California Commercial Landlords Anxious Over Proposed Legislation

Senate Bill 939 is headed to the United States Senate Committee on Appropriations after receiving a confirmation in the United States Senate Committee on the Judiciary by a vote of 5-1, with three abstentions. SB 939 voids eviction notices served on commercial tenants impacted by COVID-19. Originally proposed on February 6, 2020 in response to the COVID-19 crisis, the bill has been amended multiple times amidst widespread criticism. In its current amended form the bill imposes a moratorium on commercial evictions and gives tenants a never-before-seen bargaining power.

Tenants affected by COVID-19 are given 12 months to make good on unpaid debt after the state of emergency is lifted. SB 939 takes an added step of prohibiting landlords from engaging in any type of behavior that is deemed threatening or retaliating against a commercial tenant by imposing various damages brought up in possible future civil suits.

Critics proclaim SB 939 shifts the burden onto landlords to support tenants throughout the pandemic, leaving owners with little financial recourse when commercial tenants renegotiate leases in default. As long as the tenant is eligible and served the landlord with a sworn declaration under penalty of perjury they have been affected by the pandemic, they are permitted to seek lease modifications where under normal circumstances they would be contractually barred. If the landlord and tenant cannot reach an agreement, the tenant is permitted to terminate the lease without penalty.

It is clear to see why property owners are reacting negatively to SB 939. Commercial owners will be facing foreclosures, tax penalties and civil suits from service vendors who will not get paid. Senator Scott Wiener, the drafter of the bill, advised the Senate Judiciary Committee that he will continue to make “significant amendments” in the coming days. In response, other senators called for a review of the fiscal impact SB 939 will have on property tax revenues and on public property. To read more about SB 939, we encourage those impacted to go to: https://leginfo.legislature.ca.gov/

For more information, please contact Elizabeth L. Huynh.