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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