China – Special Topics Regarding The Legal Impact Of The COVID-19 Epidemic On The Real Estate Industry – Topic Four: The Impact Of The COVID-19 Epidemic On Property Management.

20 March, 2020

 

1.Property management enterprises have special obligations and duties in carrying out and cooperating in the prevention and control of the COVID-19 Epidemic

 

Since the outbreak of Novel Coronavirus Pneumonia (hereinafter referred to as “COVID-19 Epidemic”),  local government departments at provincial and municipal levels have issued corresponding policies. Under these policies, property management enterprises are required to fully cooperate with government departments and communities to strengthen the prevention and control of COVID-19 Epidemic (hereinafter referred to as “epidemic prevention and control”) within all property management areas. These measures include strengthening the supervision and management over people’s entry and exit to properties, and to spare no effort to guard the life, safety and physical health of the people.

 

According to Article 45 of the Law of the People's Republic of China on the Prevention and Treatment of Infectious Diseases (hereinafter referred to as “Prevention and Treatment of Infectious Diseases Law”), when an infectious disease breaks out and prevails, the State Council shall, in light of the need to control the epidemic situation of the infectious disease, have the power, within the entire country or in areas across a province, autonomous region, or municipality directly under the Central Government, and the local governments at the county level or above shall have the power, in their own administrative areas, to immediately mobilize people or transfer stored goods and materials, as well as the temporary requisition of houses and transportation vehicles and related facilities and equipment.

 

According to Article 56 of the Emergency Response Law of the People's Republic of China (hereinafter referred to as “Emergency Response Law”), other entities at a place where an emergency occurs shall follow the decisions or orders issued by the government, support emergency response operation measures adopted by the government, properly conduct their own emergency response activities and actively arrange for personnel to participate in local emergency response rescue activities and operations.

 

Under the above-said laws, local governments at the county level or above shall have the power to mobilize the relevant people or goods and materials for epidemic prevention and control, and the relevant entities and individuals shall be obligated and responsible to cooperate closely with the government.

 

In addition to the aforesaid laws, some local governments at provincial and municipal levels have issued specific epidemic prevention and control policies one after another, which clearly define the specific obligations and responsibilities of property management enterprises during the period of epidemic prevention and control. For example, the Beijing Municipal Commission of Housing and Urban-Rural Development issued the Circular on Effectively Implementing the Prevention and Control of the COVID-19 Epidemic by Property Management Enterprises (《关于物业服务企业做好新型冠状病毒感染的肺炎疫情防控工作的通知》, hereinafter referred to as the “Circular”) on January 30, 2020, which requires property management enterprises to obey the unified arrangement, dispatch and command, as well as participate in the training and guidance of communities and cooperate with them in various works relating to epidemic prevention and control. Property management enterprises shall develop epidemic prevention and control plans for each residential area on a case-by-case basis, depending on the conditions of the respective residential area. The prevention and control plans shall be approved by the community and filed with the community for record keeping. Property management enterprises shall effectively maintain epidemic prevention and control , strengthen the organization and internal management of epidemic prevention and control,1reasonably deploy staff and establish an epidemic prevention and control information reporting system.

 

Another example: the Shanghai Municipal Commission of Housing and Urban-Rural Development proposed at a press conference in Shanghai on epidemic prevention and control held on February 5, 2020 that property management enterprises should actively follow the instructions of local authorities. Property management enterprises are required to establish a management system for the entry and exit of residential areas during the period of epidemic prevention and control, effectively implement the disinfection and anti-epidemic operations for facilities and equipment, strengthen the management of property service staff, owners and tenants, and cooperate with local sub-districts (or towns), residents’ or village committees in strengthening the service and management of people in home quarantine.

 

In another example, the Housing and Urban-Rural Development Department of Guangdong Province issued the Work Guidelines for Prevention and Control of the COVID-19 Epidemic in Property Management Areas in Guangdong Province (for Trial Implementation, 《广东省物业管理区域新型冠状病毒感染的肺炎疫情防控工作指引（试行）》, hereinafter referred to as “Work Guidelines”) on February 4, 2020, requiring property management enterprises to effectively set and protect entrances and exits of property management areas, protect key people, key public areas, facilities and equipment, maintain environment sanitation and cleanliness, protect communities infected with COVID-19, and attract maximum publicity regarding epidemic prevention and control.

 

In addition to the regulations issued by local governments, the China Property Management Institute issued the Operational Guidelines for the Prevention and Control of the COVID-19 Epidemic in Property Management Areas (for Trial Implementation) (《物业管理区域新型冠状病毒肺炎疫情防控工作操作指引（试行）》, hereinafter referred to as “Operational Guidelines” ) on February 1, 2020, dividing property areas into five types, namely, residential buildings, office buildings, industrial parks, universities and hospitals. The Operational Guidelines combine the existing systems and guiding standards in respect of epidemic prevention and control at various localities, and utilize the experience and practice accumulated by property management enterprises. It notes the characteristics of different property areas and the actual situation of the property management industry, and encourages property management enterprises to adopt appropriate measures to effectively prevent the COVID-19 Epidemic from spreading in other property management areas.

 

To sum up, China is in a critical period of epidemic prevention and control, and property management enterprises shall, according to the instructions of local governments and agencies, carry out and cooperate with governments and communities in epidemic prevention and control. They need to take epidemic prevention and control seriously, formulate contingency plans for epidemic prevention and control and strengthen the control of the entry and exit points of property management areas. Other measures include storing epidemic prevention materials, strengthening the protection of people, public areas, facilities and equipment and sharing epidemic prevention knowledge, so as to protect the safety of property management areas.

 

2.Property management enterprises shall have the right to seal off areas and prohibit certain persons from entering and exiting the property to prevent the virus from spreading

 

According to the Circular on Further Strengthening the Management of the Entry and Exit of Residential Areas during the Period of Epidemic Prevention and Control by Property Management Enterprises (《关于物业企业进一步加强新型冠状病毒感染肺炎疫情防控期间住宅区出入管理的通知》) issued by the Beijing Municipal Commission of Housing and Urban-Rural Development, property management enterprises may close some entrances and exits of residential areas according to the instructions of the community and the actual management situation of such residential areas. While the management of the entry and exit areas is strengthened, property management enterprises shall protect the legitimate rights of the residents or tenants of the residential area and ensure their normal access. The temperature of visitors, newly rented tenants, and vehicles not from the residential area shall be measured individually before they enter the residential area. People with normal temperatures can be allowed to enter the residential area and their information shall be registered. In principle, couriers and food delivery providers are not allowed to enter the residential area. The circular also stipulates that communities shall specify the work plan concerning the management of entry and exit when developing the epidemic prevention and control plan, and post up these measures, such as traffic restrictions, registration and temperature detection in respect of the entry and exit management at the entrance and exit of the residential area.

 

According to the requirements put forward by the Shanghai Municipal Commission of Housing and Urban-Rural Development at the press conference on epidemic prevention and control, property management enterprises shall try their best to reduce the number of entrances and exits to the largest extent, and take body temperature measurements for all people entering the residential area. If any person with an abnormal body temperature is found, the property management enterprise shall properly register the relevant information and report the matter in a timely manner to the local sub-district or town. The property management enterprise shall remind visitors with abnormal body temperatures to seek medical treatment as soon as possible and persuade them to leave the residential area. Generally, non-local visitors and vehicles are not allowed to enter the residential area. Under special circumstances, residents in the residential area shall report to the owners’ committee, residents’ committee or village committee in advance, and visitors shall show their ID cards and register their information. 

 

Under the Work Guidelines, property management enterprises must close the property management areas and restrict persons and vehicles (including but not limited to couriers and food delivery providers and their vehicles) other than property owners, tenants and vehicles of such residential areas from entering this residential area. Items and foods delivered by couriers and food delivery providers shall be delivered to designated storage areas for temporary storage and then collected by the residents themselves. Epidemic prevention and control sites shall be set up at the entrances and exits of the residential area, and the entrances and exits without guards shall be temporarily closed. In addition, all persons entering the residential area shall have their body temperature measured. Those visitors with a body temperature over 37.3 degrees shall be persuaded to return to their own homes, and the owners or tenants of the residential area with a body temperature over 37.3 degrees shall be persuaded to go home and be in quarantine by themselves. The property management enterprise shall also report the case to the community and the residents’ committee in a timely manner and assist in any relevant operational works. The property management enterprise shall carefully record the information of visitors, and restrict visitors from entering the residential area without the consent of the owners or tenants being visited.

 

According to the 30 Measures on Strictly Examining and Controlling the Epidemic Situation in Urban and Rural Communities (Villages) in Liaoning Province (《全省城乡社区(村)疫情严查严控措施30条》) issued by the Liaoning Headquarters for Prevention and Control of the COVID-19 Epidemic on February 6, 2020, villages and resident areas shall be closed. The residents of the village or residential area shall only enter and exit the village or residential area with their certificates regarding entry and exit without exception, and their body temperature shall be measured. Non-local persons and vehicles are not allowed to enter the village or residential area.  

 

In addition to the abovementioned cities, other cities including Nanjing2 and Harbin3 have issued circulars or announcements, requiring all residential areas within its jurisdiction be closed, and vehicles and persons travelling between residential areas be strictly verified and registered. 

 

Pursuant to the aforesaid provisions, property management enterprises shall have the right to seal off property management areas (residential areas) and prohibit couriers and food delivery providers from entering and exiting the residential areas if the instructions of government departments and communities have been followed, the community’s consent to the epidemic prevention and control plan has been obtained and the rules on property access has been posted in advance. Unless otherwise stipulated, in principal, property management enterprises shall not restrict visitors or new tenants with normal temperatures or those confirmed by the owners or tenants, from entering and exiting the residential area, and shall not restrict owners and tenants from entering and exiting. Where the owners or tenants have abnormal body temperatures, the property management enterprise shall properly report such matter to the community and assist the community in the relevant follow up work.

 

Until now, the policies issued and the measures adopted in most areas including Beijing and Shanghai for epidemic prevention and control have not yet included a requirement for sealing off other types of property, such as shopping malls and office buildings. Therefore, except as otherwise clearly stipulated by the local people’s government4, property management enterprises shall not, in principle, seal off properties other than residential properties, and prohibit tenants and others from entering or exiting such property areas.

 

3.Property management enterprises which fail to promptly adopt epidemic prevention and control measures may be subject to penalties (such as the deduction of credit points),  ordered to make rectification or administrative detention, and may incur a civil liability 

 

According to the Emergency Response Law, an entity or individual shall be subject to a penalty if they violate the Law, fail to follow any decisions or orders issued by the local government or its relevant departments, or support measures undertaken by such government or departments in accordance with the law and the circumstances involved constitute a violation of the public security administration laws.

 

According to the Prevention and Treatment of Infectious Diseases Law, a unit or individual shall bear civil responsibility if they violate the provisions of this Law, leading to the spread and prevalence of infectious diseases or cause harm or property losses to another person.

 

Besides the aforementioned provisions, some governments of certain regions also issued corresponding policies, which stipulated the possible penalties on property management enterprises if they fail to promptly adopt the epidemic prevention and control measures. For example, according to the Five Rules on Epidemic Prevention and Control in Property Management Areas of Futian District (《福田区物业管理区域疫情防控五项规定》) formulated by the Futian District Housing and Urban-Rural Development Bureau of Shenzhen Municipality issued on February 3, 2020, local housing and urban-rural development departments will impose “Four Punishments” on ineffective property management enterprises that fail to fully perform their duties, cope with the work in a negative manner, are unaware of the situation or are totally irresponsible, resulting in the spread of the epidemic or other serious adverse effects. The punishments are as follows:   

 

(1)Holding interviews with the supervising property service enterprise, and being widely criticized across the whole industry;

 

(2)Restricting their participation in the tender and bidding activities for property management within the jurisdiction for a certain period of time;

 

(3)Ordering the property management enterprise to impose a penalty on the director of the office internally or adjust their job position; in a case whereby the director is a Communist Party member, suggest that the property management enterprise  impose a party discipline sanction based on the seriousness of the case;

 

(4)Bearing responsibility if there is a violation of the laws and regulations. 

 

In addition, the governments of other cities  also urge local housing and urban-rural development departments to strengthen their supervision on the performance of duties by property management enterprises. The departments shall order property management enterprises that have not taken enough epidemic prevention and control measures to rectify, and impose serious punishments on those who have not made enough rectification as required in accordance with the relevant regulations.

 

Until now local governments in different regions have successively publicized several cases whereby property management enterprises were punished due to the failure to take prompt epidemic prevention and control measures, such as:

 

(1)The Public Security Department of Yiling District, Yichang City imposed an administrative detention penalty on the chief responsible person of a property management enterprise on January 31, 2020 due to its refusal to cooperate in and carry out epidemic prevention and control work within the property area;

 

(2)The Housing and Urban-Rural Development Bureau of Gulou District, Fuzhou City imposed punishments on a property management enterprise, including red card warnings, and ordering it to make rectifications. They deducted appraisal points and enterprise credit appraisal points on February 2, 2020 due to its failure to implement epidemic prevention and control measures as required;

 

(3)The Public Security Department of Chang’an District, Xi’an City imposed an administrative detention penalty on the chief responsible person of a property management enterprise on February 3, 2020 because they failed to make sufficient efforts in epidemic prevention and control, and the daily disinfection became a mere formality;

 

(4)The Housing and Urban-Rural Development Bureau of Guangyuan City, Sichuan Province imposed punishments on a property management enterprise, including publicly criticizing the enterprise in the whole municipality, and deducting credit ratings and points on February 5, 2020 due to its failure to conduct closed management of the residential area in a timely manner, to check people entering or exiting the residential area properly and to give prompt publicity of epidemic prevention and control.

 

In addition, if the failure of property management enterprises to adopt epidemic prevention and control measures constitutes a breach of the owners’ convention and property service agreement, owners and tenants of the residential area may require the property management enterprise to stop the breach, compensate for losses generated from such a breach and pay related liquidated damages. Even if part of the epidemic prevention and control measures are not property services specified in the owners’ convention and property service agreement, the property management enterprise is still responsible for the damage or losses of the owners and tenants within the residential area under the Prevention and Treatment of Infectious Diseases Law, if it fails to promptly undertake such measures.

 

4.The expenditure incurred for epidemic prevention and control (such as disinfection within the property management areas) by property management enterprises shall be borne by government finance and be raised through multiple channels

 

In order to strengthen the epidemic prevention and control, many property management enterprises have adopted various measures, such as increasing personnel engaging in property management, purchasing disinfecting apparatus, and increasing their investment in cleaning. Who should be responsible for the expenses incurred by property management enterprises for epidemic prevention and control? The expenses should be mainly settled through the following channels:

 

(1)Expenditure on epidemic prevention and control shall be primarily borne by government finance

 

According to the Prevention and Treatment of Infectious Diseases Law, local governments at the county level or above shall be responsible for allocating funds for the daily prevention, control and supervision over infectious diseases within their own administrative areas. The governments of provinces, autonomous regions, and municipalities directly under the Central Governments shall, within the scope of the items determined by the health administration department under the State Council, determine the items for the prevention, control and supervision over infectious diseases, and guarantee funds for the items. 

 

(2)Expenditure on epidemic prevention and control is also expected to be financed through multiple channels

 

In addition to the government financial subsidies, property management enterprises should also try to raise funds and materials through other channels. According to the Work Guidelines, property management enterprises shall raise and collect materials via various channels and in various ways, ensure sufficient supplies for cleaning and disinfection, and clean and disinfect thoroughly. If there is indeed a shortage of materials, it shall be promptly reported to the community residents’ committee and the departments of public health, housing and urban-rural developments, etc. Property management enterprises may actively ask owners of residential areas for help to expand the channels of raising materials. All costs and expenses incurred in the process of epidemic prevention and control shall be properly registered for future handling.

 

Owners shall also bear part of the expenditure, in accordance with the principle of reciprocity, in respect of the rights and obligations as the precautions are taken for the interests of the owners of residential areas.

 

Since the outbreak of novel coronavirus pneumonia is an emergency, the bearing of the expenses for epidemic prevention and control remains to be further clarified at the national and local levels.