(a) Purpose and Findings. The COVID-19 pandemic has created an unprecedented crisis in the City, leading to disputes between commercial landlords and tenants regarding whether a tenant is required to pay rent that accrued during periods when the tenant was legally prohibited from operating due to COVID-19. In some cases, where performance of a contractual duty has become impossible or where the purposes of a contract have been frustrated, state law excuses a party to the contract from performance. The Board of Supervisors finds that it is appropriate to presume – at least in the absence of a contract provision or other agreement between the parties to the contrary – that a legally required shutdown due to COVID-19 is a circumstance that made it impossible for those tenants to perform or frustrated the purpose of those tenants’ leases. This presumption applies only to those situations where a tenant fell under a category of businesses that was required to shut down under a health order, not where a tenant would have been allowed to stay open but had to close due to a COVID-19 outbreak, or where the tenant closed due to the economic impacts of COVID-19. The payment of rent pursuant to a commercial lease should be excused if the operation of the business was rendered illegal by a COVID-19 health order(s), if the parties have not agreed otherwise.
(b) Excusing Performance. Absent an agreement to the contrary between a Covered Commercial Tenant and the landlord, if the Covered Commercial Tenant fell under a category of businesses that was legally prohibited from operating in the unit due to a state or local health order concerning COVID-19, then there shall be a rebuttable presumption that the shutdown frustrated the purpose of the lease and that payment of rent covering the period of the shutdown is excused. The Covered Commercial Tenant need not seek to terminate the lease to invoke the protections of this ordinance. This presumption shall apply unless and until evidence is introduced that would support a finding that, notwithstanding the shutdown order(s), the purpose of the lease was not frustrated and performance remained possible.
(c) Non-Applicability to Certain Negotiated Agreements. In some cases, commercial landlords and their tenants may have executed written agreements in response to the COVID-19 pandemic in order to reduce, waive, or extend the tenant’s deadline to pay rent that might otherwise have been due. It is the policy of the Board of Supervisors to encourage such negotiated agreements. Accordingly, the presumption in subsection (b) shall not apply to those rent payments that the landlord and tenant addressed in such a negotiated agreement, assuming the agreement is otherwise legal and valid.
(d) Federal and state law. Nothing in this Section 37C.4 shall be interpreted or applied so as to conflict with the terms of the lease or any federal or state law. This Section 37C.4 does not override the terms of any lease, does not modify any state laws that relate to the interpretation or enforcement of leases, and does not alter the burden of proof under state law with regard to a landlord’s claim that a tenant has breached the lease or a tenant’s defense or excuse regarding the alleged breach. Instead, this Section 37C.4 seeks to simplify the burden of presenting evidence so that landlords and tenants, especially those who may be unable to afford legal representation or protracted litigation, may resolve their disputes more easily and more economically.
(Added by Ord. 122-21, File No. 210603, App. 8/4/2021, Eff. 9/4/2021)