Modrall Sperling COVID-19 Task Force
*This article is authored by Roberta Cooper Ramo with Alicia Ubeda Harvey, Nicole T. Russell, Haley B. Adams, Jamie L. Allen, and other Modrall Sperling attorneys.
Modrall Sperling strives to be a resource for our clients as they strategize how to continue safely their businesses amidst the ever changing landscape of COVID-19 regulations. In this article, we endeavor to summarize answers to frequently arising questions and provide resources to our clients. Please note that the law, the regulations, and judicial interpretations are in a constant state of flux. Before acting upon any of the information contained in this article, please consult with one of our attorneys to ensure that there have not been changes that might affect your planned course of action. Earlier archived versions of this Article may be accessed here. Though the information they contain is outdated, the history and fuller context of the issues discussed may be helpful.
1. What is the Status of New Mexico’s Re-opening?
The statewide public health emergency first proclaimed by Governor Michelle Lujan Grisham in Executive Order 2020-004 has been renewed and extended many times. Most recently, it was renewed through December 11, 2020 in Executive Order 2020-080. This section aims to highlight the major regulations impacting New Mexico businesses and non‑profit corporations.
A. The Red to Green Framework
The latest order from the New Mexico Department of Health (the “Department”) imposes a highly restrictive, but now nuanced, set of public health related restrictions. The Department’s November 30, 2020 order announced a tiered county-by-county COVID‑19 risk system. This system is called the Red to Green Framework (the “Framework”). The Framework is designed to enable counties to shed burdensome restrictions as soon as public health data shows the virus is retreating within their borders. The Framework became effective December 2, 2020. A general description of the Framework is outlined below but for detailed information read the Department’s Public Health Order issued on November 30, 2020 or go to the Department’s Red to Green Framework page.
- The Framework has 3 levels: Green, Yellow, and Red.
- A county’s Framework level is based on specified health metrics.
- The required public health restrictions vary depending on the county’s Level.
- The Department’s official map displays each county’s current Level and is updated every Wednesday.
- If a county fails to meet the specified metrics for a given level, the county must begin operating at the lower level’s restrictions within 48 hours of the map’s update.
- If a county begins meeting specified metrics for a less restrictive level, the county may begin operating at that level’s restrictions immediately upon the map’s update.
- Similar to previous amended orders, there are different operational and occupancy restrictions depending on the classification of the business or entity in question. For example, “essential businesses” have very different restrictions than “Food and Drink establishments” and each category’s restrictions vary depending on the county’s level. There are different restriction levels for each classification and within each Level. These differences are explained on the Department’s Red to Green Framework page.
B. Ongoing Public Health Requirements and Restrictions
No matter a county’s level on the Framework, the following requirements remain in place throughout New Mexico:
- Facemask Mandate: Facemasks are required to be worn in public.
- Mandatory Quarantine for Individuals Traveling into New Mexico: A mandatory 14-day quarantine is still in place for all individuals traveling into New Mexico from states deemed high-risk. The list of those states deemed “high-risk” is continually changing and is updated weekly. The map of “high-risk” states can be found here. The most recent Executive Order regarding mandatory quarantine is Executive Order 2020-075, which was renewed by Executive Order 2020‑080.
- Rapid Response COVID-19 Watch List: Any organization with two or more “rapid responses” in the last 14 calendar days is included on the New Mexico Environment Department’s Rapid Response COVID-19 Watchlist. A “rapid response” refers to a reported incident of COVID‑19 in the workplace to a state agency. Reporting of COVID-19 incidents in the workplace is required. Frequently Asked Questions about the Watchlist are available here.
- Temporary Closure of Hotspot Businesses: Businesses that accrue a significant number of positive COVID-19 cases within their workforce in a two-week span are subject to temporary closure by the Department of Health. The Department’s press release is available here.
- The closure process is triggered if four or more rapid responses occur within a 14-day period.
- An essential business may be permitted to continue operating if state agencies determine the business is a necessary provider of goods or services within the community in light of geographic considerations.
- Businesses that test each employee every two weeks and regularly provide contact tracing data to the Environment Department will not be subject to closure under this framework
- Enhanced Safety Requirements for Businesses and Nonprofits: Businesses and nonprofits must adhere to the state’s COVID-Safe Practices.
C. Shareholder Meetings During COVID-19 Public Health Emergency
On November 24, 2020, Governor Michelle Lujan Grisham issued an Executive Order stating that any corporate bylaw requiring in-person shareholders’ meetings is temporarily invalid and unenforceable to the extent that it would require violating a Public Health Order. Furthermore, it directs that any shareholders’ meetings scheduled in January, February and March of 2021 are to be conducted by audiovisual means. The November 24th Executive Order is available here.
Shareholders’ meetings and Board of Directors meetings have not been identified as “essential” and have not been exempted from the Department’s Executive Order prohibiting “mass gatherings.” For a complete list of categories and definitions visit the Department’s website, available here. Under the Framework system, the number of individuals considered to be a “mass gathering” changes based on the county’s current level. Under the Red Level, all “mass gatherings” of more than five individuals are prohibited. For other levels, check the Department’s Red to Green Framework page.
Note that the United States Securities and Exchange Commission issued “Staff Guidance for Conducting Annual Meeting in Light of COVID-10 Concerns” which relaxes certain requirements and explains how virtual or hybrid meetings can be lawfully conducted under federal law during the COVID-19 pandemic. That guidance is available here.
If you have any concerns about conflicts between the SEC guidance and the state requirements for shareholders or directors meetings or are not sure how to comply with both, you should check with legal counsel.
These are the lawyers who have been working in this area: Marco Gonzales, Walter Stern, Lynn Slade, Stuart R. Butzier, Brian Nichols, Christina C. Sheehan, Vanessa Kaczmarek, Marjorie Rogers, Roberta Ramo, Jennifer Anderson, and Meg Meister.
2. What Programs are Available to Aid New Mexico Businesses Harmed by COVID‑19?
A. The Small Business CARES Relief Grant Program
The Small Business CARES Relief Grant Program (the “Program”) was created by the State of New Mexico in the November 2020 Legislative Special Session to provide $100 million in grant funding to New Mexico small businesses that are experiencing financial hardship due to the pandemic. The Program is being administered through the New Mexico Finance Authority.
Businesses will be awarded grant amounts of up to $50,000. The grant award amount will be based upon the number of individuals employed by that business. Businesses may apply for this grant regardless of whether they have already received other State or Federal assistance. For details, visit the New Mexico Finance Authority’s website.
New Mexico for-profit businesses and nonprofit organizations with 100 or fewer employees that meet one of the following requirements are eligible for this Program:
- Sole proprietorship owned by a New Mexico resident, OR
- Corporations, partnerships, joint ventures, limited liability companies or limited partnerships that are at least 51% owned by one or more New Mexico residents, OR
- Nonprofit corporation designated as a 501(c)(3), 501(c)(6) or 501(c)(8) entity, or a 501(c) organization that serves past or present members of the Armed Forced of the United States.
The grant application process will open the week of December 7 and closes at noon on Friday, December 18. The first application deadline is noon on December 10, 2020. Applicants are encouraged to apply as early as possible. Applications will be funded in three rounds. Applicants should apply only once for a grant. If an application is not funded in the round in which it was submitted, the application will roll into the next round and will be considered again. All funding is expected to be disbursed by December 24, 2020. For details on how to apply, visit the New Mexico Finance Authority’s website.
B. The Small Business Recovery Loan Fund
The Small Business Recovery Fund (the “Fund”) was enacted by the New Mexico Legislature during the June 2020 Special Session and signed into law by Governor Michelle Lujan Grisham. The Fund is being administered by the New Mexico Finance Authority. Eligible businesses may qualify for a loan of up to $75,000 from the Fund. The loans do not require a personal guarantee or collateral and carry a fixed low interest rate for the life of the loan. Eligible entities are those which:
- Are a New Mexico business or nonprofit corporation organized under Section 501(c)(3) or 501(c)(6) that has closed or reduced operations due to the public health order, and
- Had annual gross revenue of less than $5 million as determined by its 2019 federal income tax return or Form 990, and
- Experienced a 30% decline in monthly gross receipts or monthly revenue in April and May of 2020 as compared to the same months in 2019.
There are no loan fees and loans have an initial three-year term with interest-only payments for the first three years. Principal and remaining interest due on the third anniversary of the funding date or the remaining principal and interest may be converted into a loan with monthly principal and interest payments with a term of an additional three years. There is no pre-payment penalty for paying the loan off in advance.
Loan applications are being processed on a first-come, first-served basis. The application period will only remain open through December 31, 2020. To learn more about eligibility requirements and to apply, go to the New Mexico Finance Authority website.
C. The New Mexico Recovery Fund
The New Mexico Recovery Fund, L.P., is a $100 million direct lending facility designed to help larger New Mexico-based business make it through the current crisis. The money comes from the State Private Equity Investment Program and is administered by Sun Mountain Capital. This fund is for New Mexico business with 40 or more employees. Loans sizes vary based on the entity’s operating expenses but can range between $500,000 and $10,000,000. Note that there is no loan forgiveness component to the New Mexico Recovery Fund, L.P. The basic eligibility requirements are that the business:
- Meet the definition for a “New Mexico based business.”
- Employ 40 or more New Mexico based employees.
- Demonstrate negative COVID-19 economic impact.
- Commit to spending at least 80% of loan proceeds in New Mexico.
To learn more about eligibility requirements and the application process visit Sun Mountain Capital’s website.
D. City of Albuquerque Small Business Economic Relief Grant
While not a statewide resource, the City of Albuquerque Economic Development Department has set up a Small Business Economic Relief Grant, which offers a one-time payment of up to $10,000 to local for-profit small businesses.
Note that the City of Albuquerque will start accepting the third round of applications starting December 7, 2020. The application period closes on December 11, 2020. For more details and eligibility Requirements, visit the City of Albuquerque’s Economic Development page.
3. What Federal Programs remain available to help businesses and individuals?
A. The Main Street Lending Program
The Federal Reserve established the Main Street Lending Program (Program) to support lending to small and medium-sized businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic. The Program operates through five facilities. The most up to date term sheets for each facility and FAQs can be accessed here.
On October 30, 2020, the Federal Reserve updated the Program’s terms to expand the number of businesses that may be eligible to borrow under the Program. Furthermore, the rules for business and nonprofit lenders were amended to exclude receipt of Paycheck Protection Program loans when determining maximum loan size, under certain circumstances.
Small and medium-sized businesses interested in the Program can apply for Program loans by contacting an eligible lender, a list of which can be found here. This program will remain in effect until December 31, 2020.
B. Student Loan Payment Relief
On August 8, 2020, President Trump issued the Memorandum on Continued Student Loan Payment Relief During the COVID-19 Pandemic, available here. Essentially this allows borrowers of student loans that are held by a federal agency to suspend payments until December 31, 2020 without penalty or accrual of interest. However, this relief does not apply to borrowers whose student loans are held by private entities.
C. Mortgage Assistance
The loan origination flexibilities through Fannie Mae and Freddie Mac announced by the Federal Housing Finance Agency expired November 30, 2020. The flexibilities included buying qualified loans in forbearance, alternative appraisals on purchase and rate term finance loans, alternative methods for documenting income and verifying employment before loan closing, and expanding the use of powers-of-attorney to assist with loan closings. The Federal Housing Finance Agency’s press release is available here.
D. Deference of Payroll Tax Obligations
On August 8, 2020, President Trump issued the Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster, available here. The Internal Revenue Service (IRS), later issued guidance, available here, stating that payment of payroll taxes for applicable wages is postponed until the period beginning on January 1, 2021, and ending on April 30, 2021.
E. Stimulus Relief Bills like the CARES Act as Modified by the Paycheck Protection Program Flexibility Act
The Paycheck Protection Program Flexibility Act of 2020 (PPP Flexibility Act) funded by the Coronavirus Aid, Relief and Economic Security Act, known as the CARES Act, was created to provide loans for businesses. On August 8, 2020, the Small Business Administration (SBA) stopped accepting Paycheck Protection Program (PPP) loan applications. Entities that secured funding should have already received an SBA loan number.
There is ongoing discussion about a new stimulus bill and the possibility of a stand-alone bill to provide additional funding to the PPP. The legislative landscape is confusing and unpredictable. We will continue to update the Modrall Sperling website with federal guidance as it develops.
4. Is there any guidance regarding loan forgiveness under the PPP?
The guidance for PPP loan forgiveness has evolved over time. The frequent changes to the PPP forgiveness process can be confusing. The information below is intended to provide a general overview of the current PPP loan forgiveness provisions. For specific questions regarding your PPP loan you should contact your lender and consult legal counsel with additional questions.
PPP loan borrowers apply for forgiveness through their SBA approved lender, not the SBA. Forgiveness guidance is available on SBA’s PPP page.
For those borrowers who already applied for forgiveness, the SBA began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders October 2, 2020. If you have already submitted a loan forgiveness application and you are uncertain of the status of your application, it is very important that you check with your lender and not assume that the application has all of the information required under any new funding act. Every item required to be documented must be complete for a lender to submit a forgiveness application to the SBA.
Note that if a borrower does not submit a forgiveness application within 10 months of the end of the Covered Period, deferral on PPP loans ends, and borrowers must begin making payments. This and other helpful guidance can be found on SBA’s Loan Forgiveness Fact Sheet, available here.
The SBA has also offered guidance on appealing rejections of PPP loan forgiveness applications. See Subsection B below for an outline of the procedure to appeal PPP loan forgiveness applications that have been turned down.
Regardless of whether or not you have submitted your loan forgiveness application, it is important to keep detailed records of how you are complying with the stringent PPP loan rules. Applicants should continue to maintain detailed records, ask for receipts, and keep all supporting information, from the beginning of the covered period. While the PPP rules only require that you keep records for 6 years, we suggest you keep your records for the 7 years required by the IRS because there can be tax implications associated with the loans,. Applicants should draft memos—reviewed by counsel—to document eligibility for loan forgiveness.
A. Loan Forgiveness Requirements
Loan forgiveness will be based upon the business’ actions during the covered eight or twenty-four week period. From there, forgiveness will be determined by certain costs incurred and payments made throughout the covered period. Payroll costs are the primary eligible costs, and include:
- Salary, wages, commission or similar compensation (limited to $100,000.00 compensation or less per employee)
- Payments for vacation, parental, family, medical or sick leave (this may be limited if the Employer got benefits under the Families First Corona Virus Response Act, FFCRA)
- Allowance for dismissal or separation
- Payments for the provision of group health care benefits, including insurance premiums
- Payments for retirement benefits
- State or local payroll taxes
Under the PPP Flexibility Act, available here, no more than 40 percent of the loan forgiveness amount can be attributable to non-payroll costs. Those non-payroll costs eligible for forgiveness include:
- Interest payments on mortgages incurred in the ordinary course of business on real or personal property in existence as of Feb. 15, 2020
- Rent payments under leasing agreements in existence as of Feb. 15, 2020
- Utility payments for electricity, gas, water, transportation, telephone or internet for which service was in existence as of Feb. 15, 2020.
It is possible the borrower’s forgiveness amount could still be proportionately reduced if the business has reduced its number of full-time equivalent (FTE) employees, or if the business has reduced the salary or wages of certain employees. The PPP Flexibility Act has loosened those restrictions in the following ways:
- Workforce Restoration Timeline Extended: Borrowers now have until December 31, 2020, to restore their workforce levels and wages to qualify for full loan forgiveness. The prior deadline was June 30, 2020.
- Forgiveness Requirements Eased: If borrowers can in good faith document that from February 15, 2020 to December 31, 2020 they could not: (1) rehire individuals who were employees on February 15, 2020, or hire similarly qualified employees for unfilled positions on or before December 31, 2020; or (2) return to the same level of business activity at which such business was operating before February 15, 2020, because of COVID-19-related operating restrictions, they may still have their loans fully forgiven without fully restoring their workforces.
As mentioned above, the rules for PPP loan forgiveness have changed over time. For a full chronological list of all the interim rules posted starting April 2 up until now, go here or visit past versions of our site to see their evolution.
B. Loan Forgiveness Applications
On October 8, 2020, the SBA and Treasury Department announced simplified rules for PPP forgiveness for loans of $50,000 or less. The SBA also issued further guidance on loans of all sizes and lender responsibilities. The Interim Rule on Additional Revisions to Loan Forgiveness and Loan Review Procedures issued on October 8, 2020, is available here.
If your loan was for $50,000 or less you may now use the new simplified loan forgiveness application, SBA Form 3508S. Here are the instructions for the simplified loan forgiveness application. However, your SBA approved lender will likely provide you with more guidance on how to submit your application. You should consult with your lender to determine how it wants to proceed.
If your loan was for over $50,000, you must determine whether you qualify for Form 3508EZ which may only be used by borrowers who are either self-employed, independent contractors, or sole proprietors. If none of these apply to you, then your forgiveness application must be done on Form 3508, last updated June 16, 2020. Both forms have further requirements regarding employees’ salaries and wages, as well as possible deductions. For those specifics you should consult the forgiveness application instructions for each form and the SBA’s Frequently Asked Questions regarding Paycheck Protection Program Loans, last updated October 7, 2020 and available here.
There is an appeal process for borrowers whose PPP loan forgiveness applications are denied by their lender. The appeal process for PPP loan forgiveness denial was issued by the SBA on August 25, 2020 through an interim final rule, available here. If a borrower’s PPP loan forgiveness application is denied by its lender, the borrower should request SBA review. The SBA is accepting appeals by email at email@example.com, by fax at (202)205-7059, and via the Hearing and Appeals Submission Upload Application, available here.
If the final SBA review process also denies the borrower’s PPP loan forgiveness application, the borrower may appeal through the SBA’s Office of Hearings and Appeals. To appeal, borrowers must follow the steps outlined in the interim final rule, including filing the appeal petition within 30 calendar days after receipt of the final SBA loan review decision.
5. What do PPP Recipients Need to Know?
If a borrower applying for PPP loan forgiveness also received an Economic Injury Disaster Loan Advance (EIDLA), SBA is required to reduce the borrower’s loan forgiveness amount by the amount of the EIDL advance. SBA will deduct the amount of the EIDLA from the forgiveness amount remitted by SBA to the lender. If the PPP loan is not forgiven in full (including if there has been a reduction in the forgiveness amount for an EIDLA), any remaining balance due on the PPP loan must be repaid by the borrower. Lenders must notify borrowers of the loan forgiveness amount remitted by SBA and the date of which the borrower’s first loan payment is due. The borrower must repay the remaining loan balance by the maturity date of the PPP loan (either two or five years).
Additionally, PPP recipients should be aware that the SBA may review any PPP loan, regardless of size, to determine if the borrower was eligible for PPP loans under the CARES Act, whether the borrower calculated the loan amount correctly and used the funds for eligible costs, and whether the borrower is eligible for the amount of loan forgiveness it requests. For this reason, it is critical that borrowers keep all paper and electronic records related to loan disbursement and spending for at least 6 years after the date that the loan is forgiven or repaid in full. (Six years is the minimum for PPP purposes, but for tax purposes, as noted above, we recommend seven years.) However, FAQ 46, available here, provides that if the SBA in the course of its forgiveness review comes across a mistake on the part of the borrower, the SBA will notify the borrower, who can repay the loan without penalty. If you received a PPP loan and are contacted by the SBA regarding a mistake you should contact your legal counsel and accountants right away.
Borrowers who received a PPP loan of $2 million or more may be required to fill out a Loan Necessity Questionnaire as part of the SBA’s review process. The SBA published a notice seeking comment in the Federal Register on October 26, 2020, available here. Although the SBA has not officially released the Loan Necessity Questionnaires, Borrowers who received $2 million or more in PPP loans should consult legal counsel regarding the responses to and possible consequences of these questionnaires for the Borrower.
If you are PPP recipient contemplating a sale of assets of your business, you need to consider the SBA rules regarding loan forgiveness in that context. On October 2, 2020, the SBA issued a procedural notice clarifying when borrowers of PPP loans and their lenders need SBA permission for changes of ownership. The recently issued procedural notice changed the definition of a “change of ownership.” Part of the change in definition means that if the sale or transfer is less than 50% of the company’s equity or assets and the borrower has already completed a PPP forgiveness application with the lender, PPP borrowers and lenders do not need to seek SBA approval. If the sale or transfer is 50% or more of the company’s equity or assets, the borrower may need SBA approval depending on whether the borrower has completed the following requirements with the lender: (1) the borrower has completed a PPP loan forgiveness application; (2) the borrower has submitted the PPP loan forgiveness application to its PPP loan lender; and (3) the borrower has set up an interest-bearing escrow account with that lender to cover the PPP loan. However, if any of those requirements cannot be met, the borrower must still get SBA approval for the sale or transfer. Previously, SBA approval was always required. Notably, even if business ownership is transferred, the original borrower is still responsible for the PPP loan.
If your business is a PPP borrower and has not obtained PPP forgiveness, you should consult with your lender before planning any sale of equity or assets. Additionally, we recommend consulting legal counsel prior to agreeing to any transfer of equity or assets so that a clear plan to maintain loan forgiveness is determined. Meg Meister and Ian Bearden are working in this area.
6. How has COVID-19 affected tax filings, tax matters and retirement plans?
As a result of the CARES Act, for 2020, individuals who do not itemize deductions are nevertheless allowed to take a deduction for cash gifts made to charitable organizations, other than donor advised funds or supporting organizations. The amount of the allowed charitable deduction is the lesser of the value of the cash gifts or $300 ($600 if married filing jointly).
For 2020, as to an individual who does itemize deductions, the individual is entitled to a deduction for cash contributions made to charitable organizations, other than donor advised funds or supporting organizations. The amount of the allowed deduction is the lesser of the value of the cash gifts or 100% of the individual’s adjusted gross income.
A corporation may claim a deduction for cash gifts made to charitable organizations, other than donor advised funds or supporting organizations. The amount of the allowed deduction is the lesser of the amount of the cash donations or 25% of the corporation’s taxable income. These increased deduction limits for charitable contributions only apply to cash gifts made in 2020.
The CARES Act has a number of very important exemptions or changes to rules concerning retirement plans of all kinds. These range from changes providing large loans and distributions from qualified plans for those qualifying for them to suspension of required minimum distributions (RMDs). Other changes were made that might make a difference in your decisions about charitable gifts from IRA’s and certain estate planning matters. For example, qualified individuals have three years to return COVID-19 related distributions from IRAs and retirement plans. For Retirement Plan questions of all kinds, Karen Kahn is working on these matters. For other tax matters, including state taxes and estate tax questions the following lawyers are able to help: Vanessa Kaczmarek, Marjorie Rogers, Ian Bearden, Zack McCormick, Roberta Ramo and Nadine Shea.
7. Are there any health insurance or health plan issues?
Certain protections of continuation of health benefits are covered by the CARES Act. However, many of these depend upon the hour requirements of the employer’s plan and there may be state insurance rulings that have changed. The U.S. Department of Labor (DOL) and the IRS have waived health plan claims deadlines for both employees and employers, including deadlines for paying COBRA premiums. On May 13th, the IRS issued Notices that permit Employers the option of: 1) extending the grace period for unused amounts from 2019 in Health FSAs and DCRAs to December 31, 2020; 2) prospectively permitting changes to health plan coverage and to Health FSAs and DCRA amounts without a qualifying status change (although Employers can limit the amount and the election change period); 3) permitting use of telehealth services without disqualifying HSA contributions; and 4) increasing the Health FSA carryover to $550 and permanently indexing the carryover dollar amount. Amendments to plan documents are not required until December 31, 2021. The IRS has also extended many health plan deadlines including the deadlines for submitting medical claims, electing COBRA, and adding new dependents.
Further, the New Mexico Office of Superintendent of Insurance has issued various guidance documents relating to the COVID-19 pandemic. A continually-updated collection of these documents can be found here.
Also important are the requirements of HIPAA when an employer finds that an employee has been diagnosed with COVID-19. Kevin Pierce is ready to answer HIPAA questions and Karen Kahn can help with health plan and cafeteria plan questions.
8. How does COVID-19 affect employers?
The DOL is requiring employers to post a notice of the Families First Coronavirus Response Act (FFCRA). The FFCRA became effective on April 1, 2020. The current poster applicable to non-federal employees (as of March 26, 2020) can be found here. The DOL has provided additional information regarding the FFCRA and related posters on the DOL website here.
Employers are required to inform employees of the rights afforded by the FFCRA. The DOL counsels that an employer may satisfy this requirement by emailing or direct mailing this notice to employees, or posting this notice on an employee information internal or external website.
As businesses reopen, they should review the guidelines from the CDC, available here and here, and the State of New Mexico, available here. Note that businesses that are currently open must follow many requirements in the Governor’s Orders, including the number of people that can be in their business and other requirements.
Several attorneys in our Employment Group can help with these kinds of issues.
9. How has COVID-19 impacted real estate leases?
Both residential and commercial leases are impacted by the COVID-19 shutdown.
For commercial leases, look first to the language of the lease. Many tenants have stopped paying rent during the shutdown and both landlords and tenants are looking at their leases. The result of that analysis is in part dependent upon the language of the leases. However, many leases do not address a virus in a clear way. Additionally, tenants who were recipients of PPP loans may be required to pay rent under certain terms of that loan. Other loans may not have a similar requirement. Landlords should be clear about following the notice provisions of the default clauses in their leases and tenants would be well advised to get in touch with their landlords directly. Any written communication by either the landlord or tenant should be reviewed by your attorney. Meg Meister, Roberta Ramo and Robin James are working in this area.
For residential leases, the following information may be helpful:
The CARES Act contained a 120-day “moratorium” on landlords evicting tenants or imposing fees/fines due to a tenant failing to pay rent. However, this moratorium expired on July 24, 2020, allowing landlords to issue 30 days’ notice for tenants to vacate properties. The CARES Act eviction moratorium applied to “covered dwellings” and “covered properties”, which included any property that participates in a covered housing program including such as (among other programs) the Low Income Housing Tax Credit program (26 U.S.C. § 42) and programs pursuant to which the landlord’s mortgage is a HUD, VA, USDA or Fannie Mae or Freddie Mac loan.
Even though the federal moratorium has expired, relief for renters continues to be in effect at the state level. Before the enactment of the CARES Act, the New Mexico Supreme Court issued an Order staying the execution of all writs of restitution under the Owner Resident Relations Act for non-payment of rent, provided the resident “has demonstrated by a preponderance of the evidence a current inability to pay monthly rent established by the rental agreement.” The Order does not contain a termination date, and instead, “shall remain in effect until amended or withdrawn by future order of the Court.” Accordingly, the Order continues to apply even though the CARES Act moratorium has expired. There is a list of Frequently Asked Questions on New Mexico Courts website, available here.
10. What about creditors’ rights issues?
In addition to leases, COVID-19 has had a dramatic effect on loan repayments. Businesses that extend credit are being requested to forbear collection and the CARES Act has expanded certain bankruptcy relief. Moreover, the dramatic oil price reduction has hurt businesses and individuals within, and dependent on, the oil and gas industry for revenue. Creditors should understand their rights and the rights of their borrowers, including the revisions to the Bankruptcy Code under the CARES Act.
On Friday, June 5, the New Mexico Supreme Court handed down an order, available here, suspending any issuance of new writs of garnishment and writs of execution in consumer debt cases. Previously-issued writs and domestic support obligations are unaffected.
11. Is it possible to execute new Estate Planning Documents during the shutdown?
Yes. In New Mexico, documents that only need to be witnessed by a notary may be notarized by video (i.e. Zoom or FaceTime), if certain requirements are satisfied. Initially, the notary by video was allowed until June 20, 2020 but that time limit has since been extended until rescinded by Governor Lujan-Grisham under Executive Order 2020-039.
Most states have enacted some form of remote notarization. However, state laws and guidance are evolving quickly during the ongoing pandemic, so it is a good idea to check the laws of the state where you are notarizing the documents. A helpful resource that summarizes approaches from different states is available here.
Additionally, and especially important now, is letting someone in your family know where your original wills, trusts, durable powers of attorney and health care directives are kept. If you have questions about creating or updating your estate planning documents, the attorneys in our Trusts and Estates Group can help.
12. What employment issues exist in the context of reopening?
The Department of Labor and the Equal Employment Opportunity Commission have issued guidance—available here—to help employers apply sick leave and the expanded Family Medical Leave Act and to avoid claims for discrimination, retaliation, and harassment in the workplace based on COVID-19. The Guidance covers matters such as the ability for employers to take the temperatures of employees entering the workplace, limitations on disclosing the identity of a COVID‑19 positive employee, and the duty to accommodate an employee’s request for accommodation based on a fear of contracting COVID‑19. Modrall Sperling’s Employment Group is ready to navigate employers through these and other potential areas of exposure. These guidelines continue to change and you should consult with your attorney before you take action.
13. Risk management and related litigation.
The Long Term Care and Healthcare industries are facing regulatory and personal injury claims related to COVID-19. Our attorneys have handled regulatory and litigation matters for our clients in the Long Term Care and Healthcare industries, such as skilled nursing facilities and assisted living facilities, and hospitals, including regulatory proceedings, trials and appeals, and they are well-versed in recent COVID-19 developments. Should you be threatened with COVID-19 related litigation or regulatory enforcement matters, attorneys, Michelle A. Hernandez, Tomas J. Garcia, Tim L. Fields, Martha Brown, Susan Bisong and Jeremy Harrison can help you.
The most important advice of all: Stay safe, practice social distancing, wash your hands, wear your masks and know that we all care about our whole community and are here now and in what we know will be a robust recovery for New Mexico.