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COVID-19: Massachusetts Business Closures Impacting Commercial Real Estate Leases
Practical Law Legal Update w-024-6520 (Approx. 5 pages)
COVID-19: Massachusetts Business Closures Impacting Commercial Real Estate Leases
by Practical Law Real Estate
| Published on 26 Mar 2020 • Massachusetts |
In response to the COVID-19 pandemic, Massachusetts' Governor has issued COVID-19 Order No. 13, which implements two-week statewide business closures, including retail closures, effective as of March 24, 2020.
In response to the 2019 novel coronavirus disease (COVID-19) pandemic, Massachusetts' Governor has implemented statewide business closures, including retail closures, by COVID-19 Order No. 13 issued on March 23, 2020. The governor also issued a separate Exhibit A to COVID-19 Order No. 13, setting out a detailed list of COVID-19 essential services to be kept open under the order. COVID-19 Order No. 13 supersedes any order or rule issued by a municipality that will or might in any way impede or interfere with achieving COVID-19 Order No. 13's objectives.
Effective 12:00 p.m. on March 24, 2020, the brick-and-mortar premises of all businesses and other organizations that do not provide essential services as defined in Exhibit A to COVID-19 Order No. 13 must close to workers, customers, and the public until 12:00 p.m. on April 7, 2020.
Essential Businesses
Businesses providing COVID-19 essential services:
- Are excluded from COVID-19 Order No. 13.
- May remain open during their normal business hours.
- Are urged to follow social distancing protocols to the extent practicable. Social distancing practices include:
- all reasonable efforts to keep customers six feet apart; and
- frequent use of sanitizing products on common surfaces.
Businesses providing essential services include the following categories of retail tenants:
- Health care, public health, and human services, including:
- medical facilities, including dental offices;
- blood and plasma donation centers;
- medical supplies and equipment manufacturers and providers;
- pharmacies; and
- licensed medical marijuana retailers.
- Food and agriculture, including:
- grocery, food, and beverage stores, including liquor stores;
- farmer's markets; and
- farm stands.
- Transportation and logistics, including:
- airports;
- mass transit and passenger rail;
- rental car companies and Transportation Network Companies that facilitate continuity of operations for essential workforces and other essential travel;
- automotive repair and maintenance facilities;
- gas stations; and
- mail and shipping services.
- Other community-based essential functions and government operations, including:
- public and private emergency childcare programs;
- hotels;
- convenience stores;
- pet supply stores;
- hardware and home improvement stores; home appliance retailers; and
- laundromats and laundry services.
- Essential services to maintain public works, and the safety, sanitation and essential operations of residences construction sites and projects, and needed facilities, including:
- plumbers;
- electricians;
- exterminators;
- inspectors; and
- other service providers.
- Financial services, including:
- banks;
- insurance companies; and
- businesses that move currency and payments (e.g., armored cash carriers).
- Professional services (such as legal and accounting services), when necessary to assist in compliance with legally-mandated activities and critical sector services or where failure to provide such services during the time of the order would result in in significant prejudice.The Massachusetts Real Estate Bar Association has opined that transactional real estate lawyers provide essential services under both the financial services and professional services categories, because their services are necessary:
- to complete financial transactions;
- to assist clients in complying with their legal obligations; and
- to avoid prejudice to clients.
For the complete list of essential services, see Exhibit A to COVID-19 Order No. 13. The governor may issue updated versions of this list on an ongoing basis.
Restaurants and Bars
Exhibit A to COVID-19 Order No. 13 makes separate provisions for restaurants, bars, and other establishments that sell food and beverage products. Restaurants and bars:
- May and are encouraged to operate their normal business hours.
- May only offer food delivery and take-out services.
- Must follow Massachusetts Department of Health social distancing protocols.
Businesses That Must Close
Businesses that are required to close under COVID-19 Order No. 13 are encouraged to continue operations through remote means where possible.
Practical Implications
The evolving COVID-19 pandemic and the mandated closures or reductions of retail operations of retail stores are creating uncertainty for commercial landlords and tenants. Parties should consult with counsel to evaluate possible risks and liabilities, under both 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.