Senators Wiener and Gonzalez Introduce New Amendments to SB 939 to Help Restaurants, Bars, and Cafes Renegotiate Rents Due to Reduced Capacity Under Public Health Orders

SB 939 prohibits commercial landlords from evicting businesses and nonprofits during the COVID-19 State of Emergency. With new amendments, business owners will be able to renegotiate or leave leases early
May 14, 2020

Sacramento - Today, Senators Scott Wiener (D-San Francisco) and Lena Gonzalez (D-Long Beach) amended SB 939, which places a moratorium on commercial evictions of small businesses and nonprofits for the duration of the COVID-19 health emergency. The new amendments give businesses like bars, restaurants, and cafes the ability to renegotiate a lease if they have lost over 40% of their revenue due to COVID-19 restrictions and if they will operate at reduced capacity due to social distancing requirements. If the landlord and tenant cannot come to a new lease agreement, the tenant may terminate the lease with no penalty.

SB 939 will allow small business and commercial landlords to modify leases to recognize the new economic reality created by COVID-19. With businesses able to terminate their economically non-viable leases — rather than abandoning the lease, getting sued, and the owner being forced into bankruptcy — landlords will have greater incentive to negotiate an amicable resolution.

Small businesses across California are struggling immensely, and high commercial rents make it even harder for businesses and nonprofits to survive the severe drops in revenue that many are experiencing right now. The hospitality sector has been hit particularly hard; even when businesses like cafes, restaurants and bars are allowed to reopen, their capacity will be significantly reduced. Yet, these businesses are bound by leases negotiated before the COVID-19 pandemic and stay-at-home orders, which reflect a different financial reality. SB 939 will help give businesses and nonprofits a fighting chance to survive by letting them negotiate more affordable rent or other lease provisions to help them get through the COVID-19 stay-at-home orders and subsequent reopening with reduced capacity. And, without a satisfactory agreement, businesses and nonprofits can vacate their leases altogether to avoid severe financial peril for owners facing bankruptcy.

SB 939’s lease renegotiation provisions will not apply to publicly owned companies, or businesses owned by publicly owned entities. Rather, these amendments are designed to help small businesses and nonprofits in need of immediate relief.

SB 939 also helps these businesses and nonprofits stay afloat by ensuring they are safe from eviction for the duration of the COVID-19 State of Emergency. It places a moratorium on commercial evictions as long as Governor Newsom’s State of Emergency, declared March 4th, 2020, is in effect. Cities like San Francisco and Los Angeles, among others, have announced commercial eviction moratoriums. SB 939, if passed, would — by statute — protect all California businesses and nonprofits from eviction, even if a city has not or is not able to take action.

Senator Scott Wiener said:

“Our small businesses and nonprofits are part of the fabric of our community, and they are hurting like never before. If we want to see them reopen, we must act swiftly by empowering them to renegotiate their leases or terminate their leases if necessary. California cannot afford mass closure of small businesses and mass bankruptcies of their owners. Yet, that is exactly where we’re heading without a change in the law, as SB 939 proposes, to ensure these businesses have a fighting change to survive under COVID-19’s new normal. Restaurants, bars, and cafes, in particular, define California’s neighborhoods. We cannot stand by while these hospitality businesses shut down around the state because their business models no longer sustain the rent they are legally obligated to pay. These amendments will provide stronger protections and more options for our businesses and nonprofits to help them get through the COVID-19 pandemic, which is impacting them so deeply at no fault of their own.”

Senator Lena Gonzales said:

“Our local California restaurants and businesses need our support now – many are pillars of our community who work hard to keep our economy going. They were asked to lock down first, and SB 939 will ensure they have options for economic stability during this crisis.”

Gwyneth Borden, a Steering Committee Member of the Bay Area Hospitality Coalition, said: 

"The Bay Area Hospitality Coalition is thrilled to work with Senators Wiener and Gonzalez to tackle one of the biggest issues facing hospitality businesses as they confront partial and full closures. Rent is a fixed cost for businesses, being inflexible by design, and unresponsive to circumstances when a tenant cannot operate as intended.  This bill will go a long way in keeping these businesses open by working with their landlords to ensure their survival and avoiding costly litigation."

Laurie Thomas, Executive Director of the Golden Gate Restaurant Association and owner of Rose’s Cafe and Terzo, said:

“We are grateful to Senator Weiner for introducing this legislation that incentivizes commercial landlords to work with their restaurant tenants to try to restructure their existing leases in a financially sound manner.  Even after the gradual reopening of dine-in restaurants, we anticipate significantly reduced revenues for a long time. Rent is such a big component of the fixed costs that relief in this area will strongly increase restaurants’ ability to survive.” 

Roberta Economidis, a partner with GE Law Group – a hospitality law practice – said:

"In order to survive, hospitality-related businesses need long term rent relief, not simply a deferral of high rents now that will become an insurmountable debt later. This legislation affords businesses the opportunity to negotiate a long term solution that will work for both the landlord and the tenant, and if not, to terminate a lease that can no longer be sustained in this new economic environment."