California Indefinite Evictions Moratorium Bill for Commercial Tenants Dies in Committee

A bill that would have established an indefinite eviction moratorium and allowed for the unilateral renegotiating and terminating of certain commercial tenancy leases for certain commercial tenants, failed to advance out of the California Senate Appropriations Committee on June 18.

SB 939 is now effectively dead for the session, but it will be important to remain aware of efforts to include its language in other legislative vehicles. Nareit and other trade groups strongly opposed this legislation.

SB 939 would have permitted any tenant affected by COVID-19 either through a specific decline in revenue or reduced occupancy to defer paying rent until twelve months after the end of California’s state of emergency, the exact date of which is currently unknown. Second, it would have prevented property owners from serving notices of unpaid rent or violations of material lease terms until 90 days after the end of the state emergency, other than for public safety reasons.

SB 939 also would have provided certain small business, restaurant, bar, and entertainment-related tenants the right to renegotiate their leases in good faith, and, if agreement with the property owner is not reached, terminate their leases. If terminated, the tenant would be responsible only for any pre-COVID-19 unpaid rent, and only three months’ post-COVID-19 unpaid rent. Any guarantee on the lease would disappear, as would any tenant obligations for the deferred cost of any tenant improvements.

The legislation failed to take into account the many ongoing financial obligations property owners bear, such as payroll, mortgages, utilities and property taxes, all of which must be met even at a time when properties are closed and/or rent is not being paid. Further, the legislation failed to recognize that many property owners already are engaging in negotiations with their tenants regarding rent payments. SB 939 is now off the table for the session, but it will be important to remain aware of efforts to include its language in other legislative vehicles. Nareit and other trade groups strongly opposed this legislation.

To learn more about Nareit’s position on SB 939, visit the Stop SB 939 website, sponsored by the California Business Properties Association (CBPA), of which Nareit is a member. Nareit will continue to monitor future legislative developments and will advise members accordingly.

(Contact: Dara Bernstein at dbernstein@nareit.com)

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