California Senate Bill 939 Providing Protections to Commercial Tenants Fails to Pass in the California Senate Appropriations Committee

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By: Dennette A. Mulvaney, Esq.

On June 18, 2020, the California Senate Appropriations Committee declined to advance Senate Bill 939 (“SB-939”).  SB-939, as originally proposed, provided for a statewide moratorium on eviction of tenants of commercial real property during the state of emergency statewide. The Bill was later amended to limit eviction protection to certain COVID-19 impacted tenants, to allow payment of past due rent during the state of emergency to be paid 12 months after the emergency ends, and to allow tenants the opportunity to renegotiate the terms of their lease, and if unsuccessful, the ability to terminate the lease without future liability for the tenant and any guarantors.

The Bill was met with widespread opposition from landlord advocates. While some sort of relief is necessary to protect businesses impacted by the economic shutdowns, it appears that SB-939 is not the answer. The problem with addressing only one faction – here commercial tenants – is that the rest of the affected parties are left with no relief. The economic impact of the COVID-19 pandemic is wide reaching. Tenants may be the first impacted, however, all parties involved, including, landlords, owners, lenders and municipalities, will feel the financial strain caused by this economic downturn.

For now, commercial landlords and tenants will have to be creative and there will be challenging times ahead for all. Rent deferral, rent abatement, modification to percentage rent, modification to lease term and use of security deposits to pay rent remain options for restructuring.

If you have any questions about SB-939, or other questions about governmental orders and regulations for landlords and tenants, please contact Dennette A. Mulvaney. Dennette is a Partner with Leech Tishman, and a member of the firm’s Real Estate and Bankruptcy & Creditors’ Rights Practice Groups. Dennette is based in Leech Tishman’s Pasadena office and can be reached at 626.796.4000 or via email at dmulvaney@leechtishman.com

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