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Polarizing Bill Allowing Tenants Out Of Leases Falls Apart

A sweeping California commercial tenant-relief bill fell through Thursday at the hands of the state's Senate Appropriations Committee.

SB 939 would have placed a moratorium on evictions of some California small businesses and nonprofits, while also giving many of the state's hospitality tenants a way out of their lease agreements without a full penalty.

Backed by state Sen. Scott Wiener, a Democrat from San Francisco, and Lena Gonzalez, a Democrat from Long Beach, SB 939 is effectively stopped in its tracks with the committee's decision.

"Today, the Senate missed a major opportunity to throw a lifeline to small businesses and nonprofits by helping them survive the COVID-19 economic collapse," Wiener said in a statement.

"California faces the very real prospect of a mass extinction event for small businesses and nonprofits — a result that will undermine our economic recovery and inflict countless boarded-up storefronts on our neighborhoods."

SB 939 emerged last month as both a straightforward moratorium on commercial evictions and a way for businesses with 500 or fewer employees to terminate their leases. If 30 days of good faith negotiations with their landlord fell through, companies could walk away, owing at most three months of past due rent to be paid within 12 months.

The proposed bill drew strong opposition from the commercial real estate industry, even after its authors narrowed application of the eviction moratorium to businesses with 175 or fewer employees and softened the lease-termination provision.

SB 939's ultimate form limited any damages from legal action against tenants following failed negotiations to six months of rent. It also limited that protection to hospitality tenants and nonprofits, as Wiener told Bisnow last month

"Thankfully, legislators made the right choice to keep this bill on suspense," California Business Properties Association President and CEO Rex S. Hime said in a statement. "SB 939 is a bad bill. It is far too broad and would have done serious damage to California's economy."

Last month, California Business Roundtable President Rob Lapsley said the business lobby was prepared to sue to block SB 939

As it stunned landlords, the proposed legislation had the vocal support of tenants and tenant interests like the Bay Area Hospitality Coalition. Proponents argued emergency legislation was needed to better allow for renegotiated lease terms that reflected a new economic reality.

Wiener said Thursday his attempts wouldn't stop with SB 939 and that "inaction simply isn't tenable, given the consequences we face." 

"We will continue to do everything in our power to step up for these economic engines," he said Thursday. 

Hime said the CBPA will be ready for subsequent efforts.

“Even though this bill is stalled out for now, we’ll be keeping watch to make sure the language doesn’t find its way back into another bill at some point," he said.