Senator Wiener and Senator Gonzalez’s Legislation to Allow Small Businesses to Renegotiate Leases and to Place a Moratorium on Commercial and Nonprofit Evictions Passes Senate Judiciary Committee
SACRAMENTO - Today, Senator Scott Wiener (D-San Francisco) issued the following statement regarding his legislation, SB 939, which passed the Senate Judiciary Committee today by a vote of 5-1. Senator Lena Gonzalez (D-Long Beach) is a joint author of SB 939. It will now be heard in the Senate Appropriations Committee in June. SB 939 would enact a moratorium on commercial evictions – for small businesses and nonprofits – during the COVID-19 State of Emergency. SB 939 would also allow tenants in the hospitality sector to renegotiate a commercial lease if they have lost over 40% of their revenue or if they will operate at 25% reduced capacity due to COVID-19-related social distancing requirements.
SB 939’s lease renegotiation provisions are not applicable for publicly owned companies, or businesses owned by publicly owned companies. It is also not applicable for large privately owned companies, only small businesses. If the landlord and tenant cannot come to a new lease agreement, the tenant may end the lease with no penalty.
Small businesses across California are enduring unprecedented financial struggles in light of the COVID-19 pandemic and government-mandated capacity reductions and social distancing restrictions. Nevertheless, commercial rents in San Francisco and across California are some of the highest in the country. This has exacerbated California businesses’ precarious financial situations as revenue has declined sharply due the necessary but difficult shelter-in-place restrictions. The hospitality sector – including cafes, bars, restaurants – is seeing large revenue losses, and many business owners fear bankruptcy due to current lease obligations. Even though some hospitality businesses may be able to reopen at a reduced capacity, it’s unlikely that they will see a full bounceback in revenue until restrictions are lifted entirely.
Most businesses are bound by leases negotiated before the COVID-19 pandemic and stay-at-home orders, which are reflective of an entirely different financial reality. Even the most successful businesses are suffering immensely due to severe revenue loss that is likely to continue. SB 939 will allow hospitality businesses to survive by letting them renegotiate their leases with landlords to find a mutually agreeable set of terms.
SB 939 is sponsored by the Bay Area Hospitality Coalition. Assemblymembers Rob Bonta, David Chiu, Ash Kalra and Phil Ting are co-authoring the bill.
“California faces the very real prospect of a mass extinction event for small businesses and nonprofits,” said Senator Scott Wiener. “Mass closures would undermine our economic recovery, keep unemployment high, harm our neighborhoods, and damage our social safety net. We can’t let this happen, and we must take steps to stabilize these businesses and nonprofits. Particularly for restaurants, bars, and cafes, government mandates to open at significantly reduced capacity mean that current rents are no longer reality. They need to be renegotiated to align with the current emergency. While many landlords are working with their tenants and doing the right thing by renegotiating rents, others are demanding full rent - and even increasing rent - which will lead to closures and bankruptcies. The state must step in to stabilize our small businesses and nonprofits. That’s what SB 939 is about.”
“I am pleased to see SB 939 advance out of committee today, and look forward to continuing this important conversation as the bill progresses,” said Senator Lena Gonzalez. “Ensuring that our community’s businesses can remain open is a critical step in our State’s economic recovery, and SB 939 will be instrumental in giving these businesses a fair shot at staying open and serving our communities. Local businesses are the foundation of the state’s economy and with the COVID-19 pandemic, the state must advance robust efforts for them to survive during these unprecedented times.”
“The Bay Area Hospitality Coalition is pleased that the Senate Judiciary Committee understands the dire circumstances that commercial tenants face,” said Gwyneth Borden, Steering Committee Member of the Bay Area Hospitality Coalition. “Rent is the largest fixed cost for hospitality businesses, and for many it will be the determinant of whether they reopen or remain open. With record unemployment in California, being led by the hospitality sector, SB939 is crucial in saving jobs. While many have adapted to new ways of doing business, social distancing requirements, safety concerns, record unemployment, and the lack of tourism and office workers, convention traffic, and business meetings, are all illustrative of how the market has changed. We need landlords to come to the table and SB939 is crucial in encouraging survival over job losses, costly eviction proceedings, lawsuits, and bankruptcy.”
“Today the judiciary committee recognized that businesses in the hospitality industry need a lifeline,” said Roberta Economidis, a partner at GE Law Group, a hospitality law practice. “Most simply cannot survive paying pre-Covid-19 rents while their revenues are down over 40% or more, especially as they will have to reopen with severely restricted seating capacities. A mechanism to bring landlords to the table is desperately needed, and this legislation will make the difference between survival and closure for many of our communities' most beloved restaurants, bars and performance venues.