When…that was a close one. On June 18th the commercial real estate industry was spared from suffering the consequences of one of the most poorly conceived pieces of state legislation in our memory. It was called SB 939.
Thankfully, it died in a State Senate Appropriations Committee hearing after a late round of modifications was just not enough to save it. Everyone that has anything to do with owning or managing commercial property should welcome the news of bill’s demise.
SB 939 was a misguided attempt to mitigate the impact of the Covid-19 economic shutdown for California’s small businesses, especially those involved in food & beverage, entertainment and the performance arts. It would have paved the way for legitimate contracts between tenants and their landlords to be terminated if they could not be renegotiated to the satisfaction of tenants.
Furthermore, non-rent-paying tenants would have been able to remain in possession of their space until two months after the current state of emergency is lifted or December 31, 2021, whichever occurred last. Obviously, it was not well-received from the outset by everyone involved in commercial property investing, prompting its creators to pose several rounds of modifications in their attempt to garner enough support to pass floor votes from the state Senate and Assembly.
Even the latest iteration of it would have sent a shock wave through the commercial property market in all product types. Fortunately, several industry groups including the California Business Roundtable, the California Business Properties Association and the Howard Jarvis Taxpayers Association, among others, lobbied hard to stop SB 939. We applaud their efforts and offer our thanks. They fought to protect the sanctity of the lease contract, which is foundational and absolutely necessary to ensure an orderly and fair means of conducting real estate commerce. SB 939 would have changed the terms and conditions of the lease in favor of one party over another, something that would have been devastating for landlords. The sponsors of the bill may have had good intentions, but the results would have been disastrous on so many levels.
Why are we harping on this after the fact? It’s because the attempt to interfere in private business relationships is a warning to all of us in the commercial real estate industry. It is up to us to make sure that those who write the laws understand enough about the industry not to do more harm than good.
So, to anyone reading this post who made an effort to stop SB 939, thank you. You made a difference.
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