State and Local

California Bill Threatens Leases, Risks Crisis for Commercial Real Estate

In an apparent effort to help struggling business owners with their rent payments during the COVID-19 emergency, California Senate Bill 939 advanced through the state’s Judiciary Committee last week, threatening to shift the burden to properties and incite a mortgage default crisis. However well-intended, the bill would allow certain businesses to walk away from their contractual obligations. SB939 establishes, for all commercial tenants in the state, a moratorium on evictions as well as a yearlong period in which no rental payments would be due. In addition, specified businesses including restaurants and bars could terminate existing leases.

 

The commercial real estate sector, especially in California, has been supportive of executive orders and emergency ordinances regarding rent caps, evictions and other related issues. SB939, however, grants blanket benefits to some businesses while doing nothing to address mortgage payments, payroll and utility expenses that will still be due, unfairly endangering many of the individuals and small businesses it’s intended to assist. BOMA California and the California Business Properties Association are leading an intensive effort to amend or defeat the bill and are preparing for a battle when it reaches the full state senate in the next few weeks. For more details, visit BOMA/Greater Los Angeles and the CBPA.