California’s Extension of COVID-19 Measure and Its Continued Impact On Commercial Lease Payment Obligations

06.04.2020

As the number of COVID-19 cases continues to trend upwards, passing 100,000 in California alone, the State of Emergency in California and its corresponding measures have recently been extended to deal with the ongoing effects of the pandemic. This includes the authority previously granted to local jurisdictions to impose moratoriums on residential and commercial evictions as they saw fit. This alert will address the continuing moratoriums on commercial evictions 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 had been caused by the COVID-19 pandemic, or by any local, state, or federal government’s response to COVID-19, and was documented. On May 29, 2020, Governor Newsom issued Executive Order N-66-20, which extended the timeframe set forth in Executive Order N-28-20 by an additional 60 days as of the date of Executive Order N-66-20 — or to July 28, 2020.

Accordingly, commercial tenants must continue to look to the laws of their local level of government to see what substantive limitations to evictions may apply.

Extensions of Eviction Moratoriums by Various Cities

The City of Los Angeles approved Ordinance No. 186606 on May 7, 2020, which 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 May 26, 2020, adopted Ordinance No. ORD-20-0020 (the “Ordinance”), extending its moratorium on commercial evictions through July 31, 2020. However, some commercial tenants who were previously protected through May 31, 2020 (under Ordinance No. ORD-20-0010) are now excluded from the scope of the Ordinance, as follows:

(1) tenants and sub-tenants which are multi-national companies, publicly-traded companies, or companies which have more than five hundred (500) employees;

(2) tenants and sub-tenants managed by the Long Beach Airport;

(3) tenants and sub-tenants managed by the Long Beach Harbor Department; and

(4) tenants and sub-tenants 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. However, commercial tenants who remain protected under the Ordinance will now have until July 31, 2021 (as opposed to November 30, 2020) to pay all delayed rent without any associated late charges. All such delayed and unpaid rent must be repaid immediately, however, if a tenant fails to make a regularly scheduled monthly payment after July 31, 2020, and such failure persists after the expiration of an applicable pay-or-quit notice.

The City of San Francisco continues to prohibit commercial evictions, having issued its second “Executive Order Extending Commercial Eviction Moratorium” on May 14, 2020, extending the moratorium on commercial evictions for an additional 30 days from May 17, 2020 to June 16, 2020.
The City of Santa Ana issued Executive Order No. 4-2020 on May 28, 2020, extending its temporary moratorium on evictions for non-payment of rent by commercial tenants through June 30, 2020.
The City of Sacramento and the City of Costa Mesa had both explicitly tied the expiration of their respective ordinances prohibiting commercial evictions to California’s Executive Order N-28-20 (including any extensions), and with its extension by Executive Order N-66-20, the Cities of Sacramento and Costa Mesa have also extended their commercial eviction moratoriums through July 28, 2020.

Conclusion

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, impossibility, impracticability, and frustration of purpose doctrines, 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 jurisdiction.