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SB-939 Emergencies: COVID-19: commercial tenancies: evictions.(2019-2020)

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Date Published: 05/29/2020 09:00 PM
SB939:v95#DOCUMENT

Amended  IN  Senate  May 29, 2020
Amended  IN  Senate  May 13, 2020
Amended  IN  Senate  March 25, 2020
Amended  IN  Senate  March 12, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 939

Introduced by Senators Wiener and Lena Gonzalez
(Principal coauthors: Assembly Members Bonta, Chiu, and Ting)
(Coauthor: Assembly Member Kalra)

February 06, 2020

An act to add Section 1951.9 to to, and to add and repeal Section 1951.10 of, the Civil Code, relating to evictions, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


SB 939, as amended, Wiener. Emergencies: COVID-19: commercial tenancies: evictions.
Existing law permits the Governor to proclaim a state of emergency during conditions of disaster or of extreme peril to the safety of persons and property, including epidemics. Existing law provides that the proclamation takes effect immediately, affords specified powers to the Governor, and terminates upon further proclamation by the Governor. Existing law prohibits the eviction of residential tenants during the pendency of a state of emergency, except as specified.

This bill would prohibit a person, business, or other entity from evicting tenants of commercial real property, including businesses and nonprofit organizations, and from taking specified other actions relating to the eviction of tenants of commercial real property, during the pendency of the state of emergency proclaimed by the Governor on March 4, 2020, related to COVID-19. The bill would make an eviction in violation of those provisions void, against public policy, and unenforceable, and would make harassment or mistreatment of or retaliation against a tenant punishable by a fine not to exceed $2,000 for each violation. The bill would make it an act of unfair competition and an unfair business practice to violate the foregoing prohibition. The bill would require written notice of protections afforded by the bill to be provided to commercial property tenants within 30 days of the effective date of the bill. The bill would render void and unenforceable evictions that occurred after the proclamation of the state of emergency but before the effective date of this bill. The bill would not prohibit the continuation of evictions that lawfully began prior to the proclamation of the state of emergency, and would not preempt local ordinances prohibiting or imposing more severe penalties for the same conduct.

The bill would also authorize a commercial tenant that is a small business or is an eating or drinking establishment, place of entertainment, or performance venue that meets specified financial criteria, including experiencing a specified decline in revenue after a shelter-in-place order took effect, to engage in negotiations with its landlord to modify rent or other economic requirements. The bill, with exceptions, would specify the notice and other requirements for engaging in negotiations to modify the lease, including that the tenant affirm, under the penalty of perjury, that the tenant meets the required financial criteria. By creating a new crime, the bill would impose a state-mandated local program. The bill would also authorize a tenant to terminate the lease, as provided. The bill would exclude publicly traded companies and affiliated companies from those provisions. The bill would make those provisions inoperative on December 31, 2021, or 2 months after the declared state of emergency ends, whichever is later.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

This bill would declare that it is to take effect immediately as an urgency statute.

This bill would prohibit a commercial landlord, as defined, from serving a specified notice of eviction on a commercial tenant, as defined, until 90 days after the state of emergency proclaimed by the Governor on March 4, 2020, is lifted and if specified criteria apply, including that the commercial tenant served a written notice on the landlord affirming, under the penalty of perjury, that the commercial tenant is an eligible COVID-19 impacted commercial tenant. By creating a new crime with regard to the notice being signed under the penalty of perjury, the bill would impose a state-mandated local program. The bill would define an “eligible COVID-19 impacted commercial tenant” for the purposes of these provisions as a commercial tenant, operating primarily in California, that occupies commercial real property pursuant to a lease and that meets certain financially related criteria. The bill would provide that specified notices of eviction served on commercial tenants are void under specified circumstances, including that the commercial tenant was an eligible COVID-19 impacted commercial tenant at the time the notice of eviction was served. The bill, among other things, would also provide a means for stopping an eviction in process, prohibit nonpayment of rent during the state of emergency from being grounds for an unlawful detainer action, as provided, limit when late fees can be imposed on a commercial tenancy, and require the landlord to provide written notice of the protections afforded by these provisions. The bill would prohibit the landlord from willfully harassing, intimidating, threatening, or retaliating against a commercial tenant with the intent to terminate the occupancy, and would subject the landlord to various damages if found by a court to have engaged in that behavior. The bill would also make a willful violation of these provisions an unlawful business practice and an act of unfair competition, subject to specified remedies and penalties.
This bill would authorize an eligible COVID-19 impacted commercial tenant, defined for the purposes of these provisions as a small business that operates primarily in California and is an eating or drinking establishment, place of entertainment, or performance venue that occupies commercial real property pursuant to a lease and that meets specified financially related criteria, to engage in good faith negotiations with its landlord in order to modify any rent or economic requirements. The bill would authorize an eligible COVID-19 impacted commercial tenant (eligible tenant) to serve written notice on the landlord, affirming under the penalty of perjury, that the commercial tenant is an eligible tenant and stating what lease modifications the commercial tenant is seeking. By creating a new crime with regard to the notice being signed under the penalty of perjury, the bill would impose a state-mandated local program. The bill would also provide that if the eligible tenant and the landlord do not reach a mutually satisfactory agreement within a certain timeframe, the eligible tenant is authorized to terminate the lease, as provided. The bill would exclude publicly traded companies and affiliated companies from these provisions. The bill would make these provisions inoperative on December 31, 2021, or 2 months after the declared state of emergency ends, whichever is later.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 1951.9 is added to the Civil Code, to read:

1951.9.
 (a) The following definitions apply for the purposes of this section:
(1) “Commercial landlord” means any person, business, or other entity that owns or manages commercial property, or their agent.
(2) “Commercial real property” means all real property in this state except dwelling units made subject to this chapter, “mobilehomes” as defined in Section 798.3, and “recreational vehicles” as defined in Section 799.29.
(3) “Commercial tenancy” means the occupation of commercial real property pursuant to a lease.
(4) “Commercial tenant” means a tenant occupying commercial real property pursuant to a lease, including, but not limited to, businesses or nonprofit organizations.
(5) “Eligible COVID-19 impacted commercial tenant” means a commercial tenant that operates primarily in California, that occupies commercial real property pursuant to a lease, and that meets one of the following criteria:
(A) It is a commercial tenant that has experienced a decline of 20 percent or more in average monthly revenue over the two most recent calendar months when compared to one or both of the following:
(i) Its average monthly revenue for the two calendar months before a state or local government shelter-in-place order took effect.
(ii) Its average monthly revenue for the same calendar months in 2019.
(B) It is a commercial tenant that was prevented from opening or required to delay opening its business because of the state of emergency.
(C) It is a commercial tenant that has suffered a decline of 15 percent or more in capacity due to compliance with an official public health order or occupational health and safety guideline for preventing the spread of the coronavirus (COVID-19).
(6) “State of emergency” means the state of emergency proclaimed by the Governor on March 4, 2020, related to the coronavirus (COVID-19).
(b) Until 90 days after the state of emergency is lifted, it shall be unlawful for a commercial landlord to serve a commercial tenant with a notice pursuant to paragraph (2) of Section 1161 of the Code of Civil Procedure if both of the following apply:
(1) The notice requires payment of rent that accrued during the state of emergency.
(2) The commercial tenant has served written notice on the premises’ landlord affirming, under the penalty of perjury, that the commercial tenant is an eligible COVID-19 impacted commercial tenant as defined by this section.
(c) Until 90 days after the state of emergency is lifted, it shall be unlawful for a commercial landlord to serve a commercial tenant with a notice pursuant to paragraph (3) of Section 1161 of the Code of Civil Procedure if both of the following apply:
(1) The notice requires replenishment of a security deposit that the landlord has applied to an outstanding balance corresponding to unpaid rent that accrued during the state of emergency.
(2) The commercial tenant has served written notice on the premises’ landlord affirming, under the penalty of perjury, that the commercial tenant is an eligible COVID-19 impacted commercial tenant as defined by this section.
(d) Subdivisions (b) and (c) shall apply prospectively.
(e) A notice served by a commercial landlord to a commercial tenant pursuant to paragraph (2) of Section 1161 of the Code of Civil Procedure is void if both of the following apply:
(1) The notice requires payment of rent that accrued during the state of emergency.
(2) At the time the notice was served, the commercial tenant was an eligible COVID-19 impacted commercial tenant as defined by this section.
(f) A notice served by a commercial landlord to a commercial tenant pursuant to paragraph (3) of Section 1161 of the Code of Civil Procedure is void if both of the following apply:
(1) The notice requires replenishment of a security deposit that the landlord has applied to an outstanding balance corresponding to unpaid rent that accrued during the state of emergency.
(2) At the time the notice was served, the commercial tenant was an eligible COVID-19 impacted commercial tenant as defined by this section.
(g) Subdivisions (e) and (f) shall apply retroactively.
(h) In any action for unlawful detainer in which a judgment for possession has been entered in favor of a commercial landlord, the commercial tenant may move to have that judgment set aside on the basis of this section. A writ of possession shall not issue while the motion to set aside is pending. If a writ of possession was issued prior to filing of the motion to set aside, the court shall stay execution of the writ while the motion to set aside the judgment is pending.
(i) The failure of an eligible COVID-19 impacted commercial tenant to pay rent that accrues during the state of emergency shall not be grounds for an unlawful detainer action. The unpaid balance of any rent that accrued on the commercial tenancy of an eligible COVID-19 impacted commercial tenant during the state of emergency shall be due at the end of the month containing the date 12 months after the end of the state of emergency, unless the tenant has reached an agreement with the person, business, or other entity to pay off the balance at a later time.
(j) Notwithstanding any lease provision to the contrary, late fees shall not be imposed for rent that accrued on the commercial tenancy of an eligible COVID-19 impacted commercial tenant during the state of emergency unless that rent remains unpaid after it becomes due pursuant to the terms of subdivision (i).
(k) Notwithstanding Section 1479, a landlord shall apply any rental payment made by an eligible COVID-19 impacted commercial tenant after the state of emergency is lifted toward the current month’s rent before applying any residuals to any unpaid balance corresponding to rent that came due during the period of the state of emergency.
(l) Written notice of protections afforded by this section shall be provided to tenants of commercial real property within 30 days of the effective date of this section. If the commercial landlord customarily communicates with the commercial tenant in a language other than English, the commercial landlord shall provide the written notice required by this section in that other language.
(m) This section does not preempt any local ordinance prohibiting the same or similar conduct or imposing a more severe penalty for the same conduct prohibited by this section.
(n) In addition to the prohibitions contained in subdivisions (a) and (b) of Section 798.3, a commercial landlord shall not willfully harass, intimidate, threaten, or retaliate against a commercial tenant with the intent to terminate the occupancy. Any commercial landlord who violates this section shall be liable to the commercial tenant in a civil action for all of the following:
(1) Actual damages of the tenant.
(2) An amount not to exceed two thousand dollars ($2,000) for each incident constituting a violation. In determining the amount of the award, the court shall consider proof of those matters as justice may require; however, in no event shall less than two hundred fifty dollars ($250) be awarded for each separate cause of action. Subsequent or repeated violations, which are not committed contemporaneously with the initial violation, shall be treated as separate causes of action and shall be subject to a separate award of damages.
(o) In any action under subdivision (n), the court shall award reasonable attorney’s fees to a prevailing commercial tenant. In any action the commercial tenant may seek appropriate injunctive relief to prevent continuing or further violation of the provisions of this section during the pendency of the action.
(p) Willful violation of this section shall constitute an unlawful business practice and an act of unfair competition within the meaning of Section 17200 of the Business and Professions Code. The remedies and penalties provided by this section are cumulative to each other, the remedies under Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code, and the remedies or penalties available under all other laws of this state.
(q) The remedies set forth in this section are not exclusive and shall not preclude the tenant from pursuing any other remedy that the tenant may have under any other law.

SEC. 2.

 Section 1951.10 is added to the Civil Code, to read:

1951.10.
 (a) For purposes of this section, the following definitions apply:
(1) “Commercial real property” means all real property in this state except dwelling units made subject to this chapter, “mobilehomes” as defined in Section 798.3, and “recreational vehicles” as defined in Section 799.29.
(2) “Eligible COVID-19 impacted commercial tenant” means a small business that operates primarily in California, that occupies commercial real property pursuant to lease, and that meets one of the following criteria:
(A) It is an eating or drinking establishment, a place of entertainment, or a performance venue that has experienced a decline of 40 percent or more of average monthly revenue over the two most recent calendar months when compared to one or both of the following:
(i) Its average monthly revenue for the two calendar months before a state or local government shelter-in-place order took effect.
(ii) Its average monthly revenue for the same calendar months in 2019.
(B) It is an eating or drinking establishment, a place of entertainment, or a performance venue that was prevented from opening or required to delay opening its business because of the state of emergency.
(C) It is an eating or drinking establishment, a place of entertainment, or a performance venue that has suffered a decline of 25 percent or more in capacity due to compliance with an official public health order or occupational health and safety guideline for preventing the spread of the coronavirus (COVID-19).
(3) “Small business” means a business that is not dominant in its field of operation, the principal office of which is located in California, the officers of which are domiciled in California, and which has 500 or fewer employees.
(4) “State of emergency” means the state of emergency proclaimed by the Governor on March 4, 2020, related to the coronavirus (COVID-19).
(b) An eligible COVID-19 impacted commercial tenant who wishes to modify its commercial lease may engage in good faith negotiations with its landlord to modify any rent or economic requirement regardless of the term remaining on the lease.
(c) A commercial tenant that is an eligible COVID-19 impacted commercial tenant may serve written notice on the premises’ landlord affirming, under the penalty of perjury, that the commercial tenant is an eligible COVID-19 impacted commercial tenant as defined by this section and stating the lease modifications the commercial tenant desires to obtain.
(d) If the eligible COVID-19 impacted commercial tenant and the landlord do not reach a mutually satisfactory agreement within 30 days of the date the landlord received the negotiation notice, then within 10 days thereafter, the eligible COVID-19 impacted commercial tenant may terminate the lease by serving a notice of termination of the lease on the landlord. The tenant shall have 14 days from service of the notice to vacate the premises. Once the eligible COVID-19 impacted commercial tenant vacates the property, all of the following shall apply:
(1) The lease shall terminate.
(2) No further liability for any rent, fees, or costs shall accrue under the lease.
(3) Any third-party guaranties associated with the lease shall terminate and shall no longer be enforceable.
(4) In lieu of any other damages, the eligible COVID-19 impacted commercial tenant shall be obligated, within 12 months of vacating the commercial real property, to pay the landlord all of the following:
(A) Three months’ worth of the past due rent incurred during the state of emergency or a lesser sum as may be actually unpaid.
(B) All unpaid rent that accrued outside of the state of emergency.
(e) The notices in subdivisions (c) and (d) shall be served in accordance with the notice provisions of the lease. If no notice provisions exist in the lease, the commercial tenant shall provide the notice through certified mail, return receipt requested, recognized overnight carrier, personal delivery, or any other manner where actual receipt occurs to the landlord or the landlord’s designated agent.
(f) If a commercial tenant and landlord reach a mutually satisfactory agreement pursuant to this section, the commercial tenant shall not have a subsequent option to terminate its lease under this section at a later date.
(g) This section shall not apply to any publicly traded company or a company that is owned by, or is affiliated with, a publicly traded company.
(h) This section shall be inoperative on December 31, 2021, or two months after the declared state of emergency ends, whichever is later.

SEC. 3.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

SEC. 4.

 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to mitigate the economic hardships to tenants of commercial real property, including businesses, nonprofit organizations, and eating or drinking establishments, resulting from the coronavirus (COVID-19), it is necessary that this act take effect immediately.
SECTION 1.Section 1951.9 is added to the Civil Code, to read:
1951.9.

(a)It shall be unlawful for a person, business, or other entity to terminate a tenancy, serve notice to terminate a tenancy, use lockout or utility shutoff actions to terminate a tenancy, or otherwise endeavor to evict a tenant of commercial real property, including a business or nonprofit organization, during the pendency of the state of emergency proclaimed by the Governor on March 4, 2020, related to COVID-19, unless the tenant has been found to pose a threat to the property, other tenants, or a person, business, or other entity.

(b)(1)An eviction in violation of this section shall be deemed void, against public policy, and unenforceable. Harassment or mistreatment of or retaliation against a tenant by a person, business, or other entity in order to force abrogation of a lease is punishable by a fine of not more than two thousand dollars ($2,000) for each violation.

(2)A violation of this section shall constitute an unlawful business practice and an act of unfair competition within the meaning of Section 17200 of the Business and Professions Code. The remedies and penalties provided by this section are cumulative to each other, the remedies under Section 17200 of the Business and Professions Code, and the remedies or penalties available under all other laws of this state.

(c)An eviction in violation of this section that occurred after the proclamation of the state of emergency but before the effective date of this section shall be deemed void, against public policy, and unenforceable.

(d)If a tenant does not pay rent during any or all months occurring during the state of emergency, the sum total of that rent shall be due 12 months after the date the state of emergency ends, unless the tenant has reached an agreement with the person, business, or other entity to pay the sum total of that rent at a date later than the end of the month containing the date 12 months after the end of the state of emergency. The nonpayment of rent that would have been due during the state of emergency shall not be grounds for an unlawful detainer. Notwithstanding any lease provision to the contrary, no late fees may be imposed for rent that became due during the state of emergency.

(e)It is not a violation of this section for a person, business, or other entity to continue an eviction process that was lawfully begun prior to the proclamation of the state of emergency.

(f)This section shall serve as a complete affirmative defense in unlawful detainer proceedings.

(g)Written notice of protections afforded by this section shall be provided to tenants of commercial real property within 30 days of the effective date of this section.

(h)No writ of possession for commercial real property may be enforced while the state of emergency is in effect.

(i)This section does not preempt any local ordinance prohibiting the same or similar conduct or imposing a more severe penalty for the same conduct prohibited by this section.

SEC. 2.

(a)For purposes of this section, “commercial tenant” means a business that operates primarily in California that meets all of the following:

(1)The commercial tenant’s primary business is a small business, or is an eating or drinking establishment, place of entertainment, or performance venue.

(2)The commercial tenant has experienced a decline of 40 percent or more of monthly revenue as compared to two months either before a state or local government shelter-in-place order took effect or as compared to the same month in 2019, and, if an eating or drinking establishment, place of entertainment, or performance venue, a decline of 25 percent or more in capacity due to a social or physical distancing order or safety concerns; and is subject to regulations to prevent the spread of COVID-19 that will financially impair the business when compared to the period before the shelter-in-place order took effect (financial criteria).

(b)A commercial tenant described in subdivision (a) who wishes to modify its commercial lease, may engage in good faith negotiations with its landlord to modify any rent or economic requirement regardless of the term remaining on the lease.

(c)The commercial tenant may serve written notice on the premises landlord by affirming, under the penalty of perjury, that the commercial tenant meets the financial criteria and stating the modifications the commercial tenant desires to obtain (negotiation notice). The negotiation notice shall be served in accordance with the notice provisions of the lease. If no notice provisions exist in the lease, the commercial tenant shall provide the negotiation notice through certified mail, return receipt requested, recognized overnight carrier, personal delivery, or any other manner where actual receipt occurs to the landlord or landlord’s designated agent. However, a commercial tenant that was prevented from opening or required to delay opening its business because of a shelter-in-place order shall not be required to demonstrate the financial criteria.

(d)If the commercial tenant and landlord do not reach a mutually satisfactory agreement within 30 days of the date the landlord received the negotiation notice, then within 10 days thereafter, the commercial tenant may terminate the lease without any liability for future rent, fees, or costs that otherwise may have been due under the lease by providing written notification to the landlord as set forth in subdivision (c) (termination notice). Notwithstanding the previous sentence, the commercial tenant is obligated to pay previously due rent, in an amount no greater than the sum of the following: (1) a maximum of three months’ worth of the past due rent incurred during the civil authority and regulations related to COVID-19 (or a lesser sum as may be actually unpaid), and (2) all rent incurred and unpaid during a time unrelated to COVID-19 through the date of the termination notice (payment). The payment shall be paid to the landlord within 12 months of the termination notice. The tenant is required to vacate the premises within 14 days of the landlord’s receipt of the termination notice. Upon service of the termination notice, the lease and any third-party guaranties associated with the lease shall also terminate and shall no longer be enforceable.

(e)If a commercial tenant and landlord reach a mutually satisfactory agreement pursuant to this section, the commercial tenant shall not have a subsequent option to terminate its lease under this section at a later date.

(f)This section shall not apply to any publicly traded company or a company that is owned by or is affiliated with a publicly traded company.

(g)This section shall be inoperative on December 31, 2021, or two months after the declared state of emergency ends, whichever is later.

SEC. 3.

No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

SEC. 4.

This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:

In order to mitigate the economic hardships to tenants of commercial real property, including businesses and non-profit organizations, resulting from COVID-19, it is necessary that this act take effect immediately.