San Francisco Landlords File Lawsuit Against City Over Ordinance Allowing Unpaid Rent Forgiveness

Two San Francisco landlord groups filed a lawsuit on Wednesday against the city, challenging a city relief aimed at dismissing certain rent debt.

According to the lawsuit filed in the San Francisco Superior Court, the San Francisco Apartment Association and Small Property Owners of San Francisco Institute argue that legislation passed in July by the San Francisco Board of Supervisors that relieves all back rent on small businesses that were shut down for a long time during the COVID-19 pandemic, such as salons, gyms, tattoo shops, and other similar establishments, goes too far and simply removes any unpaid rent without compensation.

The ordinance, first proposed by Supervisor Dean Preston, was largely based on current state laws that excuse a tenant from a contract when trying to meet it is no longer possible. As the leases didn’t say anything against this during the pandemic, the ordinance put them in the clear.

The landlord organizations point out, however, that many of the landlords are small businesses themselves, with some collecting rent from a building as a sole means of income, and that the tenants not paying them are crippling the landlords financially.

“The legislation is a ham-fisted, vague, and ultimately illegal Ordinance that unfairly puts its thumb on the scale in favor of one side of countless two-party contracts,” said the plaintiffs in the lawsuit. “The Ordinance will hardly streamline litigation between property owners and tenants. Instead, it will give them another thing to fight about.”

They are challenging the San Francisco law by using Governor Gavin Newsom’s 2020 Executive Order which states that no commercial tenants can be outright relieved of their rent obligation, nor can landlords be blocked from collecting rent.. They also note that the legislation obviously favors the renters over the landlords and that the law is vague over what tenants are actually covered.

Landlords fight back against ordinance that removes all rent debt from certain businesses

Supervisor Preston, who spearheaded the ordinance, responded to the lawsuit on Wednesday, saying that the landlord groups are trying to take away the tenants only means of relief and that many would not recover if the lawsuit was successful.

“These landlord associations are trying to kick neighborhood businesses when they are down,” Preston said. “This was an attempt to give our mom and pop small businesses a fighting chance to get back on their feet, and now the Apartment Association wants to pull the rug out from under them. The ordinance mirrors existing state law for contracts when the purpose can’t be fulfilled, and the government shutdown as a response to COVID fits those conditions squarely.”

“If our favorite neighborhood bars or salons have this powerful tool taken away, many may never see a path to recovery. Shame on the landlord lobby for attacking small businesses on the brink.”

On Thursday, he added in a tweet that “Sometimes when you push the envelope & pass seriously impactful legislation that threatens the profits of the rich, they respond by suing. Our back rent law to save small businesses—passed unanimously—is now in the hands of judges. It should be upheld.”

Sometimes when you push the envelope & pass seriously impactful legislation that threatens the profits of the rich, they respond by suing. Our back rent law to save small businesses—passed unanimously—is now in the hands of judges. It should be upheld. https://t.co/CMmY38U8vK

— Dean Preston (@DeanPreston) September 23, 2021

Legal experts, who expected such a lawsuit to come from the ordinance, said that the city would have a harder time defending themselves in court.

“The lawsuit clearly points out all the laws being broken, all the irregularities, and all the confusing language from the ordinance,” Maria Carrasco, a Bay Area lawyer, explained to the Globe on Thursday. “The ordinance put emotion in the way of legality. Yes, it’s not great that these businesses are hurting. But by removing all the back debt, the city is only hurting others. San Francisco doesn’t want to eat the debt themselves, so the buck is being passed to the landlords, who obviously took exception to that.”

“Whoever wrote this should have had a few lawyers go over it, because it left the door wide open for the city to get sued.”

“A lot of laws that had pandemic protections are being challenged more and more nationwide because of the COVID-19 threat going down. The San Francisco one is only the latest.”