California’s Response to Covid-19: Regional Stay-at-Home Order Precludes Hotel, Lodging, and Short-Term Rental Reservations

On Friday, December 11, 2020, the Regional Stay-at-Home Order (the “Order”) went into effect in Nevada and Placer County. The Order was announced by Governor Newsom on December 3, 2020, supplemented on December 6, 2020, and becomes effective if Intensive Care Unit (ICU) bed capacities dip below 15% in one or more of five California Regions (Northern California, Bay Area, Greater Sacramento, San Joaquin Valley, and Southern California). The Greater Sacramento Region dipped below the 15% threshold late last week, effectuating the stay-at-home restrictions for at least three weeks. This not only affects family gatherings during the holiday season, but also includes significant impacts on short-term and vacation rentals (Airbnb, VRBO, etc.), hotels, and similar lodging operators. Below is a summary of certain material aspects of the Order and some relevant issues that may arise as a result of the Order.

Do rental agencies and property managers need to cancel upcoming reservations?

Yes, unless the reservation is for an “essential” worker (who presumably intends to perform essential work in the area where the reservation is made) or is for at least the minimum time period required for quarantine and the persons identified in the reservation will quarantine in the hotel or lodging entity until after that time period has expired. The Order is confusing since it expressly provides that no hotel or lodging entity shall honor out-of-state reservations for nonessential travel unless there is an exception. The Order does not discuss in-state travel or reservations.

The travel advisory for in-state nonessential travel, however, remains in effect. According to the California Department of Public Health, nonessential travel” includes travel that is considered tourism or recreational in nature; “essential travel” includes work and study, critical infrastructure support, economic services and supply chains, health, immediate medical care, and safety and security. Accordingly, nonessential travel across the State of California (and especially in Nevada and Placer County) is not permitted. Even if a tourist is traveling from a region in California that is not subject to a stay-at-home order, once they enter the Greater Sacramento Region they are restricted from nonessential travel. Thus, despite the lack of clarity in the Order, it appears that in-state reservations for nonessential travel cannot be honored and should be cancelled.

Hotel operators and property managers must review reservations on a case-by-case basis to determine whether any reservation qualifies for this exception—and should also confirm that any occupant will quarantine as required by the Order. To the same extent, property managers and lodging operators should review their contracts and policies regarding any refund of deposits or any assessment of cancellation fees.

Can hotels, vacation rentals, and short-term rentals continue to accept reservations?

Not for the periods covered by the Order or, at this time, the next three weeks. Travelers can book reservations to commence after this period, but reservations will presumably be cancelled if the Order is extended past the three-week period. Notwithstanding these restrictions, hotels or other commercial and residential buildings may offer lodging for essential functions and travel including Covid-19 mitigation and containment measures, treatment measures, accommodation for essential workers, or housing solutions, including measures to protect homeless populations.

My reservation got cancelled! What about cancellation fees charged by Airbnb, VRBO, or the hotel or property manager?

Whether the lodging provider may lawfully retain deposits and charge cancellation fees depends on the terms of the rental contract and, most likely, which party cancels the reservation. If a customer cancels a reservation on their own initiative and the cancellation triggers a cancellation fee or loss of a one-night deposit, the customer may be contractually obligated to pay the fee or lose their deposit. The rental agency could refund these monies in its discretion, and perhaps some companies will provide this refund to promote future business. Another alternative is to reschedule the reservation to a later date in 2021, so as not to incur the fee—if the hotel, property or lodging manager can accommodate the request.

Can I still go skiing?

Yes, the ski resorts themselves are open. In terms of lodging, as one example, the Village at Squaw Valley is cancelling all nonhomeowner and nonessential travel reservations for the initial three-week period and is not accepting reservations during this same period. While you can ski or snowboard at Squaw or Alpine Meadows with a mask, you cannot spend the night at a hotel or short-term rental for nonessential travel if that is the purpose of your trip. So, while you cannot travel for a nonessential reason such as tourism or activities that are recreational in nature, and you cannot stay at a hotel or short-term rental for nonessential reasons for at least the next three weeks, you can recreate outside and at a ski resort. If you find this scenario confusing and hard to predict, you are not alone.

How can the Regional Stay-at-Home Order be enforced and what are the penalties?

While the fiscal impacts of the Order are devastating for many businesses, everyone should understand that protecting ourselves and our communities must take priority. If you find yourself wanting to bend the rules or find a loophole in the temporary restrictions, you should think twice. Sure, Placer and Nevada County probably do not have the resources to aggressively enforce the new restrictions, but rental agencies and similar companies operating short-term rental units may find themselves subject to an investigation and potential revocation of their short-term rental (“STR”) permit if violations persist. To learn more about Placer County STR permits, click here. While the Town of Truckee is not implementing STR permits until next year, that will not stop the Town from monitoring the rental market to enforce the restrictions. Taking actions that arguably violate the Order could result in companies or second homeowners being disqualified from legally operating or renting in the future.

After three weeks, the Regional Stay-at-Home Order will be revisited on a weekly basis based on the California Department of Public Health’s projections of ICU bed capacity. Hotel, lodging operators and short-term renters should monitor these announcements, especially since regulations and restrictions change quickly.

Nothing in this article may be construed to provide legal advice or provide definitive statements of the law. The restrictions related to Covid-19 are in flux, subject to wide-ranging interpretations, and the statements above are a good-faith attempt to interpret the current guidelines, restrictions and risks posed by the Regional Stay at Home Order.

Ethan Birnberg is licensed in California, Nevada, Colorado, and Wyoming. He regularly assists clients with all types of corporate and business matters, asset sales, acquisitions, and real estate issues, including landlord/tenant matters, lease formation and construction issues, and HOA disputes. He holds dual certifications as a business bankruptcy and consumer bankruptcy specialist from the American Board of Certification, and has extensive insolvency experience assisting entities seeking to restructure under chapter 11 of the U.S. Bankruptcy Code, borrowers and lenders seeking out-of-court workouts, representing chapter 7 trustees, and advising directors, officers, and executive management regarding fiduciary duties and corporate governance issues. He can be reached at birnberg@portersimon.com.