During the pandemic, a spirit of we’re all in this together took some of the edge off the normally tense relationship between landlords and commercial renters. Government relief and emergency regulations helped. But now as commercial eviction moratorium protections run out, the relationship will return to normal, albeit a normal flooded with complexities, scattered in the wake of the pandemic.
If you managed to keep your business running for the last year and a half, facing shutdowns, dealing with shortages, complying with health mandates, and keeping staff employed, take a moment to congratulate yourself. You are a survivor.
Resolution of your rental debt is key to moving forward. You need to be fully informed as to what protection the government offers in resolving back rent. At the state level in California, Executive Order N-80-20 from Governor Newsom allows local government to enact eviction moratoriums to protect commercial tenants. But nothing at the state level protects commercial tenants.
Bills issued from the state Senate and Assembly during COVID are complex. Landlords and commercial tenants will differ in interpreting what they mean. Courts will add further confusion as they rule on disputes and, in effect, rewrite the rules.
All Politics is local. The Same Could be Said for Moratorium Rules.
To learn what protections you have as a commercial tenant remember, “All politics is local,” an expression credited to Former Congressman from Massachusetts and House Speaker Tip O’Neill. The noise you hear about moratoriums at the national and state level mostly addresses residential arrangements between landlords and renters. You need to turn to local government, at the county and city level, to uncover what help is available for commercial tenant assistance.
- There are jurisdictions that allow tenants a full year to pay back rent, even in some circumstances, letting them pay it all in a lump some on the 364th day.
- A Temporary Commercial Eviction Moratorium issued by Alameda County that was set to expire on June 30, 2021 was extended to September 30, 2021. http://www.acgov.org/cda/ecd/moratorium.htm
Bear in mind, the landscape of the recovery is evolving. We’re playing catch-up with the Delta Variant which is triggering a daily bump in new cases where vaccinations have lagged. Pay attention to changes in CDC rules and monitor your local government response to national developments.
Take note. The contact you need at the local level may not necessarily be the elected, office holder. In some cases you will find there is a staff person who has a handle on what the rules are and how they are changing. A good lawyer knows who that person is.
Once all moratoriums expire, determine how much time will be allowed for you to pay back rent.
Understanding your bankruptcy options and protections is important.
Does Your Pre-COVID-19 Lease Make Sense in a Post-COVID-19 World?
COVID has fundamentally changed the playing field. Old ground rules, namely the obligations stipulated in your current lease, may stand in the way of your business recovery. Examine the lease to see whether changes can help.
In keeping your business operating you may have had to downsize. Or it may be that, like many businesses, you have given staff the option of working remotely and found it successful. Either way, you have space you no longer need. Subletting the space, an option perhaps not offered in your current lease, would be in your best interest. That option may not be in the best interest of your landlord. That is where negotiation enters.
Negotiation is a complicated, critical step toward resolution of differences. At this stage you need an attorney on your side. An attorney is a professional negotiator who will likely more than pay for him or herself by creating positive outcomes. You may not have known that resolution was possible after your own, repeated examinations of the lease. It takes an experienced attorney to find the wiggle room in the dense language of lease writing.