City Strives to Protect Business Owners as the COVID-19 Pandemic Continues

City Strives to Protect Business Owners as the COVID-19 Pandemic Continues

When Carrie opened her restaurant in Alameda, she took pride in serving customers recipes that were etched in her heart as a child. In March 2020, Carrie’s restaurant had to close due to the COVID-19 pandemic. Carrie switched to take out and delivery services.

However, by June her revenues were cut in half and she was using her savings just to stay open. In August, Carrie was two months past due on rent and couldn’t foresee paying the next month.

A few weeks later her landlord posted an eviction notice. Carrie found herself wondering if her business was still protected under Alameda’s local laws.

In a previously published articled titled “Updated Law Extends Eviction Protections to Businesses,” the legal protections to Alameda commercial tenants like Carrie were discussed in relation to City Ordinance 3275.

In this article, we’ll take a deeper dive into local commercial protections and how California State law can affect local protections.

Normally, California Civil Code Section 1954.27 prohibits local governments from enacting laws controlling commercial rental properties. In an effort to address the impact of COVID-19 on commercial businesses, Governor Newsom enacted executive order N-28-20, which suspends the state law prohibiting local entities to control commercial rent.
This allowed local governments like the City of Alameda to pass their own laws. On April 7, 2020, the Alameda City Council took such a step and expanded its local law to protect its commercial tenants. Without N-28-20, local entities like the City of Alameda would be unable to continue to provide protections to its commercial tenants through its own local ordinances because of the state law prohibition against controlling commercial rent.
Executive order N-28-20, however, has an expiration date. After first enacting N-28-20 on March 16, 2020, Newsom extended the N-28-20 expiration date multiple times: first on May 29, and again on June 30.

The most recent extension, which occurred on Sept. 23, extends the expiration date to March 31, 2021. This means that, until at least March 31, 2021, commercial tenants in the City of Alameda will still be protected by the City’s local laws.

Carrie will still have an affirmative defense against an eviction proceeding if she can show a “substantial loss.” City Ordinance 3270 defines “substantial loss” of income as a reduction of 20 percent or more in monthly gross income compared to the business’ average monthly income in 2019.

Carrie may have also suffered a “substantial loss” if she had to close her business in order to comply with governmental orders, including the Shelter-In-Place health order.

It is important to note that Ordinance 3270 does not relieve commercial tenants from their responsibility to pay rent.

Rather it provides Carrie a chance to win her eviction case and stay on the property if she can show her business suffered a “substantial loss” as described in Ordinance 3270. For most tenants, the eviction protections granted by Ordinance 3270 stay in effect as long as the City of Alameda is in a state of local emergency.

Once the state of emergency has been lifted, commercial tenants will be protected under Ordinance 3270 for 210 days.

To a commercial tenant like Carrie, knowing how state and local laws interact with each other can help her make the best decision for her business. For example, now that Carrie knows that the new expiration date for executive order N-28-20 is March 2021, she can monitor this executive order to see whether local laws will remain valid.

If the executive order expires, she now knows that the city’s local laws would no longer be able to provide an affirmative defense against eviction to her commercial tenancy.

For the time being, the interplay between state and local laws mean that Carrie and other Alameda commercial tenants will remain protected. With N-28-20 extended until March 31, 2021, the City can continue to provide commercial tenants eviction protections through its local ordinances.

Elizabeth Martinez is as paralegal in the City Attorney’s Office Prosecution Unit. Wes Cheung is the deputy city prosecutor.