Devastated Bars, Restaurants Could Renegotiate Leases Under Coronavirus Bill

Bars, restaurants and nonprofits suffering financial losses over the coronavirus pandemic and stay-at-home orders could see some rent relief under a California Senate proposal.

But property owners oppose the measure, insisting it would force them to shoulder the burden of the crisis.

“We face a significant risk that we’re going to lose a massive number of our small businesses and nonprofits, particularly our neighborhood-serving restaurants, bars and cafes,” said Sen. Scott Wiener, D-San Francisco. “We need to take action to make sure that we don’t have a mass extinction event.”

Wiener’s SB 939 would place a moratorium on commercial evictions for small businesses and nonprofits during the state of emergency, which has been in place since March 4 and could last months longer. 

It would also allow businesses that have lost at least 40% of their revenue or are operating at reduced capacity to renegotiate their lease. If an agreement can’t be reached, it would let tenants terminate the lease without penalty.  

It’s targeted primarily at helping the hard-hit hospitality industry. Bars across California were the first to be shut down by Gov. Gavin Newsom and are still ordered closed. Restaurants in most counties can reopen for dine-in, but with fewer tables in service due to social distancing measures.

“If you signed a lease as a restaurant based on being able to serve at 20 tables, but now the government is telling you that you can only serve at six tables or seven tables, that rent is no longer in the world of reality and it needs to be adjusted,” Wiener said.

The San Francisco Democrat acknowledged that many commercial property owners are already working with their tenants to figure out solutions. “But some are not,” he said. “We just want to create an atmosphere where that renegotiation of rents happens.”

SB 939 was approved by a Senate committee last week, but Wiener said he is still working on changes in order to garner support from commercial landlords, who largely oppose the bill.

Rex Hime, president of the California Business Properties Association, says Wiener’s proposal does nothing to help landlords, who are also struggling during the crisis.

“Most landlords are fighting to keep their tenants. It’s more expensive for us to find a new tenant than to keep the tenant we have — particularly restaurants,” Hime said.  “We want them there.”

Hime is eyeing a package unveiled by Senate leadership aimed at helping residential renters. Among the proposals is a program to give renters hit hard by the economic impacts of the coronavirus up to ten years to pay interest-free back rent. Landlords would get tax credits to make up for the lost income.

“We prefer that approach,” he said. “This measure just simply targets landlords.”