With Covid-19 resurging across the country, many business owners in California are worried about commercial leases, whether they run a retail business or office, or they are the property owners. Predicting the future seems to be an impossible task with this virus and its effects on our economy. So, what should business owners know about commercial leases right now?
Prohibition on evictions
Governor Newsom’s Executive Order N-28-20 from March allows local governments to limit commercial evictions based on the renter’s inability to pay rent due to Covid-19. He recently extended the order. Many cities have implemented these eviction moratoriums, including the City of San Diego and San Diego County. In fact, the City of San Diego has recently extended the moratorium through September.
Requirements for renters
Renters must document their inability to pay, in writing, to the landlord before the day their rent is due. Within a week, the renter must show a financial link between their inability to pay and Covid-19. Local governments are able to define the qualifications for the type of financial impact that may protect renters from eviction. For example, the City of San Diego requires the renter to show:
- A “substantial decrease” of income for their business because they had to close or reduce their business operations.
- The closure is related to the pandemic and/or the government response and public health guidelines and orders.
- The health guidelines can come from local, state or federal government authorities.
In addition, San Diego does not allow landlords to add late fees or interest in many situations.
None of this means the landlord will never see their money. For the most part, renters will eventually be expected to pay the rent due. In San Diego, that timeline is within six months of the end of either the state or local moratorium. Governments have encouraged both sides to work out payment plans and arrangements.
No matter your role in commercial leasing, everyone can agree that we all hope to end this pandemic and get the economy moving again. Only then can all businesses prosper again.