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  • COVID-19 Halts Business, Not Rent: Navigating the Pandemic's Financial Impact

    The COVID-19 pandemic continues to have far-reaching and lasting effects on our business community. With many struggling to pay the bills, the Judicial Council has put a number or regulations in place around tenancies and foreclosures to help alleviate some of the financial burden on local business. 

    Rulings on tenancies:

    • A court may not issue a summons on a complaint for unlawful detainer (“U/D”) unless action is necessary to protect public health and safety.
    • A court may not enter default or a default judgment in a U/D action unless (1) necessary to protect public health and safety and (2) defendant failed to appear.
    • Trial dates for U/D actions are continued at least 60 days.
    • The Rule is to remain in effect until 90 days after the Governor declares the state of emergency lifted or until the rule is amended or repealed by the Judicial Council.
    Rulings on foreclosures:
    • Any actions for foreclosure, including any action for a deficiency judgment, are stayed unless necessary to protect public health and safety.
    • Any applicable statute of limitation is tolled.
    • The Rule is to remain in effect until 90 days after Governor declares the state of emergency lifted, or until the rule is amended or repealed by the Judicial Council.
    While these rulings will help businesses in the short term, it is important that local businesses understand that they are still responsible for paying their rent and mortgage. If businesses are not proactive now in addressing financial hardships, eviction notices and similar actions can take place once the shelter in place order has been lifted.

    “Tenants cannot expect to simply not pay rent, especially if the business is designated essential and has not closed due to COVID-19,” explained Karen A. O'Neil, principal and chair of the Civil Litigation and Employment Law Department at Kirk & Simas.

     “Likewise, landlords need to recognize that some of their commercial tenants are legitimately suffering economically due to the shelter-in-place orders. Landlords should address this situation on a case by case basis, because each situation is different.”

    Santa Maria City Attorney Thomas Watson says if a business is struggling financially, they should communicate these hardships with their landlord.

    “First, businesses need to pay what you can on rent,” Watson said. “Negotiate with your landlord and/or bank for any help they may be able to provide. This could include options like deferment, reduction, or a waiver of fees and/or penalties.”  

    O’Neil  also agrees that local businesses need to work with their landlord or property management company.

    “I recommend that landlords and tenants be proactive and have candid, respectful discussions about how to move forward in light of COVID-19,” she said. “One example of a resolution is for the parties to agree to spread out overdue rent repayment over the next 6 months, or the lifetime of the lease, depending on the lease term.”

    Watson said the biggest misconception he has heard from the business community is the belief that rent is frozen or not to be collected during COVID-19, which is not true.

    “Even during the pandemic and shelter in place order, the rent and mortgage continues,” Watson explained. “The legal process to evict/foreclose has been halted by the courts, but businesses need to understand that these actions can be taken once the economy begins to reopen.”

    If you are a local business owner struggling financially, there are funding options available provided by the CARES Act and SBA. Visit santamaria.com/coronavirus-resources for additional information.

    “As Santa Marians, we need to help each other, including helping our tenants, to keep everyone at home,” Watson said. “That will help us get through this situation faster and get everyone back to work.”