California Legislature Proposes New Protections for Commercial Tenants During COVID-19

California Legislature Proposes New Protections for Commercial Tenants During COVID-19
May 20, 2020 dmock2015

The California legislature has proposed a new bill – SB 939 – that would provide protections and relief for certain California commercial tenants. Specifically, in its current form, the bill would prevent commercial landlords from evicting tenants during the term of the Governor’s state of emergency declaration, and would allow some commercial tenants to renegotiate the terms of their lease or terminate their lease agreement without penalty.

As the bill is currently drafted, if a commercial tenant fails to make a rent payment during the state of emergency and qualifies for the eviction protection provisions in SB 939, the tenant would have 12 months following the end of the state of emergency to pay such past due amounts. Additionally, the landlord would be prohibited from imposing any late fees related to those payments. Currently, the only exception to the eviction protections is for tenants that have been found to pose a threat to property, other tenants, or a person, business, or other entity. The bill also does not prohibit the continuation of eviction proceedings that begun prior to the Governor’s proclamation of the state of emergency.

To qualify for the lease re-negotiation and termination rights in SB 939, the tenant must (1) be operated primarily in California, (2) be a small business or an eating or drinking establishment or an entertainment or performance venue, and (3) be able to show a 40% decline in monthly revenue, or if a restaurant or entertainment or performance venue, a 25% decline in capacity due to social distancing orders. If lease re-negotiations fail and the tenant elects to terminate the lease agreement, under SB 939 the tenant may only be liable for a maximum of three months’ worth of past due rent incurred during the civil authority and regulations related to COVID-19, plus any rent incurred and unpaid during a time unrelated to COVID-19.

As proposed, SB 939 would be in effect until December 31, 2021, or two months after the declared state of emergency ends, whichever is later. The bill is scheduled for a hearing in the Senate Judiciary Committee on May 22, 2020.

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