Shortly after the Centers for Disease Control and Prevention extended the federal COVID-19 eviction moratorium, California lawmakers followed suit with AB 832 which took effect at the end of June 2021. While the bill extended the State’s residential eviction moratorium, it expressly excluded tenants of commercial property.[1] Governor Newsom, however, extended protections to commercial tenants by way of Executive Order, which is currently set to expire September 30, 2021.[2] Several cities and counties within the Bay Area have enacted similar protections specifically aimed at helping commercial tenants.
San Francisco City and County
San Francisco’s moratorium prohibits landlords of “covered commercial tenants” from beginning eviction proceedings based on a missed rent payment (or payments) between March 16, 2020, and September 30, 2021, due to COVID-19.[3]
Covered commercial tenants include tenants, subtenants, and holdover tenants (those in possession of the leased property beyond the term in the lease) that:
Are registered to do business in San Francisco,
Have worldwide gross receipts[4] for 2019 at or below $25 million, and
Owe rent for months between March 16, 2020, and September 30, 2021.
There are some limitations. First, the moratorium does not apply to for-profit companies leasing office space.[5] Moreover, the moratorium does not forgive the unpaid rent; it merely prevents eviction due to nonpayment and encourages landlords and tenants to work in good faith to develop a repayment plan.[6]
Even after the end of the moratorium, commercial tenants may have a forbearance period, within which to pay any outstanding rent, based on the number of “full-time equivalent employees” or FTEs.[7] Smaller commercial tenants with fewer than 10 FTEs will receive 2 years from the end of the moratorium to pay back rent while larger tenants with 50 or more FTEs will not receive any additional time. Tenants with between 10 and 49 FTEs will receive between a year and 18 months to repay outstanding rent.[8]
San Francisco’s moratorium provides other protections including some for landlords. If a landlord can establish that the inability to evict a nonpaying tenant would cause “significant financial hardship” and the landlord has less than 25,000 square feet of gross floor area within the City and County of San Francisco, then the landlord may proceed to evict a protected tenant before any forbearance period ends.[9] Examples of significant financial hardships can include a landlord’s default on another debt or other obligation unrelated to the tenant’s failure to pay rent, such as previously planned renovations or turning the building over to a new owner.[10]
Alameda County
Although the County of Alameda’s eviction moratorium applies only to residential evictions,[11] cities like Alameda, Oakland, Berkeley, and Union City have all enacted protections for commercial tenants.
The City of Alameda prohibits evictions of commercial tenants who are unable to pay rent due to a “substantial loss of income” from COVID-19; though, the prohibition is set to expire on September 30, 2021, unless the State extends the deadline.[12] For commercial tenants, “substantial loss of income” means either (1) a reduction of 20% or more of a tenant’s average monthly gross income (based the 2019 calendar year) or (2) “extraordinary business expenses necessarily incurred” such as reducing business operations in compliance with social distancing or shelter-in-place regulations.[13] Notably, the ordinance includes a private right of action allowing for recovery of emotional distress and treble damages, a mandatory civil penalty—potentially upwards of $10,000—for violations prosecuted by the City or State, and a $5,000 enhancement if the violation was against someone with a disability or a senior.[14]
The Cities of Oakland and Berkeley also prohibit evictions of commercial tenants based on nonpayment of rent that became due during the COVID-19 pandemic.[15] Oakland’s moratorium is limited to “small businesses,” which are independently owned and operated businesses with 100 or fewer employees, [16] and nonprofits. Berkeley’s moratorium on commercial evictions is not limited to small businesses and provides twelve months to repay overdue rent.[17] Berkeley also provides for the recovery of attorney’s fees and costs in actions to enforce the regulation.[18] Both Oakland and Berkeley’s moratoriums conform to the September 30, 2021 extension set forth in the Governor’s Executive Order.
Union City’s ordinance prohibits landlords from evicting commercial tenants based on the nonpayment of rent due to a “substantial decrease in business income” from COVID-19.[19] A substantial decrease in business income is broadly defined to include reductions in operating hours, staff reporting to work, or consumer demand, as well as loss due to compliance with government health orders. It provides an affirmative defense to commercial tenants in unlawful detainer actions (eviction proceedings) and a private right of action to enforce the ordinance.[20] Union City’s moratorium remains in place until the expiration of the Governor’s Executive Order.[21]
Santa Clara County
The Santa Clara County Board of Supervisors extended the County’s commercial eviction moratorium, which applies to both cities and unincorporated areas within the county, until August 18, 2021.[22] This means that Santa Clara County’s moratorium will apply unless a region within the county offers broader protections to tenants; however, most cities within Santa Clara County do not protect commercial tenants against evictions. Santa Clara County’s moratorium applies only to small businesses and states that any attempt to evict a protected tenant in violation of the moratorium is void.[23] Commercial tenants have 120 days from the expiration of the ordinance to repay any past-due rent, during which time a landlord may not impose late fees. Like the City of Alameda, Santa Clara County’s ordinance provides for recovery of up to three times actual damages (including mental and emotional distress) as well as reasonable attorney’s fees and costs in actions to enforce the moratorium.[24]
Contra Costa County
Contra Costa County prohibits evictions of commercial tenants who can demonstrate that “the failure to pay rent is directly related to a loss of income or out-of-pocket medical expenses associated with the COVID-19 pandemic” or a related governmental response.[25] The eviction moratorium for commercial tenants took effect on March 16, 2020, and in June 2021, it was extended through September 30, 2021.[26] Like others, Contra Costa County’s moratorium provides for recovery of attorneys’ fees for the prevailing party in an action to enforce the ordinance.[27]
Marin County
The County of Marin initially passed a resolution prohibiting commercial evictions for nonpayment of rent due to financial loss from the COVID-19 pandemic; however, that resolution expired on May 31, 2020, despite the Marin County Board of Supervisors extending protections for residential tenants.[28] Various cities within Marin County, like San Rafael, Fairfax, and San Anselmo, have followed the County’s lead and extended the moratorium on residential evictions, but not commercial evictions.[29]
Future of Eviction Moratoriums
While some may balk at these types of commercial eviction moratoria, there are benefits to both tenants and landlords alike. A mass series of eviction proceedings would cause a spike in available commercial space on the market and drive down rental prices. Thus, moratoriums on evictions of commercial tenants, and any related forbearance periods, help stabilize the market and will likely continue so long as the economy is lagging and demand for commercial space is stagnant.
[1] As relevant to AB 832, section 1179.02 of the Code of Civil Procedure provides, in relevant part: “‘Tenant’ means any natural person who hires real property except any of the following: (1) Tenant of commercial property, as defined in subdivision (c) of section 1162 of the Civil Code.” (Emphasis added).
[2] Executive Department of the State of California, Executive Order N-08-21, Paragraph 61, available at: https://www.gov.ca.gov/wp-content/uploads/2021/06/6.11.21-EO-N-08-21-signed.pdf.
[3] San Francisco Office of Economic & Workforce Development, “FAQ’s on Commercial Eviction Moratorium,” available at: https://oewd.org/sites/default/files/Documents/FAQs%20on%20Commercial%20Evictions%20Moratorium%20v06.14.2021%20expires%209.30.21.pdf (updated June 14, 2021).
[4] In California, “gross receipts” means all revenue for a given year, which includes gross sales (the normal business activity of an entity) as well as any other sources of revenue. Sales and Use Tax Law, Section 6012(a).
[5] San Francisco Administrative Code, Section 37C.2, available at: https://codelibrary.amlegal.com/codes/san_francisco/latest/sf_admin/0-0-0-65019.
[6] San Francisco Administrative Code, Section 37C.3(b) (“Landlords and tenants are encouraged to negotiate agreements for repayment plans in good faith.”).
[7] “Full-time equivalent employees” include (a) full-time employees working 40 hours a week and (b) the aggregate number of part-time employees whose weekly hours add up to 40. For example, if an employer has two part-time employees that each work 20 hours a week, then the two part-time employees would equal one FTE (because together the two employees worked 40 hours a week, the “equivalent” of one full-time employee).
[8] San Francisco Administrative Code, Section 37C.3(a).
[9] San Francisco Administrative Code, Section 37C.3(d).
[10] San Francisco Administrative Code, Section 37C.3(g).
[11] County of Alameda Ordinance No. O-2020-41, available at: https://www.acgov.org/cda/hcd/documents/Item27O-2020-41.pdf; see also County of Alameda, “Alameda County COVID-19 Eviction Moratorium: FAQ’s,” available at: https://www.acgov.org/cda/hcd/documents/EvictionMoratoriumOrdinanceSummaryFAQ8.11.20.pdf.
[12] City of Alameda, “Help For City of Alameda Renters During COVID-19: FAQ’s,” available at: https://www.alamedaca.gov/files/assets/public/alameda-pio/tenant-resources-faq-revised-070221.pdf (updated July 2, 2021).
[13] City of Alameda Ordinance No. 3275, Section 2(1)(B), available at: https://www.alamedaca.gov/files/assets/public/departments/alameda/city-manager/ordinance-3275.pdf.
[14] Subsection 4 of section 4 of the City’s Ordinance provides for a mandatory “civil penalty in an amount up to the greater of $2500 per violation per day or $10,000 per violation, 50% payable to the City and 50% to the person or persons whose rights were violated.”
[15] Oakland City Council Ordinance No. 13589, available at: https://library.municode.com/ca/oakland/ordinances/code_of_ordinances?nodeId=1022904.
[16] California Gov’t Code, § 14837(d)(1)(A).
[17] Berkeley Municipal Code, Chapter 13.110, et seq., available at: https://www.codepublishing.com/CA/Berkeley/html/Berkeley13/Berkeley13110/Berkeley13110.html.
[18] Berkeley Municipal Code, Chapter 13.110.080.
[19] Union City Ordinance No. 879-20, Section 1(C), available at: https://www.unioncity.org/DocumentCenter/View/3519/Final-Eviction-Moratorium-Ordinance-Union-City?bidId=.
[20] Union City Ordinance No. 879-20, Section 1(H).
[21] Union City Ordinance No. 879-20, Section 1(A) (“This Eviction Moratorium shall remain in effect until May 31, 2020 or the expiration of the local emergency or the Governor’s proclamation of a state of emergency, whichever is later.”).
[22] The Ordinance extends the moratorium until the earlier of either (1) the expiration of the Governor’s Executive Order—set to expire at the end of September 2021—or August 18, 2021. Santa Clara County Ordinance No. NS-9.299, Section 3, available at: https://www.sccgov.org/sites/osh/Documents/County%20Evictions%20Ordinance.pdf.
[23] Santa Clara County Ordinance No. NS-9.287, Sections 2(a) & 3(c)(4).
[24] Santa Clara County Ordinance No. NS-9.287, Section 3(c)(9).
[25] Contra Costa County Ordinance No. 2020-14, Section 3(a), available at: https://www.contracosta.ca.gov/DocumentCenter/View/65159/urgency-ordinance-suspending-evictions-42120---final---signed.
[26] Contra Costa County Ordinance No. 2021-20, Section 4(a), available at: https://www.contracosta.ca.gov/DocumentCenter/View/71208/Urgency-Ordinance-2021-20-PDF.
[27] Contra Costa County Ordinance No. 2021-20, Section 6(b).
[28] County of Marin, “FAQs: Eviction Moratorium Resolution Nos. 2020-27 2020-40, and 2020-45 and 2020-60,” available at: https://www.marincounty.org/-/media/files/departments/cd/housing/landlord-and-tenant-resources/eviction-ban/062320-amendments/073120_eviction-moratorium-faqs_062320_english.pdf?la=en.
[29] Rodriguez, Adrian, “San Rafael Extends Eviction Freeze Through Sept. 30,” Marin Independent Journal (June 24, 2021), available at: https://www.marinij.com/2021/06/24/san-rafael-extends-eviction-freeze-through-sept-30/.