THINKING OF EVICTING YOUR COMMERCIAL TENANT? THINK AGAIN
Commercial landlords and tenants should take note. On March 24, 2020, in further response to COVID-19 and the resultant economic downturn, the County of Santa Clara has placed a moratorium on commercial evictions. The ban applies to all commercial evictions where the tenant can demonstrate a “substantial decrease in business income caused by a reduction in opening hours or consumer demand” as a result of COVID-19 and the government’s response thereto. Other counties and municipalities have passed similar measures, including San Mateo County, San Francisco and Oakland.
To qualify, a tenant must demonstrate substantial loss of income through “documentation or other objectively verifiable means.” A tenant may provide documentation of lost income at any time prior to execution of a judgment for possession of their rental unit to stop such eviction from going forward. Moreover, although not explicitly stated, under the terms of the ordinance, it appears that a commercial tenant may also rely on provisions otherwise available to residential tenants, including, but not limited to demonstrating a substantial loss of income by showing the need to miss work to care for a home bound school-age child or family member infected with coronavirus. The tenant-protection provisions also include a catch-all covering almost any demonstrable substantial loss of income relating to the COVID-19 pandemic and the government’s response.
The county’s ordinance imposes a number of novel obligations on landlords. Should a tenant demonstrate a substantial loss of income an owner is forbidden from terminating a tenancy via no-fault eviction through May 31, 2020 or any subsequent extension of approved by the Board of Supervisors. Should an owner wish to serve a notice of termination on a tenant during the pandemic, the ordinance requires that it the reason for termination and must include a notice of the tenant’s rights under the county’s emergency ordinance. An owner’s failure to comply with the ordinance renders the termination of tenancy void. Owners are expressly forbidden from charging or collecting late fees for rent delayed during the term of the emergency ordinance and for 120 days thereafter.
The ordinance applies to constructive evictions as well, instructing owners to immediately correct any conditions of the property that could constitute a cause of constructive eviction under California law. The ordinance may also be asserted as an affirmative defense in an unlawful detainer action.
Finally, owners who violate the eviction moratorium may be subject to civil suit as well as treble damages. The moratorium also contains a prevailing party attorney’s fees clause, thereby encouraging parties to rely on its private civil enforcement provisions. A failure to comply with the ordinance is also punishable by civil fines and penalties equivalent to a misdemeanor. Given the above, commercial tenants considering their options are likely to strongly consider taking their chances with litigation as by its very terms the language of the ordinance places much of the risk upon the landlord.
The county’s commercial eviction moratorium may have an enormous impact on your relationship with your landlord or tenant, as well as on your bottom line. Savvy landlords and tenants impacted by COVID-19 and the government’s response will need to consider whether abatement or deferment or a specific payment schedule, or even rescission of the lease, may be right for their situation. Nevertheless, given the potentially grave consequences for running afoul of its provisions, before taking any additional steps, interested parties should call our office to set up a consult with one of our qualified attorneys to discuss how the county’s commercial eviction moratorium may impact them.
For more information related to COVID-19 and developments in real estate see the following:
If you are a real estate broker, agent, lender, buyer or seller in the market we highly encourage you to read this article by RHRC partner Ronald Rossi which includes tips on dealing with the new COVID-19 addendums to the California Association of Realtors (CAR) standard forms for real estate transactions as well as this article by RHRC partner David Hamerslough, which goes over recent COVID-19 related developments and changes to the CAR forms, and this article in which he further details the impact of the changes in the County’s new shelter in place order on residential real estate viewings.
Finally, if you are a commercial landlord, tenant, or other interested party you should definitely read the following article by RHRC partner Ronald R. Rossi and associate Gabriel Rodriguez regarding COVID-19 and how those hoping to rely on the law to excuse performance should pause before doing so.
Santa Clara County Eviction Moratorium, https://www.sccgov.org/sites/osh/Documents/County%20Evictions%20Ordinance.pdf
San Mateo County Temporary Moratorium on Commercial Evictions, https://www.smcgov.org/sites/smcgov.org/files/Commercial%20Urgency%20Ordinance.pdf; San Francisco Eviction Moratorium, https://sfmayor.org/sites/default/files/032320_FifthSupplement.pdf; Oakland Eviction Moratorium, https://oakland.legistar.com/View.ashx?M=F&ID=8220413&GUID=2E248478-6D0D-4765-9A6B-4AAB42845A03
“A constructive eviction occurs when the acts or omissions … of a landlord, or any disturbance or interference with the tenant’s possession by the landlord, renders the premises, or a substantial portion thereof, unfit for the purposes for which they were leased, or has the effect of depriving the tenant for a substantial period of time of the beneficial enjoyment or use of the premises.” See Stroiber v. Honeychuck (1980) 101 Cal. App. 3d 911, 926 citing Groh v. Kover’s Bull Pen, Inc. (1963) 221 Cal. App. 2d 611, 614