On December 12, 2023, Seattle’s former City Council passed Ordinance 126982 in an effort to increase commercial rent affordability for small businesses. The Ordinance, returned unsigned by the Mayor, became law on January 29, 2024. The new law places limits on the amount of personal guarantees, letters of credit, and security deposits to certain new commercial leases within the City of Seattle.
The Ordinance Applies to Most Commercial Leases Within the City of Seattle, With Limited Exceptions
The law applies to all new commercial leases within the City of Seattle that are intended to generate a profit and are used for commercial or retail purposes. However, the Ordinance specifically exempts leases for:
- Residences;
- Lodging;
- Office space;
- Research and development laboratories;
- Medical practices;
- Medical clinics,
- Medical dispensaries;
- Farming or cultivation
Additionally, the requirements do not apply to leases where the landlord is a Federal, State, Tribal, County, or local government.
Limits to Personal Guarantees
Under the Ordinance, the maximum personal guaranty that may be included in any new commercial lease is limited to the first two years of base rent payments plus the total cost of tenant improvements made to the leased space paid for by the landlord.
Limits to Letters of Credit and Security Deposits
Under the Ordinance, letters of credit and security deposits for any new leases are limited to the total value of the first month and last month of base rent.
Penalties & Enforcement
The Ordinance creates an enforcement mechanism by which the City can issue citations to landlords for violating its terms. The penalty is $500 for the first violation and $1,000 for each subsequent violation. Additionally, the Ordinance creates a private right of action where any person that suffers a financial injury because of a violation may bring a civil action against a landlord for violating its terms.
Landlord’s Obligation to Provide Tenants with Summary of Chapter
The Ordinance requires the City to prepare a summary of the new restrictions to distribute to all commercial landlords. Landlords are then required to provide the summary to any commercial tenants or prospective commercial tenants before entering into a new lease. The City has not yet prepared the summary.
