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Recently proposed law could impact commercial real estate rentals

On Behalf of | Jun 3, 2020 | Commercial Real Estate |

The current health situation in California and across the nation has roiled many industries. The commercial real estate market is one and it has planted the seeds for many potential problems for owners and tenants. Since owners make their profits through renting out their properties to commercial entities, anything that interferes with the course of business can be problematic financially and personally. In short, if the business is unable to operate and earn sufficient income to pay the bills, the owner will not receive the rent.

For owners who are concerned about this issue, understanding potential changes to current law and how it may impact their situation is critical. A bill has been proposed in California that will let commercial tenants terminate a lease if the current landscape is not adequately addressed based on a resolution designed to assist renters. Since so many people have been forced to shutter their businesses through government mandate, paying the rent has been troublesome. The goal is not to allow people to break their lease randomly, but to encourage the sides to come to a reasonable solution without evictions.

At first, the bill stopped commercial evictions while businesses are still required to be closed. As it moved forward, it was revised accordingly. However, a group that specializes in real estate advocacy suggests that landlords can be harmed by this law if it passes. Still, the tenants would be required to pay past-due rent for up to three months. They would also be granted up to one year to pay it. This is for so-called “small” businesses, food and drink establishments, and entertainment businesses. The program is designed to avoid publicly traded companies from using it, so owners are protected in that area as well. Even with that, owners are concerned about how this could be construed as a violation of their rights. Hearings are ongoing.

The current crisis and laws that are being created to address it adds another layer to the complex nature of being a landlord and renting commercial property. For contracts, leases, the need to foreclose and evict tenants and any other challenge that arises, having legal assistance is one of the most important decisions a commercial real estate company can make. A law firm with experience in real estate and protecting an owner’s interests can be crucial. Calling for a consultation may provide advice, guidance and representation to handle a case.