‘We have people who rely on us for work. You know, janitors, security, and maintenance staff.’
Real estate groups and landlords are planning to sue to stop a bill that would allow missed rent payments and lease changes. Opposition against Senate Bill 939 has grown significantly this week as California real estate groups and landlords have come out and threatened legal action should it be passed.
Real estate groups landlords threaten legal action if passed
Senate Bill 939, written by Senator Scott Wiener (D-San Francisco), would significantly alter lease and renter obligations across California. According to the bill, small business owners financially hurt by the pandemic would be allowed to renegotiate rent more easily based on how much money they are taking in under the limited coronavirus limitations. Should the renter and landlord not come to a new agreement, the renter could pull out of the lease at any time. Renters would not have to pay all future rents should this happen, but all back rent would have to be legally paid.
All evictions would also be halted until the end of the state lockdown. No publicly traded companies could benefit from SB 939.
While opposition to the bill was noted in Mid-May when the amended bill was brought up to the Assembly, it was brought to a head on Friday during Judiciary Committee testimony.
Rob Lapsley, president of the business lobbying group California Business Roundtable (CBR) said the CBR would sue the state in court to block SB 939 should it pass and be signed into law by the governor. Other business groups came forward with similar support and plans.
“It could cause a financial collapse,” warned California Business Properties Association (CBPA) Vice President of government relations Matthew Hargrove.
The Judiciary Committee itself subsequently passed the bill, but the final tally showed the divisiveness of the bill. 5 Senators voted in favor, 3 abstained, and 1 voted against.
Senator Wiener has argued that SB 939 would allow buildings to keep tenants and allow at least some cash flow to continue but emphasized putting the tenant ahead of the landlord in such decisions.
“We’re at severe risk of mass closure of restaurants, bars & cafes due to social distancing requirements,” said Senator Wiener in a tweet earlier this month. “We can’t let that happen. These businesses play an essential role in our economy & our neighborhoods.”
This week Senator Wiener added that “These landlords aren’t going to be able to collect the pre-COVID rents from these restaurants, bars and cafes. That is not the reality. The choice is not between full rent and reduced rent. The choice is between reduced rent and no rent.”
This explanation has only emboldened many landlords.
Landlords understand reasoning but remain unphased because of dire commercial consequences
“That seemingly makes sense, but our models account for full rent, not half-rent,” said Southern California strip mall owner John Caldwell. “We reduce rent for, say, half of everybody, that’s a 25% reduction in rent coming in. Ballpark. That’s not where our profit margins are at. We lose money on this if SB 939 is passed.”
“So if we don’t agree, we lose a tenant. If we keep them, we won’t be able to make costs, or we severely reduce something like maintenance.”
“If we keep the, we still lose money, but then we can’t get them out as easily.”
“And yes, they will owe any back rent, but it could take a year to get. We have people who rely on us for work. You know, janitors, security, and maintenance staff. There’s also other businesses like pest control and other things we may skimp on, so they’re hurt too.”
“Oh, and since taxes are on the building and property and not businesses, we still have to pay that in full. And those are just some of the costs.”
“How do they expect us to pay a mortgage and all the bills with not enough money coming in.”
“Yes, we get a profit, but we also become a bedrock for these tenants. We give them a home and a place to grow and keep the property tidy and enticing for people to come in. This is crazy to us.”
Landlords also noted the legal action.
“I can’t go into it too much, but we’re looking at it if it’s passed,” noted a landlord in Alameda County who spoke on the condition of anonymity. “I never thought I’d be suing the state, but here we are.”
SB 939 is currently set to be heard before the Senate Appropriations Committee in the coming weeks where it is expected to receive similar resistance from Committee Senators.