Three months since our last update on the impact of COVID-19 on commercial lease payment obligations (here), COVID-19 continues its onslaught throughout the United States with now more than 717,000 confirmed cases in California alone. The State of Emergency in California continues, and the Executive Order that previously granted local jurisdictions the authority to impose moratoriums on residential and commercial evictions has likewise been extended. This alert will address the continuing moratoriums on commercial evictions throughout various jurisdictions at the local level, and their impact on commercial lease payment obligations.
Executive Order N-28-20 was issued on March 16, 2020, and authorized local governments to impose substantive limitations on commercial evictions through May 31, 2020, if: (a) tenants were unable to pay rent because of a substantial decrease in business income (caused by, for example, a reduction in opening hours or consumer demand) or out-of-pocket medical expenses; and (b) the decrease in business income or out-of-pocket medical expenses was caused by the COVID-19 pandemic, or as a result of any local, state, or federal government’s response to COVID-19, provided the COVID-19-related cause was supported by documentation. On May 29, 2020, Governor Newsom issued Executive Order N-66-20, which extended the timeframe set forth in Executive Order N-28-20 (as discussed above) by an additional 60 days as of the date of Executive Order N-66-20 — i.e., to July 28, 2020. On June 30, 2020, Governor Newsom issued Executive Order N-71-20, which further extended the timeframe set forth in Executive Order N-28-20 through September 30, 2020.
It remains to be seen whether Executive Order N-28-20 will be further extended past September 30, 2020, particularly in light of the recent passage of Assembly Bill (“AB”) 3088 on August 31, 2020, which codified a statewide eviction moratorium for residential tenants. AB 3088 followed on the heels of the Judicial Council of California’s decision on August 13, 2020 to allow two temporary emergency rules (including rule 1, which prohibited the issuance of summons or the entering of defaults in unlawful detainer actions or “eviction actions”) to expire on September 1, 2020.
However, as commercial tenants were not included within the scope of AB 3088, commercial tenants must continue to look to the laws and ordinances in their local jurisdictions for any substantive limitations to evictions that may apply.
Extensions of Eviction Moratoriums
- The City of Los Angeles’ Ordinance No. 186606, which was passed on May 7, 2020, continues to prohibit commercial evictions during its Local Emergency Period, and for an additional three months thereafter for commercial tenants. This does not include, however, commercial real property leased by a multi-national company, a publicly traded company, or a company that employs more than 500 employees.
- The City of Long Beach, on August 4, 2020, adopted Ordinance No. ORD-20-0028 (the “LB Ordinance”), extending its moratorium on commercial evictions from July 31, 2020 to September 30, 2020. Commercial tenants are still required to pay all delayed rent by July 31, 2021, but may not be charged any associated late charges. Interestingly, the City of Long Beach did not update Long Beach Municipal Code § 8.100.050, which states that “all of such delayed and unpaid rent shall become immediately payable should a tenant fail to make a regularly scheduled monthly rental payment after July 31, 2020, and such failure to make a regularly scheduled payment persists after the expiration of a pay-or-quit notice applicable thereto.”
As a reminder, commercial tenants in Long Beach who were previously protected through May 31, 2020 (under Ordinance No. ORD-20-0010) are still excluded from the scope of the LB Ordinance, as follows:
(1) tenants and sub-tenants that are multi-national companies, publicly-traded companies, or companies which have more than five hundred (500) employees;
(2) tenancies and sub-tenancies managed by the Long Beach Airport;
(3) tenancies and sub-tenancies managed by the Long Beach Harbor Department; and
(4) tenancies and sub-tenancies within the Long Beach Tidelands area.
These excluded commercial tenants retain their obligation to repay the entirety of any rent deferred through May 31, 2020, on or before November 30, 2020.
- The City of Santa Ana issued Executive Order No. 10-2020 on July 23, 2020, extending its temporary moratorium on evictions for non-payment of rent by commercial tenants until such time as California’s Executive Order N-28-20 (as most recently extended by N-71-20) is repealed or revoked — this extends its moratorium through September 30, 2020.
- The City of Costa Mesa had previously tied the expiration of its ordinance prohibiting commercial evictions to California’s Executive Order N-28-20 (including any extensions), and following Executive Order N-71-20, the City of Costa Mesa has likewise extended its commercial eviction moratorium to September 30, 2020.
- The City of San Francisco continues to prohibit commercial evictions, having issued its fifth “Executive Order Extending Commercial Eviction Moratorium” on August 12, 2020, extending the moratorium on commercial evictions for an additional 30 days (the latest in its series of 30-day extensions) from August 15, 2020 to September 14, 2020.
- The City of Sacramento had previously prohibited all commercial evictions until the expiration of California’s Executive Order N-28-20; however, on June 30, 2020, it limited the scope of its prohibition on commercial evictions to retail businesses on the first floor of buildings, and further defined the types of retail businesses which qualified as “commercial tenants” after July 1, 2020.
- Commercial tenants who no longer qualify as “commercial tenants”, as defined by the City of Sacramento, have until 120 days after June 30, 2020 (i.e. October 28, 2020) to pay their landlord all unpaid rent without any related late fees, and remain protected against eviction for nonpayment of rent during this time. Retail businesses who do qualify as “commercial tenants” have until 120 days after the expiration of Executive Order N-28-20 (including any extensions) to pay their landlord all unpaid rent without any related late fees, and remain protected against eviction for nonpayment of rent during this time.
AALRR has a team of commercial litigation attorneys who will be able to assist you to navigate tenancy issues, ranging from rent abatement and obligations due to business interruption, force majeure, the doctrines of impossibility, impracticability, and frustration of purpose, and commercial evictions. The rules and protections for your commercial lease may be subject to change by the local governing body and application of the various rules is highly fact-specific and may or may not apply to your business. If you have any questions about which substantive limitations or protections pertain to your specific commercial lease agreement, contact the authors or your usual business law counsel at Atkinson, Andelson, Loya, Ruud & Romo for a thorough analysis of your lease and the impact of any rules or protections in your local jurisdictions.
This AALRR post is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR post does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process.
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