Concerns related to COVID-19

During the Covid-19 outbreak, we have received many questions related real estate issues. Concerns such as lease relationships, property sales, and mortgages. There is a lot of uncertainty with how some of these matters will be resolved. Today we update you with some of the current topics and issues on how Covid-19 is impacting the real estate.

As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing managing shareholder Keith Dunnagan at

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Addressing Real Estate Concerns related to
By: D. Keith Dunnagan, Esq., Matthew J. Kirkpatrick, Esq., and Adem A. Balikci, Esq.

covid-19 real estate impactAs the COVID-19 outbreak continues to develop rapidly changes and new laws are coming out almost hourly. In this update, we are addressing issues related to real estate involving disclosures, escrow transactions, foreclosures and leases.

With respect to pending transactions and new escrows, recently the California Association of Realtors provided a Coronavirus Addendum/Amendment (“CVA”) that addresses delays likely to occur as it relates to COVID-19. This addendum is predicated on a legal theory known as “force majeure” which can provide parties to a contract relief from performance when certain unforeseen circumstances beyond the control of the parties arises. Usually, this is referred to as the Act of God clause and can allow the parties to be released from liability on the contract based upon the unforeseen issue that prevent the contract from being performed. Under the CVA the form identifies potential resolutions for parties to an escrow that allow for extensions in closing times for the transaction and creates mutual cancellation rights for the parties. This addendum will assist in dealing the current uncertainty in real estate transactions, while at the same time trying to hold together current escrows by creating closing extensions.

Additionally, we have been asked several questions related to whether or not sellers should be disclosing if someone in house has been diagnosed with COVID-19. I want to start by saying we have not been provided any information of someone who has actually been diagnosed with the virus and none of the real estate professionals that we have talked with know anyone that has been diagnosed. This question is being asked in preparation for if or when the scenario arises. On the issue of disclosure, the law requires that a seller disclose ANY known material defect that is likely to affect price or desirability of a home. This is a very broad and subjective statement that depends upon the opinions of the buyer. As a buyer, if you are concerned about COVID-19 you should absolutely ask the question. As a seller, at least for the immediate future, you should be disclosing diagnosis of COVID-19. This current outbreak would likely be considered a material defect in which a person may base their buying decision on entirely. If it is disclosed and a buyer completes the transaction, they cannot later bring a case for non-disclosure. It is always better to be safe than sorry in these types of transactions.

On the issue of foreclosures, President Trump earlier this week ordered HUD and the Federal Housing and Finance Agency ordered Fannie Mae and Freddie Mac for “at least 60 days” while the nation deals with COVID-19 and will allow families to stay home during the COVID-19 outbreak. The federal agencies in charge of these programs have indicated that they are working on programs to assist borrowers suffering from hardship related to the COVID-19 outbreak, however, details of what those programs will look like are not available. It is likely that some of the modification programs like HAMP and HARP from the 2008 recession may be re-tooled to help homeowners during this crisis. While, the Government has addressed government backed mortgages, these directives do not addressed portfolio loans or those loans that institutional lenders maintain. We will have to watch as the government continues to roll out programs to assist with the COVID-19 outbreak.

Further there have been several questions from landlords and tenants related to the financial impacts on leases whether commercial or residential. These are tough issues to navigate and there is no perfect answer rather, the contractual issues and practical issues should be consider holistically when dealing with difficulties that both landlord and tenants are facing as a result of the COVID-19 outbreak. Below is a synopsis that we are providing both landlords and tenants alike as they navigate these changing times.

As you may know, with the Tenant Protection Act of 2019 (“TPA”) which imposes a state-wide restriction on rent increase and termination of the tenancy with some properties being exempt. According to the TPA, nonexempt property owners could not evict their tenants without just cause. As indicated in the law, nonpayment of rent is considered a just cause and frankly one of the main reasons a landlord could evict the tenant. However, with COVID-19-19 pandemic, Governor Gavin Newsom, on Monday evening, issued Executive Order N-28-20 to help prevent evictions during the COVID-19 outbreak including those premised on the nonpayment of rent.

The order will be in effect through the end of May and could be extended. It doesn’t mean renters won’t have to pay rent, but it could mean delayed payments. The order urges banks and financial institutions to stop foreclosures and evictions during the same time period as well.

The order gives local governments the authority to halt evictions for renters and homeowners, but stops short of creating a statewide moratorium. The order also aims to slow foreclosures and help keep utilities running for residents affected by COVID-19.

Several major cities across the state have taken steps locally to prevent evictions. San Jose, San Francisco, and Los Angeles have moved to enact a moratorium of at least 30 days on evictions against residents who can show that they cannot pay rent because of a loss of income related to COVID-19. Additionally, the Oakland City Council said it would send a letter to Alameda County Superior Court asking the court to halt ongoing eviction cases and refrain from taking new cases. Although it is not clear whether the Courts would reject to file eviction complaints or whether they would file but wait to hear the case until end of April or May, but one thing seems to be clear is that the Executive Order aims to prevent any person to be put on the streets because they cannot pay the rent due to reasons related to COVID – 19.

While landlords may be legally entitled to demand full payment of all rent owed and commence evictions once the above restrictions are lifted, there are business practicalities to consider before moving forward. Some tenants may need to eventually be evicted, but Landlords do not want to be left with vacant buildings as their mortgages oftentimes have convents requiring specified occupancy rates or debt service coverage ratios. Evicting an entire complex of commercial or residential tenants could not only bankrupt the landlord, but also result in a default on the landlord’s loans. There is also the chance that evicted tenants will not have the liquidity to be collectible and may file for bankruptcy. Judgments against tenants will not do a landlord any good in paying their bills.

Therefore, Landlords will need to take individualized approaches to various tenants. A national chain with a 30-year lease should not be treated the same as a sole proprietor or a residential tenant. If commercial vacancy rates rise as a result of lost businesses, there is a high possibility that we could see a shift towards a tenant-friendly market for those that are able to weather the outbreak. Landlords will want to look at all of the options available and negotiate the right deals while considering their portfolio of tenants. Some options to consider are:

    • Forgiving a portion of rent payments;
    • Forbearing a portion of the rent payments until a date certain after the outbreak passes;
    • Change rent schedules to reduce payments now and make up the difference after the outbreak passes and the economy restarts;
    • Keeping the current rent schedule but amortizing a portion of any unpaid rent over the remaining life of the lease;
    • Extending the term of the lease to spread out the repayment of unpaid rent; and/or
    • Securitizing unpaid rents with tenant’s collateral.

In any case, negotiating a workout with tenants will help to provide some certainty in these uncertain times. Reach out to the attorneys at BPE and we can work with you to evaluate your tenants and options.


The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in probate, business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at Our flat fee consult for new clients may get you the answers you need for the questions you have.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.