San Francisco homeowners are fighting over a new debt relief law

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Empty shop fronts on Haight (Ph: Emily Landes)

Two groups of landlords have sued the city of San Francisco over a new law that removes rental debts from some commercial tenants who have been forced to shut down by pandemic health orders.

While the legislation’s goals are worthwhile, they argued, the city has decided to help small businesses by shifting the burden on landowners, many of whom are small businesses themselves. Damaging small property owners will “cool the investment climate” and jeopardize the city’s recovery, said Cody Harris of Keker, Van Nest and Peters, one of the lawyers representing the landlords.

“Everyone agrees that small businesses need help. But the regulation works as a godsend for certain small businesses, forcing other small businesses to shoulder the full brunt, without any help or compensation. It’s both unfair and myopic, ”Harris said.

The lawsuit, filed by the San Francisco Apartment Association and the Small Property Owners of San Francisco in the Superior Court, seeks a new law that
Unanimously approved by the San Francisco Board of Supervisors in July and approved in September.

The city estimates that the law could spell the forgiveness of up to $ 600 million in rental debts for small businesses such as gyms, hair salons and bars that had to close for months amid housing restrictions.

Companies with gross income of up to $ 25 million in 2019 will qualify; most branch offices do not unless they are registered as a 501c3 nonprofit. The new law also has no impact on tenants, some of whom have called for their own “debt strike”.

Supervisor Dean Preston endorsed the legislation in May after $ 24 million in city aid for rent, payroll, and other bills, as well as state and federal loans, didn’t do enough to support small businesses that are still burdened with rental debt and not in the Were able to reopen. he told the San Francisco Chronicle when the law was introduced.

“The fact that some landlords expect to receive 100% of their rent for the periods when businesses have been completely closed is completely unfair and it is disappointing that we need to legislate to address this, but we do,” said Preston back then.

The basis of the legislation is a state law that allows a party to withdraw from a contract if the fulfillment of their obligations is no longer possible. City legislation states that this law may apply to the rental of businesses that are forced to close due to the pandemic, unless the lease explicitly states otherwise.

The “presumption” created by this interpretation of state law is at the center of the landlord’s business. According to the lawsuit, filed on Sept. 21, the board decided to “issue a lazy, vague and ultimately illegal ordinance that unfairly weighs the thumbs in favor of one side of countless two-party treaties.”

The attorney said he is currently awaiting the city’s response to the lawsuit and it is difficult to say at this point when a decision will be made, especially if the appeals court is asked to weigh up. He said he hoped, in the interests of all the small businesses involved, that there would be “a solution as soon as possible” and asked property owners to “get in touch” if they thought they might be affected by the legislation.

In the days after the lawsuit was filed, Preston was out tweeted: “Sometimes when you cross the line and pass serious laws that threaten the profits of the rich, they respond with a lawsuit. Our unanimously passed rent-back law to save small businesses is now in the hands of judges. It should be sustained. “

In the heart of Preston’s borough is Haight Ashbury, which has been hit hard by the pandemic decline in tourism. Carly Dent runs Indigo Vintage, one of the many vintage clothing stores on Haight Street. She has worked in the store since it opened in July 2019, and said even if that law is followed, it would be too late for many stores in the neighborhood that she has closed consecutively over the past 18 months.

“It’s nobody’s fault that COVID happened, but it shouldn’t fall on small businesses,” she said.

At the same time, she sees the landlords’ arguments that they don’t have to bear the burden alone and that they need money to maintain their buildings, many of which are over 100 years old. She pleaded with the city to “strike a middle ground” before losing more of its unique restaurants, bars, and retail stores.

“That makes San Francisco San Francisco,” she said.



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