COVID-19: New York Business Closures Impacting Commercial Real Estate Leases | Practical Law

COVID-19: New York Business Closures Impacting Commercial Real Estate Leases | Practical Law

In response to the COVID-19 pandemic, New York's Governor has implemented statewide business closures, including retail closures, by Executive Orders issued pursuant to the program known as New York State on Pause (Policies Assure Uniform Safety for Everyone).

COVID-19: New York Business Closures Impacting Commercial Real Estate Leases

Practical Law Legal Update w-024-5853 (Approx. 5 pages)

COVID-19: New York Business Closures Impacting Commercial Real Estate Leases

by Practical Law Real Estate
Published on 24 Mar 2020 • New York
In response to the COVID-19 pandemic, New York's Governor has implemented statewide business closures, including retail closures, by Executive Orders issued pursuant to the program known as New York State on Pause (Policies Assure Uniform Safety for Everyone).
In response to the 2019 novel coronavirus disease (COVID-19) pandemic, New York's Governor has implemented statewide business closures, including retail closures, by Executive Orders issued pursuant to the New York State on Pause (Policies Assure Uniform Safety for Everyone) program. Executive Order (EO) 202.8 was signed on March 20, 2020, and supplements and modifies restrictions made in a series of previous executive orders issued earlier in the month.
Effective 8pm on March 22, 2020, all non-essential business normally open to the public are closed until further notice. Businesses other than essential businesses, must reduce the in-person workforce at any work locations by 100%, provided that businesses may, to the maximum extent possible, use any telecommuting or work from home procedures that they can safely utilize. (EO 202.8.)

Essential Businesses

The New York State Department of Economic Development has issued guidance that these restrictions do not apply to essential businesses, which include:
  • Essential Health Care Operations, including:
    • walk-in-care health facilities;
    • emergency veterinary services;
    • doctor and emergency dental services; and
    • medical supplies and equipment manufacturers and providers.
  • Essential infrastructure, including:
    • airports;
    • transportation infrastructure, such as bus, rail, or for-hire vehicles and garages; and
    • hotels and places of accommodation.
  • Essential retail, including:
    • grocery, food, and beverage stores;
    • pharmacies;
    • convenience stores;
    • farmer's markets;
    • gas stations; and
    • hardware and building material stores.
  • Essential services, including:
    • mail and shipping services;
    • laundromats;
    • child care services;
    • auto repair; and
    • funeral homes, crematoriums and cemeteries.
  • Financial institutions, including:
    • banks;
    • insurance; and
    • financial market services.
  • Essential services to maintain the safety, sanitation and essential operations of residences or other essential businesses, including:
    • building cleaners or janitors; and
    • automotive repair.
  • Vendors that provide essential services or products, including:
    • child care programs and services; and
    • government owned or leased buildings
A business that only has a single occupant or employee is also exempt from the Orders.

Restaurants and Bars

Restaurants and bars may remain open but:
  • Must not serve food or beverage on-premises.
  • May only serve food or beverage for off-premises consumption.
Restaurants and bars that have a retail on-premises license, may sell alcohol for off-premises consumption, either by take-out or delivery, subject to State Liquor Authority limitations (EO 202.3).

Retail Businesses That Must Close

Specific categories of businesses that are closed include:
  • Personal care services, including all:
    • barbershops;
    • hair salons;
    • tattoo or piercing parlors;
    • nail technicians;
    • cosmetologists and estheticians; and
    • electrolysis and laser hair removal services.
    (EO 202.7)
  • All indoor common portions of retail shopping malls with over 100,000 square feet of retail space. Essential businesses located within shopping malls having their own external entrances may remain open, provided that any interior entrances to common areas of the mall remain closed and locked.
    (EO 202.5)
  • All places of public amusement, whether indoors or outdoors, including:
    • carnivals, theme parks, amusement parks, and water parks;
    • bowling alleys;
    • aquariums and zoos;
    • arcades and fairs; and
    • children's play centers, and funplexes.
    (EO 202.5)
  • Facilities authorized to conduct video lottery gaming, or casino gaming.
  • Gyms and fitness centers.
  • Movie theaters.
    (EO 202.3)

Practical Implications

The evolving COVID-19 pandemic and the mandated closures or reductions of operations for businesses and stores are creating uncertainty for landlords and tenants of commercial properties. Parties should consult with counsel to evaluate possible risks and liabilities, both under their lease agreements and applicable state law, and should proactively negotiate to:
  • Adjust the terms of the lease, either:
    • for the duration of the COVID-19 pandemic; or
    • permanently.
  • Avoid future lease disputes.
  • Mitigate damages.
To assist with future negotiations or dispute resolution, tenants should carefully document:
  • The dates when governmental orders become effective against the tenant.
  • All impacts of regulations and orders on the tenant's business at the premises.
  • All expenses that they are incurring in responding to the COVID-19 pandemic.
  • All efforts by the tenant:
    • to perform under the lease; and
    • to mitigate losses.
For a collection of resources related to global coronavirus, COVID-19, pandemics, and business interruption content, see Global Coronavirus Toolkit.