Senator Scott Wiener. (Photo: Kevin Sanders for California Globe)
Senator Wiener Attempts to Remove Key Parts of Controversial Small Business Lease Bill
Real estate groups plan to sue if SB 939 is passed
By Evan Symon, June 9, 2020 2:57 pm
On Monday, shortly before the Tuesday Senate Appropriations Committee meeting, a bill that would alter lease termination perimeters in the wake of the coronavirus-caused economic downturn was nearly given significant changes.
Big amendment changes to SB 939
Originally, Senate Bill 939, written by Senator Scott Wiener (D-San Francisco) and Lena Gonzalez (D-Long Beach), would have given economically-hurt tenants significantly more power in rent renegotiations. Small business tenants would have been allowed to renegotiate rent more easily based on how much money they were taking in under the coronavirus limitations. If landlords and renters didn’t agree on a new rent amount, then renters could leave without penalty. Only any backed up rent payments from before leaving the lease would have been paid.
But attempted changes by Wiener nearly threw power somewhat back to landlords. The provision allowing a tenant to leave the lease scot-free if the two sides couldn’t agree on a new amount after 30 days was to be removed. The current 90 day moratorium of commercial evictions after the end date of the state of emergency outlined in SB 939 was also to be significantly reduced. Terms and circumstances for not paying rent were also going to be reduced for small businesses seeking protection under the bill.
Overall, the bill was to be refocused on rent negotiations due to the reduction of business sales, with renters no longer having the ultimate trump card of simply walking out of the lease.
The changes were attempted due to the commercial real estate industry coming out en masse against SB 939, with the provision allowing tenants to leave at any time in particular being a sticking point. Many real estate groups have planned to immediately sue should SB 939 be passed. It also reduced support for the bill in recent weeks among lawmakers, spurring the need for new amendments.
“It was causing a lot of blowback”
“It was causing a lot of blowback,” said Senator Wiener in a statement on Monday about the ‘walk-away’ provision. “And our goal, of course, is never for leases to be canceled, but rather to encourage renegotiation.
We’re trying to make sure that we are, in a very focused way, helping to save these small businesses who are at severe risk of disappearing, and doing so in a way that’s equitable, because there are many landlords who are also small businesses.
There are people who insist that all landlords are working things out with their tenants, which is not true. There are plenty of landlords who are working things out with their tenants. We know that there are absolutely landlords who are doing the right thing by working to ensure that their small business tenants can continue to exist. But it’s just not universal, which is why the bill is necessary.”
While many lawmakers and some landlords would have been appeased by the amendments, many landlords still insist that SB 939 will only hurt them.
“I’m still not buying this,” said Southern California strip mall owner John Caldwell. “Ok, so they can’t leave. Great. But we still can’t evict them and we still can’t easily collect any rent from them. It’s forcing us to reduce rents still. And I’ve said this again and again, but we honestly can’t afford missed or reduced rents. Besides the mortgage there are so many fees and utility bills to take care of. We don’t want to lose tenants at all, but this forces us to make a bad deal, lose money, and possibly go into the red.
Depending on the business, we may actually lose more with reduced rent payments than them moving out. While we get rent money coming in, there’s still a lot of wear and tear going on we pay out of pocket once rent money set aside for that runs out.
I’m afraid of falling behind right now, and it’s only going to get worse for me and others if this is passed.”
SB 939 is due to be heard in the Senate Appropriations Committee hearing on Tuesday.
Addendum: The attempted SB 939 changes were not made by Senator Wiener, with the Committee Chair raising concern over Constitutional and cost issues.
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Someone wrote a check a “viola”, changes are made. Expect this to disappear completely in a few days
Restaurants tenants need help especially when leases favor the landlord. Rent deferments will not help small businesses. We need assistance in making the landlord negotiate rents. Why is it that only large companies get to negotiate! Without 939, small businesses will need to file bankruptcy. That will not help the landlord. We all need to take some of the hit!!!
Landlords aren’t helping. SB 939 bill should be passed.
I own 6 small retail stores that I’ve spent my life building. There is no way we can afford to pay pre-Covid rents with sales down 50%, not to mention pay back deferred rents from March, April and May. Senators, we need your help to survive! Landlords have all the power with leases written to protect them, down to personal guarantees. My landlords are trying to stick us with the Covid-19 bill while they try to maintain there big profits for the year. Rents should reduced by the same percentage that sales are down. If the landlord doesn’t like it they can let the tenant out of their lease.
There are some landlords who are attempting to assist tenants. Key word is SOME. Majority, especially the mall landlords, are only offering rent deferments which does not help especially with malls’ restrictive guidelines for covid (mandatory wear masks, social distancing, capacity restrictions in mall). Sales are down and we need help. The current leases are so strongly written favoring the landlord, tenants have no options. How are tenants supposed to negotiate when they refuse to. Only offered rent deferments is not negotiating. We are locked in with personal guarantees or joinder clauses which will force majority of us to be hit financial. If we go under, it hurts all creditors including our ability to pay home mortgages and bills. We are not huge corporations with extra funds to survive more than a few months without sales. We need help!!!
There are some landlords who are attempting to assist tenants. Key word is SOME. Majority, especially the mall landlords, are only offering rent deferments which does not help especially with malls’ restrictive guidelines for covid (mandatory wear masks, social distancing, capacity restrictions in mall). Sales are down and we need help. The current leases are so strongly written favoring the landlord, tenants have no options. How are tenants supposed to negotiate when they refuse to. Only offered rent deferments is not negotiating. We are locked in with personal guarantees or joinder clauses which will force majority of us to be hit financial. If we go under, it hurts all creditors including our ability to pay home mortgages and bills. We are not huge corporations with extra funds to survive more than a few months without sales. We need help!!!
Majority, especially the mall landlords, are only offering rent deferments which does not help especially with malls’ restrictive guidelines for covid (mandatory wear masks, social distancing, capacity restrictions in mall). Sales are down and we need help. The current leases are so strongly written favoring the landlord, tenants have no options. How are tenants supposed to negotiate when they refuse to. Only offered rent deferments is not negotiating. We are locked in with personal guarantees or joinder clauses which will force majority of us to be hit financial. If we go under, it hurts all creditors including our ability to pay home mortgages and bills. We are not huge corporations with extra funds to survive more than a few months without sales. We need help!!!
Wow.
No guts from the California senate to assist small business renters who are simply facing bankruptcy because they won’t be able to pay their deferred rents or future rents during the economy crisis that the state puts us into because of COVID-19. We are dealing with one landlord for two different spaces and they just won’t budge. They have not engaged at all with us and the only answer that they sent us was that the building has been open for business during the entire Shelter at Home order. Which is totally against the law.
The least the senate should do is to provide some type of protection. A lot of us, good tenants who have worked for years building a business do not want to default their financial responsibilities. We just need to start a conversation and see how we can make this work the next 12 months… because let’s face it. This is certainly the biggest economy crisis in the USA.
Why is it always the wealthy that have the needs that win these things. You really wonder what drives our politicians. They need to care about all their constituents an not only a portion of them…. What do these landlords expect anyway? To rent out their space after all these small businesses have closed?
This is really disappointing to say the least… and so many people are going to lose their livelihoods.
Disappointing and heartless…
SB 939 bill should be passed.
This bill had to be passed. Landlords are not offering equitable help to their tenants.