Senate Bill 939, a COVID-19 commercial rent moratorium eviction bill sponsored by California State Senator Scott Wiener (D-San Francisco) was amended this week, and, if enacted, would upend existing real estate leases throughout the state. The legislation requires all lessors in California to defer lessee rent obligations for more than one year. It would also allow a certain business type to negate the existing lease contract, removes existing legal remedies, and rights from, and gives one party to a contract the right to walk away from a valid lease. In addition to jeopardizing the rule of contract law between private parties, the bill creates a number of problems, including picking winners and losers in the marketplace.
According to the California Business Properties Association (CBPA):
- SB 939 makes it illegal to even serve notice to terminate a tenancy until a FULL YEAR AFTER the State’s COVID-19 Emergency Order expires.
- SB 939 gives one party the upper hand by making the common act of serving a notice to terminate tenancy a VIOLATION OF THE STATE’S UNFAIR BUSINESS PRACTICES and creates a $2,000 penalty.
- SB 939 enables the confusing patchwork of local ordinances on the same topic making it even more complicated for any business that has buildings in multiple jurisdictions.
- SB 939 allows restaurants, bars and entertainment venues with a decline in revenue of 40% as compared to before shelter in place and facing an ongoing reduction of capacity of 25% or more, to engage in good faith negotiations with their landlord to modify any rent or economic requirement regardless of the term remaining on the lease.
- Under SB 939, should the tenant and landlord not be able to reach a mutually satisfactory agreement, the tenant shall have the option to terminate the lease and not be liable for more than three months rent from the start of the SIP to cover the entire rest of the lease term.
- Under SB 939, any third party guarantees will expire with the lease termination.
- SB 939 will be in effect for at least 22 months from March 2020 until December 31, 2021, OR two months after the end of the state of emergency, WHICHEVER IS LATER.
- SB 939 does not apply to any publicly-traded company or a company that is owned by or is affiliated with a publicly-traded company (franchisee), creating even more unfair treatment of businesses.
Click the following link to view the bill text: SB 939 (Wiener) – Negates all current commercial leases to the benefit of one business over another.
Click here to communicate your opposition to S.B. 939: https://p2a.co/aFc8t2d