Washington's "Silenced No More Act" Goes into Effect on June 9, 2022

Since 2018, Washington has prohibited employers from requiring employees to sign agreements, as a condition of employment, that prevent employees from disclosing sexual assault or sexual harassment occurring in the workplace or at work-related events.

The new law repeals and expands upon the 2018 version. Under the new law, Washington employers cannot (1) retaliate against an employee for disclosing allegations related to protected issues; (2) request an employee agree to a provision that the law prohibits; or (3) try to, threaten to enforce, or try to influence a party to comply with a provision that the law prohibits.

In this regard, the law prohibits certain topics, such as: any conduct an employee “reasonably believes” under Washington, federal, or common law to be discrimination, retaliation, harassment, a wage-and-hour violation, sexual assault, or conduct violative of public policy. This extends to allegations arising from the actual workplace and work-related events (on or off the premises) and also conduct that is coordinated by or through the employer, between employees, or between an employee and employer.

Interestingly, some exceptions exist. An employer can keep the amount of a severance or settlement confidential (though employers cannot prohibit the employee’s disclosure of allegations or the fact of the settlement). Second, employers can still protect trade secrets, IP, and confidential information that do not otherwise involve illegal conduct or prohibited conduct.

The new law applies to employment agreements, separation and severance agreements, and independent contractor agreements. However, it does not automatically invalidate prior agreements that may violate the law as long as employers (1) don’t try or threaten to enforce the otherwise illegal provisions and (2) employers comply going forward with new agreements.

The law provides a private right of action and for civil penalties of either actual damages or statutory damages of $10,000, whichever is greater. The law also provides for attorneys’ fees and costs under certain circumstances.

Because of the broad scope of the act, the severe penalties, the requirement not to enforce prior agreements, and the mandate of compliance moving forward, it is imperative that Washington employers consult with their legal advisors to ensure compliance with the new law. Mack Mayo at Piskel Yahne Kovarik PLLC has extensive experience in preparing employee handbooks, internal policies and procedures, employment agreements, independent contractor agreements, separation agreements, and severance agreements. Let us know how we can help your business do what it does best - business - while we take care of the legal work.

Remember All Those ‘Extra’ Landlord/Tenant Regulations from Last Year? Here is What Is Still in Effect.

What Landlords Can Do:

• Charge late fees for rent* that came due on or after January 1, 2022.

• Report a tenant’s nonpayment of rent that occurred on or after January 1, 2022 to a prospective landlord.

• Report an eviction action based on nonpayment of rent brought against the tenant that was brought on or after January 1, 2022 to a prospective landlord.

• Reject a tenant based on nonpayment of rent or an eviction which occurred on or after January 1, 2022.

• Regardless of when unpaid rent accrued:

  • Attempt to collect debt through a collection agency.

  • Apply a security deposit to past due rent.

  • Report debt to credit bureaus.

What Landlords Cannot Do:

•  Charge late fees for rent that came due between March 1, 2020 and December 31, 2021.

• Report a tenant’s nonpayment of rent that occurred between March 1, 2020 and December 31, 2021 to a prospective landlord.

• Report an eviction action based on nonpayment of rent brought against the tenant that was between March 1, 2020 and December 31, 2021 to a prospective landlord.

• Reject a tenant based on nonpayment of rent or an eviction which occurred between March 1, 2020 and December 31, 2021.

What Landlords Must Do:

Landlords must offer tenants a “reasonable schedule” for repayment before filing an eviction action for all unpaid rent accrued between March 1, 2020 and the end of the “Public Health Emergency.”

 The “Public Health Emergency” ends whenever Governor Inslee’s proclamation 20-05, declaring a state of emergency due to COVID-19, ends. It has been in place since February 29, 2020 – there is no clear end date on the horizon.

 * For these purposes, Rent includes utilities. Landlords are no longer prohibited from pursuing collection or eviction actions based on nonpayment of utilities.

Inslee is out of the Housing Business - Now What?

     By: Whitny Norton and Tyler O’Brien 

The Eviction Moratorium “Bridge” came to an end on October 31st. Now, Landlord’s can go back to the status quo … but what was it? The “Bridge,” in and of itself, was not as restrictive or protective as many political pundits made it out to be. The significant changes are relatively simple.

The important thing for landlords to remember is that many of the changes to Washington law in the past year were made by the legislature. Even with Governor Inslee out of the housing business, the Washington Residential Landlord-Tenant Act (“WARLTA”) looks significantly different than it did prior to the pandemic. There are plenty of laws, still in effect, that can cause significant issues and liability for Landlords.

 The Significant Changes Resulting from the Expiration of the Bridge

i.         Certain Collection Actions Are Allowed

Landlords may now treat defaulted rent accrued between February 29, 2020 and July 31, 2021 as an enforceable debt. Unless the terms of a lease agreement say otherwise, Landlords can: (1) apply a security deposit to past due rent; (2) attempt to collect debt through a collection agency; or (3) report to credit bureaus.

REMEMBER: Landlords are still obligated to offer repayment plans and cannot report defaulted rent from this period to prospective landlords. HB 5160.

 ii.       Restrictions are No Longer Based on Local Programs

Landlords may proceed with evictions, regardless of whether their county has a Right to Counsel, Rental Assistance, or Eviction Resolution Programs in place.

REMEMBER: your county may have adopted its own policy. Look to your county’s standing order (issued by its superior court) and any other rules it may have.

Still in Effect – Recent Changes to the WARLTA

i.         For Cause Evictions and 60 Days’ Notice to Terminate Most Fixed-Term Leases

In order to terminate most fixed term leases and ensure they do not continue on a month-to-month basis at the end of the term, landlords must send a notice informing the tenant the lease will end at least 60 days before the term expires.

ii.        Eviction Resolution Program Notices and Repayment Plans – the New Status Quo.

Eviction Resolution Program Notices are required by statute in all evictions based on defaulted rent. HB 5160. The same law requires repayment plans to be offered for all rent accrued between March 1, 2020 and 6 months past the end date of the state of emergency declared by Governor Inslee on February 29, 2020, which is still in effect today. For the foreseeable future, both ERP notices and Repayment Plans are required.

iii.       Adverse Actions Still Forbidden

Landlords cannot charge late fees for rent accrued since March 1, 2020 until after December 31, 2021. This means Landlords can go back to charging late fees on January 1, 2022 but cannot retroactively apply late fees to defaulted rent from March 1, 2020 to December 31, 2021. 

For this same time period, current/former Landlords cannot report the tenant’s nonpayment or an unlawful detainer action brought against them to prospective Landlords. Prospective Landlords also cannot take adverse actions for the nonpayment of rent during this period. In short, Landlords cannot discuss or make decisions based on defaulted rent accrued between March 1, 2020 and December 30, 20221.

A landlord who violates these laws is liable for up to 2.5 times the amount of monthly rent of the property at issue, court costs, and attorney’s fees.

Sending notices for evictions, rent increases, and lease renewals have become risky endeavors. Taking the wrong action can, in some cases, force a landlord to pay a tenant up to 2.5x damages, court costs, and attorney’s fees.

We can help. Piskel Yahne Kovarik, PLLC (“PYK”) is an experienced team of legal professionals offering, among other things, comprehensive legal representation to owners, property managers, and businesses.

PYK carefully tracks the frequent changes in landlord tenant law, so we can better serve our clients.

Contact our legal team today to see how we can assist you in protecting your investment.

The Latest “Bridge” to Nowhere: WA Law Extends Protections – Creates No New Ones

By: Whitny L. Norton and Tyler B. O’Brien

On September 24th, 2020, Governor Inslee signed a proclamation extending Washington’s eviction moratorium “Bridge.” At this point, someone should probably write an article assessing the effectiveness of eviction moratoriums as a long-term policy from an economic and political standpoint. We will leave that conversation to the pundits and stick to what we know, landlord-tenant law.

I.              How Does the Second Bridge Affect Me as a Landlord or Property Manager?

The latest “Bridge” is just an extension of the previous one.

·      The rules regarding defaulted rent which accrued between February 29, 2020, and July 31, 2021, have not changed.

o   Damage deposits cannot be applied to past due rent for this period.

·      The rules regarding defaulted rent which accrued between August 1, 2021, and September 30, 2021, have been extended to October 31, 2021. In summary, landlords cannot serve an unlawful detainer summons or a notice to vacate if a tenant:

o   has made full payment;

o   made a partial payment pursuant to an agreement with the landlord;

o   has a pending application for rental assistance; or

o   resides in a jurisdiction where the rental assistance program is anticipating receipt of additional rental resources but has not yet started their program or the rental assistance program is not yet accepting new applications. 

Under the “Bridge,” late fees cannot be assessed through October; however, that was already prohibited by SB 5160. Late fees cannot be applied until at least December 30, 2021 (subject to change).

II.            What Can I do To Evict Tenants Who Refuse to Pay Their Rent?

Sending notices for evictions, rent increases, and lease renewals have become risky endeavors. Taking the wrong action can, in some cases, force a landlord to pay a tenant up to 2.5x damages, court costs, and attorney’s fees.

We can help. Piskel Yahne Kovarik, PLLC (“PYK”) is an experienced team of legal professionals offering, among other things, comprehensive legal representation to owners, property managers, and businesses.

PYK carefully tracks the frequent changes in landlord tenant law, so we can better serve our clients.

Contact our legal team today to see how we can assist you in protecting your investment.

U.S. Supreme Court Eliminates the CDC Eviction Moratorium – Plenty of Hurdles Still in Place For Landlords In Washington

By: Tyler O’Brien and Whitny Norton

Some of Washington’s Landlords have been waiting since January of 2020 to evict tenants who never intend to pay their rent. The U.S. Supreme Court’s decision to strike down the Center for Disease Control’s (“CDC”) eviction moratorium may sound like welcome news but it has little effect on Washington tenants and landlords.

l. Most Tenants Never Qualified for Protection Under the CDC Moratorium

When it was in effect, the CDC moratorium banned evictions based on defaulted rent where the tenant was specifically affected by the pandemic (i.e., fell ill, lost their job, etc.). Evictions for other causes, (i.e., illegal conduct on the premises, damage to the premises, etc.) were still allowed. Based solely on the cases that Piskel Yahne Kovarik, PLLC was exposed to through its clients, tenants rarely qualified for protection under the CDC moratorium.

Washington State’s numerous requirements, including repayment plans and Eviction Resolution Program Notices, remain in effect. For an in-depth discussion of those requirements, see the Articles below – posted at http://www.pyklawyers.com/blog:

• The Fastest (and only) Way to Evict a Free-Riding Tenant – July 30, 2021

• Landlords Be Wary: Washington’s New Changes to Landlord & Tenant Law – May 24, 2021

• New Eviction Requirements: Repayment Plans and Waiver of Fees – May 24, 2021

ll. The U.S. Supreme Court’s Decision Does Not Affect Washington’s Moratorium

The reasoning behind the U.S. Supreme Court’s decision is straightforward. The CDC never had the authority to institute an eviction moratorium. The full opinion can be found here. The CDC claimed it had authority under a statute from 1944 which provides the Surgeon General with authorization to:

… make and enforce … regulations … to prevent the introduction, transmission, or spread of communicable diseases from foreign countries into the States … or from one state … into any other state …

The statute goes on to say:

For purposes of carrying out and enforcing such regulations, the Surgeon General may provide for such inspection, fumigation, disinfection, sanitation, pest ex-termination, destruction of animals or articles …. and other measures as in his judgment may be necessary.

According to the Supreme Court, regulations made under this authority have generally been limited to quarantining infected individuals or prohibiting the import or sale of animal – e.g., turtles known to carry salmonella (true story – see page 3 of the opinion).

The court was not impressed with the CDC’s logic. According to the Court:

The CDC has imposed a nationwide moratorium on eviction in reliance on a decades-old statute that authorizes it to implement measures like fumigation and pest extermination. It strains credulity to believe that this statute grants the CDC the sweeping authority that it asserts.

III.  Eviction is Possible with the Help of An Attorney

We can help. Piskel Yahne Kovarik, PLLC (“PYK”) is an experienced team of legal professionals offering, among other things, comprehensive legal representation to owners, property managers, and businesses.

PYK carefully tracks the frequent changes in landlord tenant law, so we can better serve our clients.

Contact our legal team today to see how we can assist you in protecting your investment.

The Fastest (and only) Way to Evict a Free-Riding Tenant

By: Whitny Norton and Tyler O’Brien

Washington Landlord Tenant Law has grown increasingly complex. The following explanation: (1) only applies to the extremely specific circumstances described below; (2) is a general explanation and does not include details regarding how to comply with very important and required notice requirements.  Landlords and property managers should always consult a lawyer before proceeding with any action.

In addition: this path only works in counties which have fully implemented an Eviction Resolution Program (“ERP”) and a Rental Assistance Program (“RAP”). Consult a lawyer or your local housing authority to determine whether an ERP and RAP exist in your county.  

I.              The Free-Rider Issue

Many people were disadvantaged by the COVID-19 pandemic and understandably required protection from eviction; additionally, many tenants are now working hard to repay the defaulted rent they accrued during the eviction moratorium. At the same time, there are some people who were practically unaffected by COVID-19, did not fall ill, did not lose their job, have not paid rent since January of 2020, and appear to never intend to pay rent again. The eviction moratorium left Landlord’s hamstrung, with no way of evicting these bad-faith tenants. Now that the moratorium is over, many Landlords are asking how they can finally start the eviction process.

Before even considering pursuing eviction, Landlords need to be aware of numerous laws, policies, and governor’s proclamations that control evictions in Washington. These include:

·               WA Governor’s Proclamation 20-05– COVID State of Emergency

·               WA Governor’s Proclamation 21-09– Eviction Moratorium “Bridge”

·               The WA Residential Landlord – Tenant Act (RCW Chapter 59.18)

·               Engrossed Substitute House Bill 1236 (“HB 1236”)

·               Engrossed Second Substitute Senate Bill 5160 (“SB 5160”)

·               Various Orders by the Center for Disease Control

·               Washington State Supreme Court Standing Order issued September 9, 2020

·               Any Local Standing Orders

 II.            Evicting a Tenant for Defaulted Rent Accrued February 29, 2020 through July 31, 2021 

As a general outline, the process to evicting the free-riding tenant can be broken into four steps: 

STEP 1: Offer a Reasonable Payment Plan

For all defaulted rent accrued between February 29, 2020, and, at least, March 30, 2022 (technically the later of the end of the state of emergency or 6 months past the end of the eviction moratorium), Landlords must offer a “reasonable” repayment plan, prior to giving any notice to evict. HB 5160. Reasonable payment plans cannot impose a monthly payment greater than one-third of the monthly rental charges during the period in which the debt was accrued. For example:

·               If the tenant was to pay $900/month when they failed to pay, the repayment plan cannot ask them to pay more than $300/month (in addition to their current rent).

Reasonable repayment plans:

·               Cannot require payment until 30 days after the plan is offered to the tenant.

·               Must cover rent only and not any late fees, attorneys' fees, or other fees.

·               Cannot include provisions or be conditioned on: compliance with the rental agreement; payment of costs of litigation; a requirement that the tenant apply for government benefits; or any waiver of a tenant's rights to notice.

1.              Wait for the Tenant to Reject or Breach the Repayment Plan

After offering a reasonable repayment plan, the landlord can send the tenant a notice of eviction, subject to the ERP notice requirements (described below), if:

·               The tenant fails to accept the plan within 14 days; or

·               The tenant fails to pay rent owed under the payment plan.

If the tenant accepts the repayment plan, but later defaults, the landlord may either apply for reimbursement from the landlord mitigation program OR proceed with an eviction (subject to the ERP requirement).

2.              Send an Eviction Notice AND an Eviction Resolution Program Notice

Landlords must provide a notice to a tenant informing them of the eviction resolution pilot program (“ERP”) in addition to providing the standard notice required by RCW 59.12.030(3), 14 days prior to filing an unlawful detainer action. If the tenant chooses to engage in ERP the landlord must complete the ERP process before evicting. ERP was created by SB 5160 and is a very detailed process which requires certain notices to be served in an attempt to negotiate a repayment plan through a local Dispute Resolution Center.

Declaration of Service Mailing:  At the time of service or mailing of the pay or vacate notice and ERP notice to the tenant, a landlord must also send copies of these notices to the local dispute resolution center serving the area where the property is located.

3.              Proceed with Eviction

ERP Certification:  A landlord must secure a certification of participation with the eviction resolution program by the appropriate dispute resolution center before an unlawful detainer action for nonpayment of rent may be heard by the court.

III.          Your Fastest Route to Eviction May be a ‘Mere’ 28 Days Away

IF a tenant fails to accept a reasonable payment plan after 14 days and then chooses not to engage ERP within 14 days of notice, AND if a Landlord sends ALL notices correctly, then an unlawful detainer action could be commenced after 28 days. If a tenant engages in the ERP process, it could add on an additional 14-28 days.

IV.           The MAJOR CAVEAT – Does your county have ERP and RAP?

Unfortunately, most landlords cannot even take advantage of this process, because doing so requires there to be a “fully implemented” ERP and RAP program in their county. Whether an ERP or RAP program has been “fully implemented” is a question that is proving so complicated as to deserve its own blog post.  

Can I pursue this path in my county?

What about defaulted rent that is accrued after July 31st?

What fees can I charge tenants for defaulted rent that accrued during COVID?

We can help. Piskel Yahne Kovarik, PLLC (“PYK”) is an experienced team of legal professionals offering, among other things, comprehensive legal representation to owners, property managers, and businesses. Available for general counsel, transactional, and litigation services, PYK primarily serves clients in the areas of commercial business litigation, construction litigation, real estate disputes, purchase and sales agreements, landlord and tenant law, mergers and acquisitions, general corporate representation, financial workouts, and employment issues. Focused on building strong client relationships, we have earned our reputation as aggressive litigators and creative problem-solvers.  Contact our legal team today to see how we can assist you in protecting your investment.

Your Email Signature IS a Signature - Washington’s Adoption of the Uniform Electronic Transactions Act (“UETA”)

By: Tyler O’Brien and Whitny Norton

For those who have used E-signature or E-notary services, it comes as no surprise that the days of signing on the dotted line in bright blue ink are coming to an end. With Washington’s Adoption of the UETA in July 2020, parties entering into all kinds of agreements can do so from afar, with the use of electronic signatures. E-signatures can cut back on transaction, travel, and mailing costs. In addition, with the use of Blockchain technology, E-signatures can be easier to validate (i.e., more difficult to forge) than wet signatures.

I.              Emails, Texts, and SnapChats Could Be Signatures

While E-signatures have very few risks when used intentionally, the UETA’s definition of E-signature is so expansive that many people are unknowingly using E-signatures in their everyday lives.

Under the UETA, an "Electronic signature" means an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record. WASH. REV. CODE § 1.80.020(10). "Electronic" means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities, including without limitation blockchain and distributed ledger technology. WASH. REV. CODE § 1.80.020(10).

Based on this expansive definition, any electronic communication could constitute an E-signature. In theory, a person could “sign” a contract through practically any application on their phone, laptop, or gaming device.

II.            The Law Is New to Washington, So Proceed with Caution

Before anyone decides to throw out their child’s PS5 and hightail it for the mountains, there is another provision of the UETA to consider. The UETA applies only to transactions between parties each of which have agreed to conduct transactions by electronic means. WASH. REV. CODE § 1.80.040(2). Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties' conduct. Id.

The bottom line is that –the average person – is not going to inadvertently bind themselves to a contract using an email, text, or direct message. The law takes into consideration that parties must intend to sign. However, business owners and employees need to be mindful of how they communicate, particularly via email. Consider the following scenarios:

 1.              A CEO for a general contractor receives an email from a subcontractor offering to perform work for $30 million. The CEO is busy at the moment, so she takes a quick look at the contract then replies, “looks good to me.”

Under the UETA, the emailed response could be considered an E-signature, which would make the entire contract enforceable. To determine whether the CEO entered into the contract, a court will look to the circumstances of the parties. Courts may ask questions like: have the parties contracted via email in the past; or do similar companies create agreements in this manner? Whether the contract is binding on the general contractor would depend on the answers to these questions.

 2.           A tenant sends an email to an employee at a property management company asking to get out of his lease 10 months early in exchange for his damage deposit. The employee replies saying “that’s fine” but later finds out that this is against company policy.

Many residential lease agreements contain what is called a “no oral amendments clause”. The problem here is the “amendment” is not oral. It is in writing.

The amendment was also arguably E-signed by the employee who replied with the email saying “that’s fine.” While case law is still developing, it seems that under the UETA, this response constitutes an E-signature.

III.          How Do I Protect Myself from Inadvertent E-Signing? How Do I Enforce an Agreement that Was Signed via Email?

 We can help. Piskel Yahne Kovarik, PLLC (“PYK”) is an experienced team of legal professionals offering, among other things, comprehensive legal representation to owners, property managers, and businesses. Available for general counsel, transactional, and litigation services, PYK primarily serves clients in the areas of commercial business litigation, construction litigation, real estate disputes, purchase and sales agreements, mergers and acquisitions, general corporate representation, financial workouts, and employment issues. Focused on building strong client relationships, we have earned our reputation as aggressive litigators and creative problem-solvers.  Contact our legal team today to see how we can assist you in protecting your investment.

New Eviction Requirements: Repayment Plans and Waiver of Fees

By: Tyler O’Brien and Whitny Norton

Back in April, Governor Inslee signed SB 5160 into law. The bill extends a number of new protections to tenants who are behind on rent payments due to the COVID-19 Pandemic. It also provides landlords with the opportunity to be reimbursed for up to $15,000 of lost rent accrued during the pandemic.

I.              Special Rules in Favor of Tenants Who Failed to Pay During the Pandemic:

If a tenant has failed to pay rent that became due between March 1, 2020 and December 30, 2021:

(1)  a landlord is not allowed to charge or impose late fees or other charges against the tenant.

(2)  a landlord may not report the tenant’s nonpayment or an unlawful detainer action brought because of the nonpayment.

A landlord who violates these new rules is liable for up to 2.5 times the amount of monthly rent of the property at issue, court costs, and attorney’s fees. 

II.            “Reasonable” Repayment Plans Required:

For collection of unpaid rent accrued between March 1, 2020 and, at least, December 2021 (it could be longer if the “public health emergency” is not over at that time), landlords are required to offer tenants a “reasonable schedule” for repayment.

This “reasonable schedule” cannot impose a monthly payment greater than one-third of the monthly rental charges during the period in which the debt was accrued.

A landlord cannot proceed with eviction unless the tenant fails to accept a reasonable payment plan or defaults on the payment plan.

III.          The Landlord Mitigation Program:

The bill includes amendments to existing legislation which make it so that some landlords can recover up to $15,000 in defaulted rent accrued between March 1, 2020 and Dec 2021.

This reimbursement program is only available if the tenant was “low-income,” “limited resourced” or “experienced hardship” during the pandemic and voluntarily vacated or abandoned the tenancy.

A landlord who receives reimbursement through the program is barred from collecting remaining unpaid rent from the tenant.

IV.          Other Noteworthy Rules

Landlords and prospective landlords cannot inquire about, consider, or require disclosure of a tenant’s or prospective tenant’s medical records unless necessary to evaluate a reasonable accommodation request.

The eviction moratorium created by Washington’s proclamation 20-19.6 ends on June 30, 2021. 

Is mitigation the best avenue for me as a Landlord?

When can an action be brought against a tenant under this new law?

What fees am I still allowed to charge a tenant for?

We can help. Piskel Yahne Kovarik, PLLC (“PYK”) is an experienced team of legal professionals offering, among other things, comprehensive legal representation to owners, property managers, and businesses. Available for general counsel, transactional, and litigation services, PYK primarily serves clients in the areas of commercial business litigation, construction litigation, real estate disputes, purchase and sales agreements, mergers and acquisitions, general corporate representation, financial workouts, and employment issues. Focused on building strong client relationships, we have earned our reputation as aggressive litigators and creative problem-solvers.  Contact our legal team today to see how we can assist you in protecting your investment.

Landlords Be Wary: Washington’s New Changes to Landlord & Tenant Law

By: Tyler O’Brien and Whitny Norton

On Monday May 10th, Governor Inslee signed HB 1236 which makes major changes to the Washington’s Residential Landlord Tenant Act (WARLTA). These changes include limitations to the conditions under which a landlord can terminate a lease, evict a tenant, and refuse to continue periodic and month-to-month leases.

I.              Fixed Period Leases – New Requirement to Notify the Tenant that the Lease is Ending

Under the new act, for a landlord to terminate a fixed period lease, set to last 12 months or more, the landlord must provide 60 days’ notice to the tenant that the lease will be deemed expired at the end of the initial period. If the landlord does not provide 60 days’ notice, the fixed period lease will become a month-to-month lease.

II.            Fixed Period Leases that Continue Month-to-Month After the Initial Term

Rental agreements that have an initial period between 6 and 12 months but provide for the tenancy to continue for an indefinite period on a month-to-month basis after the initial period can be terminated by the landlord at the end of the initial period. However, to do so, the landlord must serve notice on the tenant 60 days before the end of the initial term. If the landlord allows the lease to continue after the initial term, the landlord may only terminate the lease for cause.

III.          All Other Leases – Termination, Eviction, and Denial of Renewal Only Allowed for Cause.

The reasons a landlord may evict a tenant, refuse to continue a tenancy, or end a periodic tenancy are now limited to 16 different causes (listed below) enumerated in the amended WARLTA. These limitations apply to all agreements not described in Part I & Part II above, including: month-to-month leases; periodic leases; fixed period leases set to last less than 12 months; and fixed period leases that provide for the tenancy to continue month-to-month after an initial period that lasts less than 6 months or more than 12 months.

Each of the ‘for cause’ provisions have specific requirements for providing notice to the tenant. Notice times range from 20 to 120 days depending on which provision termination is sought under.

The causes under the WARLTA include the following.

1.     The tenant has defaulted on payment;

2.     For subsidized housing, the tenant has breached a material program requirement;

3.     The tenant permitted waste or nuisance on the premises, unlawful activity on the premises, or substantially and repeatedly interfered with the use and enjoyment of the premises by the landlord or neighbors;

4.     The landlord has sought to obtain the property to use as the landlord’s principal residence or the principal residence for their immediate family member;

5.     The residence is a single-family residence and the landlord has decided to sell it;

6.     The landlord has changed its policy to exclude children, seeks to change an apartment to a condominium, or plans to demolish or rehabilitate the premises;

7.     The landlord has elected to withdraw the premises to pursue a conversion;

8.     The premises have been condemned or deemed uninhabitable;

9.     An owner or lessor that shares the dwelling unit has served 20 days’ advanced notice prior to the end of the rental period;

10.   For transitional housing, the tenant is no longer be eligible for the program;

11.   The tenant has not signed a proposed new rental agreement which was proffered by the landlord. This provision does not apply to tenancies that are periodic.

12.   The tenant made intentional, knowing, and material misrepresentations in their rental application.

13.   For “other good cause” constituting a legitimate economic or business reason not enumerated under the section.

14.  The tenant has, within a 12-month period, committed four or more violations of: (i) a requirement of subsidized housing; (ii) a substantial breach of a material term of the rental agreement; or a substantial breach of an obligation imposed by law.

15.  The tenant has failed to register as a sex offender.

16.   The tenant has made unwanted sexual advances or other acts of sexual harassment directed at the property owner, property manager, property employee, or another tenant based on the person's race, gender, or other protected status in violation of any covenant or term in the lease.

IV.          Do These Provision Apply to My Agreement? Do I have “Good Cause” for Terminating as a Landlord?

We can help. Piskel Yahne Kovarik, PLLC (“PYK”) is an experienced team of legal professionals offering, among other things, comprehensive legal representation to owners, property managers, and businesses. Available for general counsel, transactional, and litigation services, PYK primarily serves clients in the areas of commercial business litigation, construction litigation, real estate disputes, purchase and sales agreements, mergers and acquisitions, general corporate representation, financial workouts, and employment issues. Focused on building strong client relationships, we have earned our reputation as aggressive litigators and creative problem-solvers.  Contact our legal team today to see how we can assist you in protecting your investment.

Contractor Registration - Can’t Live Without It!

By: Jason Piskel

In Washington, a contractor must be registered at the time of entering into a contract for a Project. This means having a valid bond, and without a bond, the contractor loses the right to pursue a claim for work performed while unregistered. Division I of the Washington Court of Appeals provides us with a good example of this situation. In Abacus Fine Carpentry, LLC v. Wilson, No. 80324-7-I, the court held that the cancellation of a contractor’s bond for nonpayment results in automatic loss of contractor registration. Abacus argued its nonpayment was an honest mistake, and the Department of Labor and Industries records did not note the cancellation of the bond. However, Abacus did not deny it had notice of the bond’s cancellation. Abacus tried a unique argument, contending that because the Department did not note the bond cancellation, it may pursue a claim up until the Department takes action to suspend the contractor. The appeals court disagreed with Abacus, reasoning via statutory construction of plain meaning that the word automatic does not require a specific action by the Department, and thus the failure of the contractor to maintain its registered status is fatal to its desire to seek a claim for a project. 

Contact the lawyers at PYK with any questions you may have regarding proper registration when performing construction in Washington. 

Washington’s Business Reopening Delayed Another Week

By: Boyd M. Mayo

Businesses will see another week-long delay in moving toward reopening under Washington’s “Healthy Washington-Roadmap to Recovery” plan – current regulations will stay in place until at least Jan. 18, 2021. 

On Jan. 5th, Gov. Jay Inslee announced the plan that would slowly allow businesses (primarily indoor dining, entertainment, and fitness centers) to incrementally reopen their doors to patrons.    

Under the plan, there will be two phases of reopening to start, and the state will add more as the situation improves. All counties, which are grouped into eight regions, will begin in Phase 1. To move on to Phase 2, the region must meet the following four targets: 

• 10% decreasing trend in case rates 

• 10% decrease in coronavirus hospital admission rates 

• ICU occupancy less than 90% 

• Test positivity rate less than 10% 

Phase 2 will permit indoor dining and indoor fitness centers at 25% capacity, increased wedding and funeral capacity, and sports competitions with limited spectators.  It was originally hoped that Spokane County would move to Phase 2 on Jan. 11th.  Late Friday night (Jan. 8th), the State announced that no counties will be moving to Phase 2.  

An overview and summary of the Phase 2 allowances can be found here:

https://medium.com/wagovernor/inslee-announces-healthy-washington-roadmap-to-recovery-229b880a6859

WE CAN HELP 

Piskel Yahne Kovarik, PLLC (“PYK”) is an experienced team of legal professionals, offering, among other things, comprehensive legal representation to the hospitality and fitness industry, representing dozens of bars, restaurants, breweries, wineries, and fitness centers, among hundreds of other businesses, as well as The Spokane Hospitality Coalition – a non-profit group of more than 100 Spokane restaurants.  Focused on building strong client relationships, PYK has earned its reputation as aggressive litigators and creative problem-solvers. 

LANDLORD COMPLIANCE ALERT: Spokane County Enacts New Pre-Eviction Mediation Requirement for Residential Unlawful Detainers

Contributors: Boyd M. Mayo and Whitny L. Norton

2020 has been a difficult year for everyone, especially landlords, who are particularly susceptible to negative cash flow consequences.  Rent-related evictions are presently barred under Governor Inslee’s proclamation enacting a “moratorium” on unlawful detainers.  Any non-emergency eviction (threat to property or safety) is prohibited unless a very narrowly drafted exception applies.   

Now, under a pilot program adopted by six Washington State counties, Spokane County included, landlords are presently encouraged to participate in pre-eviction mediation with a third-party.  However, once the Governor’s moratorium is lifted (presently set for expiration on December 31, 2020), landlords will be required to participate in mediation with a tenant before commencing formal eviction proceedings.  This requirement is ostensibly a method to ease the hundreds of evictions that are presently looming.   

What is Mediation? 

Generally speaking, mediation is an informal dispute resolution mechanism by which the parties try to settle a case through a third-party neutral (typically a trained professional acting in a non-advocate capacity).  The parties typically sit in separate rooms and the mediator tries to settle the case by going back and forth between the parties.  It’s non-binding, though.  This means that no decision can be “rendered.”  Rather, both parties must agree to a resolution.  If either party refuses to agree, then the case can proceed to court. 

How Does Mediation Apply to Unlawful Detainers? 

There are two firms in Spokane County who have received federal funding for the eviction mediation program and who will oversee the program, which is designed to prevent homelessness, needless accumulation of debt, and the spread of COVID-19.   The program will cover all evictions, including those based on non-payment of rent or lease or statutory violations, as well as no-notice evictions (drug- or gang-related activity, assault with a deadly weapon that results in arrest, and the like).

First, under the Governor’s proclamation, and local court order, Landlords must try to negotiate a repayment plan with tenants before proceeding to any dispute resolution forum. The failure to offer a reasonable repayment plan renders unpaid debt accumulated during the pandemic non-collectible. Second, either party may request mediation, and the tenant will receive a lawyer if they are eligible. If the tenant requests mediation, the landlord must submit to mediation. The tenant, however, is free to reject going to mediation if the landlord requests it. Thereafter, the landlord is free to bring a case for eviction on the unlawful detainer docket.

Talk to PYK’s Experienced Real Estate Team  

I can’t tell you the number of times that I have received a phone call from a landlord who attempts to evict a tenant but ultimately fails because of one simple misstep.  Failing to follow legal procedures can be much more than a headache - it can lead to you, the Landlord, paying your tenant damages under the Residential Landlord-Tenant Act. 

Piskel Yahne Kovarik, PLLC (“PYK”) is an experienced team of legal professionals offering, among other things, comprehensive legal representation to owners, property managers, and businesses.  Available for general counsel, transactional, and litigation services, PYK's lawyers, including Mack Mayo, Whitny Norton, and Ryan Yahne, have successfully prosecuted hundreds of commercial and residential unlawful detainers in Eastern Washington and North Idaho.  Focused on building strong client relationships, PYK has earned its reputation as aggressive litigators and creative problem-solvers. Contact our experienced real estate legal team today to see how we can assist you in protecting your investment. 

COMPLIANCE ALERT: Governor Inslee Issues Sweeping COVID-19 Restrictions

By: Boyd M. Mayo

As COVID-19 cases break records daily, Washington State Governor Jay Inslee has issued additional restrictions on Washington State businesses that go into effect Monday, November 16, 2020, at 11:59 PM and last through December 14, 2020. 

Read the following carefully, and contact us if you have any questions, as these new restrictions will directly impact many of Piskel Yahne Kovarik’s business clients, including, but not necessarily limited to, real estate companies, movie theaters, gyms, retail stores, and hospitality enterprises (bars, restaurants, brewpubs, and the like). 

• No indoor gatherings with people outside your household (except for specialized childcare).

• Outdoor gatherings limited to 5 people outside your household.

• No indoor service in restaurants and bars. To-go service and outdoor dining is permitted (table-size limited to 5).

• No indoor fitness facilities: pools and spas can remain open.

• No indoor bowling, event venues, movie theaters, museums, zoos, aquariums.

• No real estate open houses.

• No wedding or funeral receptions. Ceremonies are permitted but limited to 30 people.

• In-store retail limited to 25% indoor occupancy. No seating areas or food courts.

• Religious services limited to 25% indoor occupancy and no more than 200 people. No choir performances, but soloists okay. Masks required.

• Professional services must work from home when possible. Offices are restricted to 25% occupancy and closed to the public.

• Personal services are limited to 25% maximum occupancy.

• Long-term care facilities are limited to outdoor visits only, except end-of-life care.

• Youth and adult amateur sports limited to outdoor only for intra-team practices. Masks required.

WE CAN HELP.  

Piskel Yahne Kovarik, PLLC (“PYK”) is an experienced team of legal professionals offering, among other things, comprehensive legal representation to owners, property managers, and businesses, including hospitality enterprises. Available for general counsel, transactional, and litigation services, PYK primarily serves clients in the areas of commercial business litigation, construction litigation, real estate disputes, purchase and sales agreements, mergers and acquisitions, general corporate representation, financial workouts, and employment issues. Focused on building strong client relationships, we have earned our reputation as aggressive litigators and creative problem-solvers. Contact our legal team today to see how we can assist you in protecting your investment.

Commercial Requests for Rent Relief Due to COVID-19

Update on COVID-19 Orders and Legislation Affecting Commercial Landlords and Tenants.

By: Whitny L. Norton

On April 2, 2020, Governor Inslee extended the “stay home, stay healthy” order to May 4, 2020. No business pass or credentialing program is required for businesses to continue operating; however, violators may be subject to criminal penalties. Click here for a list of businesses deemed essential. The list was last updated on March 31, 2020. If you are unsure about the status of your business, you can fill out this form to receive a direct answer from Washington State’s Coronavirus Response.

Congress recently passed stimulus legislation known as the Coronavirus Aid, Relief, and Economic Security Act, which includes the Paycheck Protection Program (“PPP”) and expanded SBA Economic Injury Disaster Loan Program (“EIDL”). A business can apply for both forms of relief. EIDL provides up to $10,000 to businesses impacted by the Coronavirus pandemic, which is essentially a grant. The application process only takes about five minutes; you can access the application for EIDL here. PPP provides up to $10,000,000. This program has a built-in feature for those who qualify. Qualified applicants must utilize at least 75% of the loan on payroll and payroll-related costs. Businesses can request a PPP loan through the lender of their choice. Not all financial institutions are participating, but you should start with the financial institution you currently have a relationship with to better expedite and streamline the application process.

On March 23, 2020, Spokane Mayor Nadine Woodward signed an Executive Declaration ordering a moratorium on residential and commercial evictions through April 30, 2020 in the city of Spokane. Landlords are prohibited from issuing notices of termination or acting on any termination notice unless the termination action is based upon acts by the tenant constituting an imminent threat of damage to the property or to the health or safety of neighbors, the landlord, commercial lessor, or the tenant’s or landlord’s household members. In addition, landlords are prohibited from imposing late fees or other charges due to late payment of rent.

On April 7, 2020, Greater Spokane Incorporated announced that it is facilitating applications of a new small business COVID-19 relief program known as the Working Washington Small Business Emergency Grant (“WWSBEG”). Qualifying businesses may obtain a grant up to $10,000. For more information and to download the application, please visit the Washington State Department of Commerce’s website here.  

Commercial Rent Relief Considerations and Options.

With more and more businesses experiencing the impact of the Coronavirus pandemic, we expect a continued and constant uptick in the number of businesses requesting rent relief. Before requesting rent relief and upon receipt of a rent relief request, it is imperative for both landlord and tenant to conduct their due diligence. Both parties should review the lease agreement and ask questions about the existence and applicability of any force majeure provision. “Force majeure” is French for “a superior force.” Such provisions are found in most commercial leases and apply to “Acts of God” –unforeseeable events that prevent contract performance, such as strikes, lockouts, terrorist acts, and governmental action. Typically, force majeure provisions do not apply to the payment of rent. Instead, these clauses generally excuse performance under the lease when a force majeure event occurs.

Both landlord and tenant should review their loan documents to determine what notice or permission they must first obtain from their lender before entering into a rent relief agreement. The parties should also review their insurance policies to determine whether or not any coverage is applicable and available to provide relief and support. For example, business interruption coverage or other coverages acquired specific to the party’s status as a landlord or tenant. Most business interruption policies require physical damage for coverage to apply. However, legislation has been introduced in New York, Massachusetts, New Jersey, Louisiana, Pennsylvania and Ohio that would require insurers to pay under business interruption policies if COVID-19 was the reason for the business closure. Landlords and tenants should contact both their tax advisors and legal counsel to determine the tax and legal ramifications of any proposed rent relief agreement.

There are a variety of rent relief agreements that landlords and tenants should consider and carefully choose based upon the unique situation giving rise to the request for rent relief and the underlying terms of the lease:

1.         Rent Reduction – A landlord can reduce a tenant’s rent temporarily or over the term of the lease. Rent reduction should be focused on reducing the base rent, operating expenses, or both. 

2.         Rent Deferment – For tenants struggling to pay rent at the moment or in the near future, rent can be deferred with a promise to pay back incrementally over time in the form of increased rent, upon the receipt of a government payment (SBA loan or other CARES relief) or in a lump sum on an agreed upon date.

3.         Rent Abatement – Landlords may choose to abate rent for a period of time until the tenant is able to start making regular rent payments again. Abatement is a complete relief of the obligation to pay without a request for future repayment.

4.         Loan Conversion – If a tenant comes to the landlord with back rent the landlord can convert the past due rent into a loan payable over time while the tenant continues to timely pay current rent. The loan should be secured by a promissory note.

5.         Lease Extension – In lieu of collecting current rent a landlord may extend the current lease term by the number of months that rent is abated to extend the time the landlord is guaranteed a tenant and to provide additional time to negotiate a new lease term or extension.

6.         Security Deposit – The landlord and tenant may agree to apply the tenant’s security deposit to currently owing rent with an agreement that the tenant repay the security deposit over time or in a lump sum at a date certain in the future.

7.         Lease Termination – If a tenant has been so hard hit by the COVID-19 pandemic and there is no hope at future viability then negotiate an amicable lease termination.

8.         New Lease – If the current lease is completely unworkable due to the new status quo, a new lease agreement may be necessary

9.         Subletting – Bringing in a new tenant for a portion or all of the leased space.

It is essential that the parties formalize their rent relief agreement in writing to ensure enforceability in the future. If the lease is longer than one year, the rent relief amendment will need to be notarized in order to be valid.

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We can help. Piskel Yahne Kovarik, PLLC (“PYK”) is an experienced team of legal professionals offering, among other things, comprehensive legal representation to owners, property managers, and businesses. Available for general counsel, transactional, and litigation services, PYK primarily serves clients in the areas of commercial business litigation, construction litigation, real estate disputes, purchase and sales agreements, mergers and acquisitions, general corporate representation, financial workouts, and employment issues. Focused on building strong client relationships, we have earned our reputation as aggressive litigators and creative problem-solvers.  Contact our legal team today to see how we can assist you in protecting your investment.

Impact of Pandemic COVID-19 on Real Estate Investors, Landlords, and Property Managers

Contributors: Mack Mayo and Christi Disparte

STATES OF EMERGENCY AND SHELTER-IN-PLACE

COVID-19 (“Coronavirus”) is presenting unique challenges to the U.S. real estate sector.  In Washington State, for example, Governor Jay Inslee declared a state of emergency due to the progression and risks associated with the new virus and ordered a shelter-in-place.

Washington’s Stay Home, Stay Healthy order (“shelter-in-place”) requires everyone to stay at home and only to leave for essential purposes:  if you’re an essential employee or for medicine, food, water, exercise, care, etc.  Most businesses are ordered to close or go “remote-only,” unless essential.  Essential businesses include but are not limited to medical and care facilities, restaurants (take-out or to-go only), grocery stores, and businesses dedicated to home or commercial cleanliness and sanitation.

RESIDENTIAL

Non-compliance and termination notices.

Landlords are virtually banned from issuing any type of notice (including for failure to pay rent, etc.).  This also includes 20-day notices of termination (limited exceptions explained below).

Evictions

• Generally.

  •   In Washington, there is a statewide moratorium on residential unlawful detainers, most courts are closed to the public, and, in Spokane County, Sheriff Ozzie Knezovich has declared that his department will not execute any writs of restitution until late April 2020.  An exception is made in Spokane where the tenant(s) pose a risk to the property or immediate threat to the health and safety of neighbors (think no-notice type evictions – e.g., drug and gang-related activity, assault plus deadly weapon, etc.).  

• As related to federally backed housing.

  • The CARES Act (discussed supra) provides 120 days of eviction relief for tenants in federally backed housing, thus precluding service of any eviction notice until July 25, 2020.  During this period, subject landlords cannot charge late fees, penalties, or other fees for paying rent late.

Inability to Pay Rent. 

While landlords are prohibited from issuing eviction notices except in highly limited circumstances, our clients are implementing a variety of strategies to assist tenants in these trying times while also keeping vacancy rates to a minimum:

• Rent reduction.  Temporarily reducing what is owed per month to keep tenant with reduced income in unit.

• Rent deferral.  Deferring part of the rent until the end of the lease by lump sum or payment plan in exchange for staying in the unit.

• Rent abatement.  Waiving past due rent as long as tenant stays current thereafter.

• Loan conversion.  Converting the past due rent into a payable promissory note with interest. 

All of these options come with risk.  Thus, it is important that you memorialize the terms and consequences in writing mutually executed by the parties, including appropriate termination and damages provisions.  Moreover, if you are a landlord of a federally backed property, you will have more stringent requirements of what type of rent relief you must provide to your residential tenants. 

Late Fees. 

We are advising all landlords and property managers to halt the imposition of late fees for any payments until the moratorium is lifted state-wide and in Spokane County specifically. 

Essential v. Non-Essential Activities for Property Managers.

• Maintenance

Maintenance needed to maintain the safety, sanitation, and operation of residences is considered essential under the shelter-in-place order. We recommend all maintenance providers take special precaution prior to entering a unit to ensure their own safety, including wearing gloves and face coverings. Landscaping is not considered an essential activity, at least for now (Landscape Professionals are advocating to have this industry deemed essential).

• Available Units

While social distancing is necessary for the foreseeable future, our clients are implementing a variety of processes to clean, process, and rent available units.

• Unit Showings. Open houses are prohibited. Virtual tours allow potential tenants to view the until while maintaining proper social distancing. If virtual tours are not an option, viewings should be conducted by appointment only and limited to no more than two people at a time, while exercising social distancing at all times.

• Lease Signing. All lease signing should occur electronically or remotely.

• Sanitization. All units should go through a sanitization process prior to move-in to ensure the unit is clean and move-in ready. We recommend hiring cleaning and sanitization professionals when available and possible.

• On-Site Staff

Staff necessary to maintaining office operations, including back-office personnel, are considered essential under the shelter-in-place order. If possible, staff should be allowed to work from home. If working from home is not possible, all on-site staff should strictly abide by social distancing and appropriate health and worker protection measures should be put in place. We recommend closing operations to the public. We also recommend setting up drop boxes for tenants to communicate with staff.

Following these processes will assist Landlords in avoiding potential liability.

PURCHASERS AND SELLERS OF REAL ESTATE

Residential Real Estate. 

Residential real estate transactions are essential, including sales, appraisers, agents, escrow officers, property inspectors, mortgage loan originators, underwriters, and back-office personnel, such as IT professionals.  

• Restrictions and Limitations.

  • In-person meetings are prohibited except in cases when necessary for a customer to view a property or siging documents. 

  • Open houses are prohibited.

  • Property viewings, inspections, appraisals, and final walk-throughs should be arranged by appointment and limited to no more than two people on site at any one time while exercising social distancing.

  • New real estate listings shall be facilitated remotely.

• Shifting market forces increases negotiations. 

  • Perhaps unsurprisingly, we are seeing a slow decline in the residential real estate marketplace.  All reports, however, indicate that the market is still alive and well.  Similar to other contexts, we see the coronavirus as another factor in negotiations.  On the sell-side, sellers are witnessing a shift from their strong “take-it-or-leave-it” bargaining position in a more volatile market.  Buyers now have more leveraging power to create uncertainty in the seller’s mind to allow for more sales price and concessions negotiation.

• Enhanced disclosure and sanitation clauses. 

  • Another wrinkle is what disclosures need to be made or relied upon for sellers who themselves or a resident living in their home had coronavirus.  We would advise adding sanitation provisions into any sales agreement.  This could give rise to a new wave of litigation in the coming months and into 2021.  It is important to ensure all disclosure requirements are met (along with appropriate venue, jurisdiction, governing law, dispute resolution, and liquidated damages clauses in place) to insulate one’s self from liability post-sale.

• Virtual versus in-person showings. 

  • Similar to showings for rentals, showings for real estate purchases should be conducted virtually when possible.

Employers and Employees.

Employers have an obligation to take necessary precautions to ensure the safety and health of their employees. Employees should be allowed to work from home when possible. When working from home is not an option we recommend employers take certain precautions:

• Work stations.

  • Employees’ work-stations should be placed at least 6 feet away from each other.

  • Do not hold in-person meetings.

  • Close lunchrooms and limit access to gatherings areas.

  • Limit visitors, or close to the public entirely.

• Sick Employees.

  • Have flexible sick leave policies that are consistent with public health guidelines.

  • Make sure all employees are aware of sick leave policies.

  • Do not require a doctor’s note from employees who have been sick. Requiring a doctor’s note can put unnecessary strain on already strained health care providers.

  • Tell sick employees to stay home. This is necessary to ensure the safety of other employees.

    • Employees who contract Coronavirus while on the job may qualify for worker’s compensation.

  • Employees who have a sick family member at home should stay home for at least 14 days.

  • Employees should use paid sick leave, paid vacation time, and paid state family leave, when available.

• Clean workplace areas.

  • Clean all high touch areas, such as handrails, elevator buttons, and door handles frequently.

  • Use cleaning products registered with the Environmental Protection Agency (“EPA”) labeled for use against Coronavirus.

While the forgoing is meant to provide guidance to employers, it’s important to consult with an experienced legal advisor for practices and precautions specific to your business.

Force Majeure Clauses.  Whether in the residential or commercial context, force majeure clauses are getting more attention than they have in decades.  These clauses offer an escape hatch from performance of the contract in certain events – Acts of God, natural disasters, war, etc.  However, most are very strictly construed by the courts and are considered exhaustive – if you’re item isn’t listed in the series of events, then you have no “out.”  However, these clauses are typically drafted to exclude purely economic events.  In other words, if you hope to escape performance of the contract due to purely economic forces (i.e., “business decisions”) then you may be out of luck.  It’s important to consult with an experienced legal advisor.

FINANCIAL RELIEF FOR SMALL BUSINESSES AND LANDLORDS

Paycheck Protection Program.

As you likely know, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) – a $2.2 trillion stimulus bill - was recently passed.  The Act, as relevant to this post, offers multiple avenues of relief, including $350 billion earmarked for small business grants to cover items such as payroll, rent, industry-specific subsidies.  Dubbed the “Paycheck Protection Program,” the program is attempting to get hands into small businesses (500 employees or less) and incentivize them to keep workers on staff.  The program provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the crisis. Employers and self-employed individuals can defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. To qualify, you must meet be an Employer whose:

(1) operations were fully or partially suspended due to a Coronavirus related shut-down order, or

(2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. Credit is based on qualified wages paid to the employees.

You can learn more about the Paycheck Protection Program here:  https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources#section-header-2. 

Relief Specific to Landlords. 

Landlords who do not evict tenants may be entitled to mortgage forbearance under various programs.  The CARES Act is a double win for landlords who are small business owners because it helps tenants pay rent and assists the landlords in paying their mortgage. 

PISKEL YAHNE KOVARIK CAN HELP.

Piskel Yahne Kovarik, PLLC (“PYK”) is an experienced team of legal professionals offering, among other things, comprehensive legal representation to real estate investors, owners, and property managers.  Available for general counsel, transactional, and litigation services, PYK primarily serves clients in the areas of commercial business litigation, construction litigation, real estate disputes, purchase and sales agreements, mergers and acquisitions, general corporate representation, financial workouts, and employment issues. 

Focused on building strong client relationships, we have earned our reputation as aggressive litigators as well as creative problem-solvers.  Contact our legal team today to see how we can assist you in protecting your investment.

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Mack Mayo is of counsel at PYK.  His practice focuses on landlord representation, unlawful detainers, contract negotiation, purchase and sale agreements, entity formation and sales, general counsel services, complex real estate transactions, securities compliance, employment law, and complex civil litigation. 

Christi Disparte is an associate attorney at PYK with experience in complex civil litigation. Christi’s practice primarily focuses on employment law, personal injury, real property disputes, landlord/tenant disputes, and commercial and business litigation. Christi is licensed in Idaho and Washington.

Insurance Carriers May be Hit with Double the Liability: Good News for Insureds; Bad News for Insurers

By Whitny L. Norton

The duty of good faith applies to everyone conducting the business of insurance. Individual insurance adjusters are now personally liable for bad faith even when they are acting in the course and scope of employment. Earlier this year, Division I of the Washington State Court of Appeals unequivocally held that individual insurance adjusters may be liable for bad faith and violation of the Consumer Protection Act. Keodalah v. Allstate Insurance Company, et al., Case No. 75731-8-I (Div. 1, March 26, 2018). In that case, an individual insurance adjuster handling an automobile collision claim failed to negotiate a settlement in good faith with its insured. The insured was involved in a collision with an uninsured motorcyclist and made a claim with its insurer under its uninsured motorist coverage. The insurer interviewed several witnesses to the collision, all of whom represented that the motorcyclist was traveling at an excessive speed. In addition, the insurer hired an accident reconstruction firm that determined the insured had obeyed the traffic laws and that the motorcyclist caused the collision. Despite this investigation, the insurer assessed the insured’s fault at 70 percent and offered to resolve the claim at just one-fifth of policy limits. The Court of Appeals found the insurance adjuster, who the insurer designated as its Civil Rule 30(b)(6) representative, personally liable reasoning that the duty of good faith imposed on the business of insurance applies to “all persons” involved in insurance, including the insurer and its representatives.

Washington law strongly favors insureds and it is important for individual consumers, businesses, and insurance carriers to consider the implications of Washington’s strong public policy in favor of insured.

The Washington State Supreme Court Expands Per Se Violations of the Consumer Protection Act for Unsolicited Text Messages in Violation of CEMA

By Courtney B. Whitten

Wright v. Lyft, Inc., 189 Wn.2d 718, 406 P.3d 1149 (2017).

On March 20, 2014, Kenneth Wright received a text message from an acquaintance inviting him to download the Lyft application to his phone and offering him a $25 Lyft credit for doing so. Wright then brought a class action lawsuit against Lyft, alleging that this text message violated Washington’s Consumer Protection Act (“CPA”) and Consumer Electronic Mail Act (“CEMA”). The federal district court certified two questions to the Supreme Court of Washington, the second of which is discussed here. The court asked:

Does the liquidated damages provision of CEMA, RCW 19.190.040(1), establish the causation and/or injury elements of a claim under the Washington Consumer Protection Act, Ch. 19.86 RCW (“CPA”), as a matter of law or must the recipient of a text in violation of CEMA prove injury in fact before he or she can recover the liquidated amount?

The Supreme Court of Washington, en banc, answered this question in the affirmative, despite the fact that the Washington State Legislature did not include text messages in violation of CEMA as a per se CPA violation.

In order to prevail on a CPA claim, a plaintiff must prove five elements:

1. [A]n unfair or deceptive act or practice;
2. [T]hat the act or practice occurred in the conduct of defendant’s trade or commerce;
3. [T]hat the act or practice affects the public interest;
4. [I]njury to plaintiff’s business or property; and
5. [D]efendant’s act or practice was the cause of plaintiff’s injury.

Sending an email in violation of CEMA is a per se violation of the CPA, meaning it automatically satisfies all five elements. However, according to the language of the statute, sending a text message in violation of CEMA only establishes the first three elements. Wright argued that the liquidated damages provision of CEMA establishes the final two elements.

The liquidated damages provision at issue reads:

(1) Damages to the recipient of a commercial electronic mail message or a commercial electronic text message sent in violation of this chapter are five hundred dollars, or actual damages, whichever is greater.

(2) Damages to an interactive computer service resulting from a violation of this chapter are one thousand dollars, or actual damages, whichever is greater.

It does not mention injury or causation. The court concluded that since the liquidated damages provision does not condition the award of damages on proving either causation or injury, it is therefore automatic, establishing the final two elements.

However, CEMA expressly provides for a per se CPA violation for spam emails. The Court overlooked the distinction in the legislature’s language regarding emails and text messages, relying on the legislative intent not to treat emails and texts messages differently and the legislative intent to discourage unsolicited text messages.

After Wright, the recipient of an unsolicited text message does not have to prove injury in order to bring a CPA claim and recover $500. But more importantly, this holding opens the door for other per se CPA violations where the Legislature has not expressly provided for them.

If you have questions concerning the Washington’s Consumer Protection Act, call the lawyers at Piskel Yahne Kovarik, PLLC.

Bankruptcy Code’s Automatic Stay Ruled a Statutory Prohibition under Washington Law that Tolled a Secured Creditor’s Limitations Period.

By Benjamin J. McDonnell

Merceri v. Deutsche Bank AG, 2 Wn. App.2d 143, 408 P.3d 1140 (2018)

Division I of the Washington State Court of Appeals recently addressed whether the automatic stay imposed by applicable bankruptcy law is a “statutory prohibition” under RCW 4.16.230 that tolled the statue of limitations on a secured creditor’s counterclaim for judicial foreclosure.  In Merceri v. Deutsche Bank AG, Division I of the Washington Court of Appeals concluded that, “[u]nder the plain language of RCW 4.16.230, the statute of limitations is tolled during the bankruptcy stay.”  Thus, the appeals court reversed the trial court’s ruling that a secured creditor was time barred from foreclosing on a debtor’s home because the six-year statute of limitations applicable to the creditor’s foreclosure claim was tolled for about two years while the bankruptcy stay was in place.

The question presented to the court of appeals involved the interplay between applicable bankruptcy and Washington state law.  Subject to certain exceptions, filing a bankruptcy petition gives rise to an automatic stay under 11 U.S.C. § 362 that generally prohibits creditors from taking certain actions.  The automatic stay is broad.  It gives debtors a “breathing spell” from creditors and prevents a “race to the courthouse” by creditors that would occur absent the stay.  

While the stay may suspend or impact creditors’ ability to pursue state law remedies, 11 U.S.C. § 108(c), provides creditors with a thirty-day window to commence an action, as follows: “if applicable nonbankruptcy law . . . fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor, . . . and such period has not expired before the date of the filing of the petition, then such period does not expire until the later of - . . . (2) 30 days after notice of the termination or expiration of the stay . . . .” This statute may, therefore, allow a thirty-day window to commence an action that would otherwise be time barred. The appeals court noted, however, that Washington has joined those jurisdictions that have held that, while 11 U.S.C. § 108(c) may provide a 30 day window to commence an action, ultimately, nonbankruptcy law governs applicable statutes of limitation and tolling.  The particular tolling provision at issue in this case was RCW 4.16.230, which provides: “[w]hen commencement of an action is stayed by . . .  a statutory prohibition, the time of the continuance of the . . . prohibition shall not be a part of the time limited for the commencement of the action.”  Applying the plain language of this statute, the appeals court concluded the bankruptcy stay is a statutory prohibition and, consequently,  “the statute of limitation is tolled during the bankruptcy stay.” Therefore, the secured creditor’s counterclaim for judicial foreclosure was tolled and, ultimately, timely.

If you have questions concerning how the automatic stay may impact any right you may have, call the lawyers at Piskel Yahne Kovarik, PLLC.

Post Judgment Summary Judgment Nips Bonding Company.

By Jason T. Piskel

Kunda v. Shaul, 34920-9-III, 2018 WL 619897 (Wn. App. Jan. 30, 2018)

A contractor in the State of Washington must register under the Contractor Registration Act. This Act requires a contractor to file a $12,000 bond issued by a surety. This surety may have to pay when its contractor breaches its contract with either a homeowner, subcontractor, or supplier. A plaintiff does not need to sue both the contractor and the surety in a single action, suits may be brought separately. The liability of the bond is measured by the liability of the contractor, up to the limit of the bond. 

In this recent Division III case, the plaintiff, a home owner, convinced a jury the contractor breached its contract and the jury awarded the plaintiff with a judgment against the contractor. The surety, a party in the lawsuit, was for some reason not named on the jury verdict form submitted to the jury.  Thus, when the contractor failed to pay, the plaintiff turned to the bond asking for the $12,000. The surety responded by not paying, arguing it was not responsible. So, the plaintiff filed a “post judgment” motion for summary judgment against the surety. The trial court denied the request and dismissed the plaintiff’s claim, but the Court of Appeals reversed and entered judgment in favor of the plaintiff against the surety up to the $12,000. The case demonstrates the power of a Court to strike down potential games or mistakes to reach the appropriate and a just result under the law. The appeals court remarked that the lack of naming the surety on the jury verdict form “might even have been a deliberate effort to take advantage of the plaintiff’s apparent oversight on her verdict forms” or some “oversight or it may simply have been deemed unnecessary… .” Rather than protract litigation, the Court cut through the “knot” and granted the Plaintiff relief. That said, the court did eliminate the plaintiff’s fees on appeal, noting that the plaintiff’s “failures made this appeal necessary.”

If you have any questions or concerns regarding filing or defending bond claims, call the lawyers at PYK - 509.321.5930.

Recent Changes to the Washington Limited Liability Act: A Broad Overview

By Whitny L. Norton

Recently, the Washington State Legislature enacted legislation that overhauls the existing Washington Limited Liability Act (“Act”). Beginning on January 1, 2016, changes to the Act go into effect. The following represent some of the more significant changes to the Act. 

Oral LLC Agreements

While the best practice is to have a written LLC agreement, an LLC agreement no longer needs to be in writing. It may be “oral, implied, in a record, or in any combination.” Therefore, like partnerships in Washington, a limited liability agreement may arise by implication. Keep in mind that while LLC’s may be entered into orally, the entity must still file a certificate of formation with the Washington Secretary of State. 

LLC Agreements

LLC agreements structure and regulate the relationship between the LLC and its members subject only to the LLC Act. An LLC agreement may limit a member or manager’s duties to the LLC (including fiduciary duties) so long as the modifications or limitations are not inconsistent with the law and do not eliminate or limit: 

(a) The duty of a member or manager to avoid intentional misconduct and knowing violations of law, or violations of RCW 25.15.231; or
(b) The implied contractual duty of good faith and fair dealing.

Conversions/Mergers

Washington LLCs and corporations may convert into other entity types in Washington or other states. Thus, entities formed as corporations prior to Washington’s enactment of the original LLC Act in 1994, may convert into an LLC by following the statutory process.

If a member of a converting/merging LLC will have personal liability with respect to the surviving entity, then the member must sign a separate written consent to become subject to such liability. 

Manager-managed or Member-managed

LLCs no longer have to designate whether it will be manager-managed or member-managed in its certificate of formation. The LLC agreement will determine whether the LLC is manager-managed or member-managed. If the LLC agreement is not express, the LLC will be considered manager-managed if the LLC agreement vests management of the LLC in one or more managers, otherwise the LLC will be considered member-managed.

Apparent Authority

Consistent with the deletion of the manager-managed/member-managed distinction in the certificate of formation, the new Act does away with the statement of a managing member’s apparent authority for matters in the ordinary course. Common law agency rules will apply to third parties dealing with LLCs.

Board as Manager

The new Act allows a manager to be “a person, or a board, committee or other group of persons” named or designated by an LLC agreement as a manager of the LLC. If the manager is a board, the fiduciary standards of conduct apply to each person on the board. Furthermore, if an LLC’s manager is a board or other group of persons, the members of that board or group will not have authority, individually, to act on behalf of the LLC by virtue of their membership in the group or on the board.

Standards of Conduct

The new Act specifically defines the manager’s or managing member’s fiduciary duties of loyalty and care.

Voting

The new Act’s default voting rule for actions requiring member approval, requires a majority of the members – per capita voting. The Act mandates that some actions require unanimous member approval. For example, unanimous approval is required to amend the limited liability company agreement; authorize withdrawal of a member; sell, lease, exchange, or otherwise dispose of all, or substantially all, of the LLC’s property, other than in the ordinary course of the LLC’s business; or undertake any act outside the ordinary course of the LLC’s activities.

Records

Like the Business Corporation Act, the new Act creates a right for members to access certain LLC records. The member seeking the records must provide a written demand setting forth a purpose reasonably related to the member’s interest in the LLC and the records requested must be directly related to the member’s purpose. The LLC may impose reasonable restrictions on the member’s use of the information.

Allocations of Profit and Loss

The new Act provides a default rule for distributions, based on the agreed value of contributions, but provides no default rule for allocating profits and losses. 

If you have any legal issues or disputes regarding your entity or questions regarding the changes to the Washington Limited Liability Act contact the knowledgeable and experienced attorneys at Piskel Yahne Kovarik, PLLC, at (509) 321-5930.