Rent for most businesses who rent spaces will due on May 1st after most businesses have been closed over one month in California due to the COVID-19 pandemic and subsequent State of California “Stay at Home” Order. For tenants struggling to pay rent there are few issues to consider before deciding how to address rent payments.
First, there are a number of local ordinances protecting commercial properties. Prior posts highlight those local cities and the County of Los Angeles’ eviction moratoria for commercial properties. Rent freezes generally do not apply to commercial units, so if a lease had a rent increase scheduled during the COVID-19 pandemic, the lease terms would most likely apply.
Second, before not paying rent, a tenant should carefully review the lease agreement. If it is a long term lease and the landlord finds a breach after the COVID-19 Stay at Home Order is lifted, a tenant may be legally liable for extensive damages for breach of lease. In particular, a tenant should review if there is a personal guaranty on the lease and if it still applies.
Third, if there is an issue with rent payment, a tenant should reach out to the landlord (or vice versa) and discuss the issue. In the commercial setting, payment plans will most likely be more common. A payment plan should be in writing. Both parties — the landlord and the tenant — should have the agreement reviewed by an attorney to ensure no one is signing any rights or obligations away.
After the emergency orders are lifted, rent obligations will still be due and whatever was not paid during the COVID-19 pandemic state of emergency will still be due. If there is a personal guaranty of any type, a tenant should be cautious before allowing rent obligations to swell or to simply give back possession. This matter should be discussed with an attorney prior to making any decisions regarding large amounts of rent owed or simply walking away from a lease.
For more information regarding commercial tenancies, please contact Attorney Anthony Marinaccio at 818-839-5220.