The Mayor of San Francisco has placed a temporary moratorium on evicting “small and mid-sized” commercial tenants who can show rent delays due to financial impact related to Covid-19. Here is our summary of key points:
When did the Moratorium Order go into effect?
- March 17, 2020
How long does it last?
- Until April 16, 2020 unless extended.
What happens after the Moratorium Order eventually terminates?
- Upon termination, any cure periods and rights in effect at the time are extended (tenant can get up to 6 months delay for past due rent existing when the Order terminates), but the moratorium would cease as to future defaults.
Does it apply to All Commercial Tenants?
- Commercial Tenants registered to do business in SF with worldwide gross receipts for 2019 of up to $25MM.
So tenants with over $25MM in such gross receipts can be evicted for not paying rent?
Does the Moratorium Order apply to Evictions other than for non-payment of rent, such as failure to obtain necessary insurance?
Can a landlord sue to collect rent but not evict?
- Yes. However, unlike unlawful detainer cases which are swift, regular lawsuits are relatively slow.
Can a landlord enforce an arbitration clause in a lease to evict for non-payment of rent?
- Possibly, depending on how the lease was drafted.
Can a landlord draw down security deposits and request replenishment?
- Probably yes depending the upon provisions of particular lease.
If a tenant is eligible for the Moratorium Order’s protections, how does it work?
- Basically, the Order provides an automatic 30 day cure right that can extended for up to 6 months.
What if application of the Moratorium Order to a landlord would cause financial hardship:
- Landlords can get waivers from the Mayor’s Order if they can show that being unable to evict would cause them a significant financial hardship, such as default on debt secured by the property. The Order grants the SF Office of Economic and Workforce Development (“OEWD”) authority to grant such waivers.
If a tenant subject to the Moratorium Order misses a rent payment what happens next?
- To preserve its right to evict for non-payment, the landlord first must serve tenant with a 30 day written notice to either pay the rent due or provide “documentation…showing that the tenant is unable to pay the rent due to a financial impact related to Covid-19.” The notice must specify tenant has a cure period of at least one month.
- During the 30 day notice period, the tenant has an absolute right to cure past due rent, no eviction action allowed;
- “Financial impact” means a “substantial decrease in business income due to illness or other disruption, reduced open hours or reduced customer demand or temporary closure of the business including temporary closure required to comply with restrictions or in response to restrictions under the shelter in place or other orders of the (City) Health Officer”;
- It is unclear presently what documentation suffices to show inability to pay rent. The OEWD is to provide guidance. For now, more than a mere conclusory statement by a tenant of inability would appear necessary along with supporting documentation (e.g., a current financial statement, copy of bank accounts, etc.)
What if the tenant does not pay the past due rent within 30 days?
- The landlord can evict such a tenant unless during the 30 days they provide the required documentation. If tenant provides such documentation, the parties must try to negotiate a payment plan and the tenant gets a one-month extension to cure.
Can a tenant repeat the documentation process after the first month if no payment plan is worked out?
- Yes, for up to 6 months. Thereafter, a landlord can evict for non-payment.
If you have any questions, please let us know.
The Weyand Law Firm is a leading Northern California real property and business litigation firm.