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(a) If a Covered Commercial Tenant (1) fails to make a rent payment that originally fell due during the Moratorium Period, and (2) was unable to pay the rent due to a Financial Impact Related to COVID-19, then the landlord may not recover possession of the unit due to the missed or delayed payment unless the rent remains unpaid after the end of the applicable Forbearance Period, which shall be:
(1) For Tier 1 Covered Commercial Tenants, 24 months after expiration of the Moratorium Period;
(2) For Tier 2 Covered Commercial Tenants, 18 months after the expiration of the Moratorium Period;
(3) For Tier 3 Covered Commercial Tenants, 12 months after the expiration of the Moratorium Period;
(4) For Tier 4 Covered Commercial Tenants, 6 months after expiration of the Moratorium Period.
(5) For Tier 5 Covered Commercial Tenants, upon expiration of the Moratorium Period.
(b) A Covered Commercial Tenant may pay rent deferred under the conditions stated in subsection (a) in installments or in a lump sum prior to the expiration of the applicable Forbearance Period; provided, however, that any payments made prior to the Forbearance Period by Covered Commercial Tenants in Tiers 1-4 shall first be applied to rents that come due during the Forbearance Period, and then to unpaid rents that originally came due during the Moratorium Period. Landlords and tenants are encouraged to negotiate agreements for repayment plans in good faith. An agreement for repayment must be in writing and may provide for a longer or shorter Forbearance Period than as set forth in subsection (a), subject to the mutual agreement of the parties, in which case the agreement rather than this Chapter 37C shall govern the timing of the tenant’s obligation to pay the deferred rent. The Office of Economic and Workforce Development (“OEWD”) is authorized to create incentive programs to encourage landlords and tenants to agree to repayment plans, and may require proof of an agreement for repayment or successful mediation in order to be eligible for participation in such programs.
(c) If a Tier 1 Covered Commercial Tenant that is unable to pay the rent due to a Financial Impact Related to COVID-19 and its landlord fail to reach a mutually satisfactory agreement for repayment, the Tier 1 Covered Commercial Tenant shall also have the option to terminate its lease and cease paying any further rent upon 30 days’ written notice to the landlord, notwithstanding any lease term to the contrary. Termination shall not affect whether the tenant is responsible for any unpaid rent that originally came due prior to the effective date of termination. In addition, if the tenant has terminated during the Moratorium Period, then the tenant shall not be liable for any penalties arising out of the termination, notwithstanding any lease term to the contrary. Nothing in this subsection (c) is intended to or shall affect any rights or remedies a landlord may have under state law with respect to the termination of a lease under this subsection, subject to any legal or equitable defenses the tenant may have with respect to such claims.
(d) Notwithstanding subsections (a) and (b), if the landlord owns less than 25,000 square feet of Gross Floor Area (as defined in Section 102 of the Planning Code) in the City, then the eviction for non-payment may proceed before the applicable Forbearance Period ends, if the landlord can demonstrate that being unable to evict would create a significant financial hardship (for example, default on debt or similar enforceable obligation) for the landlord. OEWD shall have authority to adopt regulations and develop and publish guidelines consistent with this Chapter 37C, including forms and recommendations of the types of documentation that tenants may use to show Financial Impact Related to COVID-19 or that landlords may use to show significant financial hardship.
(e) No landlord shall assess interest or other charges on a Covered Commercial Tenant based on unpaid rents that fell due during the Moratorium Period. If rents remain unpaid at the end of the applicable Forbearance Period, interest and penalties may be imposed prospectively, to the extent authorized under the lease.
(f) A Covered Commercial Tenant’s failure to provide their landlord notice and/or documentation regarding their inability to pay at the time of the missed rental payment shall not affect the tenant’s ability to claim the protections of this Chapter 37C as an affirmative defense in the event the landlord sues to recover possession.
(g) This Section 37C.3 shall also apply in its entirety to attempts to recover possession of a commercial unit from a Covered Commercial Tenant that is occupying the unit on a month-to-month periodic tenancy, holdover basis, or similar arrangement, and including where the landlord has the right to terminate or not renew the agreement at the landlord’s discretion. In such situations, if a Covered Commercial Tenant misses a rent payment due to COVID-19, the prohibition against recovering possession due to non-payment shall apply, unless the landlord qualifies for the “significant financial hardship” exception stated in subsection (d), or can demonstrate an alternative, non-pretextual reason (unrelated to the commercial tenant’s failure to make a rental payment) for recovering possession of the unit (for example, turning the unit over to a new tenant under a previously executed agreement; planned renovations; or a previous agreement to turn over the unit vacant to a new owner).
(h) The provisions of this Chapter 37C, being necessary for the welfare of the City and County of San Francisco, its residents, and the health of its economy, shall be liberally construed to effectuate its purpose, which is to protect Covered Commercial Tenants from being evicted for missing rent payments due to the COVID-19 pandemic.
(i) Nothing in this Chapter 37C shall relieve a Covered Commercial Tenant of the obligation to pay rent, nor restrict a landlord’s ability to recover rent due. In addition, nothing in this ordinance shall affect any legal or equitable defenses that a tenant may have with respect to claims arising out of the unpaid rent.