Is Your Commercial Property Subject to COVID-19 Related Evictions?

Payne & Fears

Last week, Governor Gavin Newsom issued an Executive Order authorizing local governments to halt evictions and foreclosures, as well as prohibit utility shutoffs related to the same. Any provision of state law that would otherwise restrict local governments' ability to impose such limitations is now suspended. These protections are in place through May 31, 2020, but that date is subject to change or extension.

Although Governor Newson's order suggests that local governments can impose substantive limitations on commercial evictions and foreclosures by holders of home or commercial mortgages, it does not act as a statewide moratorium on any evictions or foreclosures ---    including residential. The order instead delegates that authority to local governments, specifically stating that local jurisdictions "may" determine to put such measures in place. 

The statewide order authorizes local governments to impose substantive limitations on "commercial evictions" when: (1) the basis is nonpayment of rent arising out of a substantial decrease in "business income" caused by "a reduction in opening hours or consumer demand," and (2) the decrease in "business income" was "caused by the COVID-19 pandemic, or by any local, state, or federal government response to COVID-19, and is documented."

The order further suggests that financial institutions holding commercial mortgages "to implement an immediate moratorium on foreclosures and related evictions when the foreclosure or foreclosure-related eviction arises out of a substantial decrease in household or business income, or substantial out-of-pocket medical expenses, which were caused by the COVID-19 pandemic, or by any local, state, or federal government response to COVID-19." Some lenders like Bank of America and Ally Financial (Ally Bank) have plans in place for residential properties and payment deferral. Wells Fargo is dispersing communications inviting customers to discuss options for consumer lending and small businesses. 

In practice, not all local governments have imposed moratoriums for commercial properties. Los Angeles' "Eviction Moratorium" applies exclusively to evicting residential tenants and is silent on foreclosures, similar to the orders in Culver City, Santa Monica, El Monte, and San Francisco. The same is true for Ventura County cities Ojai and Thousand Oaks.

However, ordinances in several Southern California cities, including Oxnard and Camarillo, do protect commercial properties from eviction. Moorpark and Simi Valley protect from both eviction and foreclosures. In Northern California, Fresno's moratorium applies to commercial tenants as well-both for eviction and foreclosure. 

According to news releases, these cities and counties are "considering" bans: 

  • Long Beach
  • San Diego
  • Santa Ana
  • San Jose
  • Hayward
  • Oakland
  • Sacramento
  • The City and County of San Mateo
  • The County of Santa Cruz

It is possible more local governments (even the ones with moratoriums already in place for residential tenants) will adopt Newsom's guidance and expand moratoriums to commercial properties. We will do our best to provide updates as more information arises. 

Even if your locale has placed a moratorium on evictions or foreclosures, tenants are generally still required to pay the back rent or mortgage bills. Some locales provide six months to make outstanding payments, while others do not specify a time period. Please check your specific order for details. And even if there is not an order in place where you operate, it is a good idea to talk with landlords or tenants about these issues and work out a plan in the absence of an operative moratorium. Some businesses are already implementing such plans. For example, commercial and retail landlord the Irvine Company in Orange County is deferring tenants' rent for up to 90 days, and allowing repayment interest-free starting in January 2021.

Links to the orders currently in place are below for easy reference. 

California Executive Order >>

Los Angeles Eviction Moratorium >>

Culver City Public Order >>

Santa Monica Executive Order >>

El Monte City Council Meeting >>

San Francisco Moratorium >>

Ojai Executive Order >>

Thousand Oaks City Order >>

Oxnard Director Order >>

Camarillo Director Order >>

Moorpark Executive Order >>

Simi Valley Executive Order >>

Fresno Ordinance >>

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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