Back rent edict not blocked
A judge has refused to block a San Francisco ordinance that will allow some small businesses to avoid paying rent for periods in which they were shut down because of the pandemic.
The ordinance, passed unanimously by San Francisco supervisors last July, applies to commercial storefront tenants whose income disappeared during COVID-19 shutdowns. It was challenged by property owners who said it conflicted with state law and with executive orders by Gov. Gavin Newsom.
They cited Newsom’s March 2020 order, shortly after his declaration of a state of emergency, that temporarily allowed local governments to ban commercial as well as residential evictions but declared that nothing in the order “shall relieve a tenant of the obligation to pay rent.” That means a city cannot excuse commercial tenants from their previous rental agreements, said lawyers for the San Francisco Apartment Association and the Small Property Owners of San Francisco Institute.
City Attorney David Chiu’s office replied that Newsom was only saying the state was not canceling commercial rents and was not preventing a local government from going further. Superior Court Judge Charles Haines agreed Wednesday in a brief order saying the owners had not shown any conflict with state law or the governor’s edicts.
If a commercial tenant can show that a publichealth order, such as a pandemic-related shutdown, “frustrates the purpose of the lease,” Haines said, “state law governs the remedies available.”
One such law, cited in the San Francisco ordinance, says that when a contract — such as a rental agreement — becomes impossible to perform, it is no longer binding. If a small business plausibly contends it cannot pay rent for the periods in which it was shut down, the ordinance will require the property owner to prove otherwise.
“Our city made the difficult public health decision to shut down businesses early on in our pandemic response,” said Supervisor Dean Preston, who introduced the ordinance. “This measure helped small businesses find a path to get back on their feet, and we are glad to see the specious legal arguments against it were rejected.”
Chiu, in a statement, said the ordinance simply helps commercial tenants “resolve any disputes with their landlords over rent that accrued during the COVID shutdown so that both the small business tenant and the landlord can move on from the pandemic and recover. I’m pleased the court agreed that San Francisco’s ordinance to help keep small businesses afloat during the pandemic is consistent with state law.”
Cody Harris, a lawyer for the property owners, said they were assessing their next steps, which could include an appeal.
“We continue to believe that the ordinance is both unconstitutional and unfair,” he said.
Businesses such as gyms, bars and movie theaters that were closed for months could particularly benefit from the ordinance. It does not apply to properties leased from the city or to most office spaces.
In a January court filing, the property owners contended state law required tenants to prove they could not afford to pay current and previous rent bills and that San Francisco had reversed the burden of proof.
“The city is placing its thumb on the scale,” Harris wrote. “Rather than attempting to relieve the significant financial burdens both tenants and property owners face, the Board (of Supervisors) opted to shift that burden entirely onto one side.”
The city’s lawyers countered that San Francisco was protecting only a “small subset” of commercial tenants that had lost their income. While Newsom’s order did not provide ongoing rent relief, they said, it also did not prohibit “additional local protections.”