San Mateo County Temporary Moratorium on Commercial Evictions

NOTICE RE: SAN MATEO COUNTY TEMPORARY MORATORIUM ON EVICTIONS FOR NONPAYMENT OF RENT BY SMALL BUSINESSES COMMERCIAL TENANTS

On April 7, 2020, the San Mateo County Board of Supervisors adopted an urgency ordinance placing a temporary moratorium on evictions for non-payment of rent by small business commercial tenants who document an inability to pay rent due to decreased net business income as a direct result of the COVID-19 pandemic or the federal, state, or local government response to the COVID-19 pandemic (the “Urgency Ordinance”).

The Urgency Ordinance took effect on April 7, 2020 and will remain in place until May 31, 2020, unless it is extended by the Board of Supervisors.  The Urgency Ordinance applies only in the unincorporated area of the County. 

For the purpose of the Urgency Ordinance, qualifying small business commercial tenants are those (1) that operate a business within the unincorporated area of the County (2) with annual gross receipts, as that term is defined by Section 6012 of the California Revenue & Taxation Code, of not more than $2,500,000 for the 2019 calendar year.  If a business did not operate for the entire 2019 calendar year, including a business that began operating after December 31, 2019, the $2,500,000 amount is prorated for the amount of time the business operated.  Thus, for example, where a business operated for three months, it would qualify as a small business if its gross receipts for that three-month period were no more than $625,000. 

Under the Urgency Ordinance, if a commercial tenant does not make a rent payment when it is due and the property owner wishes to move forward with an eviction for that failure to timely pay rent, the owner must first send the tenant a copy of this “Notice Re: San Mateo County Temporary Moratorium on Evictions for Nonpayment of Rent by Small Business Commercial Tenants”.

After the property owner provides the commercial tenant with a copy of this Notice, to receive the protections of the Urgency Ordinance, the small business tenant has 14 days to (1) notify the owner in writing and provide the owner with documentation that it qualifies as a small business under the Urgency Ordinance; and (2) notify the owner in writing and provide the owner with documentation that the inability to pay rent in full and on time is due to a decrease in net business income as a direct result of COVID-19 or the government’s response to COVID-19.

Examples of ways that a small business’s net income may have decreased as a direct result of COVID-19 or the federal, state, or local government response to COVID-19 include:

  • A decrease in net business income caused by the tenant’s illness or an inability to work;
  • A reduction in, or elimination of, operating hours, available workforce, or consumer demand;
  • Increases in the tenant’s health care expenses, including employee health care expenses for which the tenant is responsible, the tenant’s own health care expenses, or the health care expenses of the tenant’s family members;
  • Increases in the cost of supplies, services, or other overhead expenses necessary to carry out the tenant’s business; or
  • Temporary closure of the tenant’s business.

To be eligible for protection under the Urgency Ordinance, a qualifying small business commercial tenant must make partial monthly rent payments, if able to do so.  However, a tenant has up to 180 days after the Urgency Ordinance expires to pay the full amount of rent payments missed as a direct result of reduced net business income due to COVID-19.  

                Within 90 days after the Urgency Ordinance expires, the small business commercial tenant must pay the full amount of missed rental payments, if able to do so.  If the tenant is still unable to do so as a direct result of COVID-19, the tenant must provide the owner another written notice and additional documentation to extend the payment date an additional 30 days. The tenant may provide additional written notices and documentation every 30 days to further extend the deadline, but under no circumstances is the property owner required to extend the deadline beyond 180 days after the Urgency Ordinance expires. The owner cannot charge or collect a late fee for any missed payment covered by this Urgency Ordinance.

                The Urgency Ordinance does not relieve the small business commercial tenant of the obligation to pay current rent as it comes due after the Urgency Ordinance expires.

                A small business commercial tenant can raise the Urgency Ordinance as an affirmative defense to any unlawful detainer or other action to recover possession of the property initiated by a property  owner in violation of the Urgency Ordinance.  In addition, if an owner knowingly violates the terms of the Urgency Ordinance, a tenant may bring an action against the owner and seek both injunctive relief and money damages.  The Urgency Ordinance makes clear, however, that any action taken by an owner to evict a qualifying small business commercial tenant will not be considered a violation where the action was taken before the tenant provided the owner a written notice of inability to pay full rent due and supporting documentation, provided that the owner does not take any further actions to evict the tenant after receiving the written notice and documentation.

Frequently Asked Questions

What does the Urgency Ordinance do?

The Urgency Ordinance places a temporary moratorium on evictions for non-payment of rent by qualifying small business commercial tenants who document an inability to pay rent is due to decreased net business income as a direct result of the COVID-19 pandemic or the federal, state, or local government response to the COVID-19 pandemic.

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Does the Urgency Ordinance apply to small business commercial tenants located in an incorporated city within the County?

No, the Urgency Ordinance applies only to small business commercial tenants located in the unincorporated areas of the County. If you are a commercial tenant located in an incorporated city within the County, your city may have its own protections in place, and you are encouraged to consult your city’s rules and regulations.

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What is a “qualifying small business” under the Urgency Ordinance?

The Urgency Ordinance defines “qualifying small business” as a business that (a) operates at a location within the unincorporated area of the County and (b) has annual gross receipts, as defined by Section 6012 of the California Revenue & Taxation Code, of not more than $2,500,000 for the 2019 calendar year. A copy of Section 6012 of the California Revenue & Taxation Code can be found here: https://www.cdtfa.ca.gov/lawguides/vol1/sutl/6012.html.

If a business operated for only part of the 2019 calendar year, or began operating after December 31, 2019, the $2,500,000 gross receipts standard is prorated for the amount of time the business operated. For example, where a business operated for three months, it would qualify as a small business if its gross receipts for that three-month period were no more than $625,000.

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How long will the Urgency Ordinance be in effect?

The Urgency Ordinance took effect on April 7, 2020 and has been extended for an additional 30 days, so it will now remain in effect through June 30, 2020, unless it is further extended by the San Mateo County Board of Supervisors.

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What happens if a qualifying small business commercial tenant misses a rent payment that comes due while the Urgency Ordinance is in effect?

If a qualifying small business commercial tenant misses a rent payment that comes due while the Urgency Ordinance is in effect, and the property owner seeks to evict the tenant for a failure to pay that rent, the Urgency Ordinance will temporarily suspend a property owner’s right to evict or otherwise attempt to retake possession of the property for that missed payment if the commercial tenant takes certain actions.

Here is how it would work:

If a commercial tenant misses a rent payment and the property owner wants to evict that commercial tenant for non-payment of rent, the property owner must first send the commercial tenant a copy of a form entitled “Notice Re: San Mateo County Temporary Moratorium on Evictions for Nonpayment of Rent by Small Business Commercial Tenants”, which is available at https://www.smcgov.org/covid19-commercial-evictions

After the property owner provides the commercial tenant with a copy of this Notice, the commercial tenant has 14 days to do each of the following:

  • • Notify the owner in writing that the tenant both (a) qualifies as a small business under the Urgency Ordinance and (b) cannot pay the rent in full and on time due to a decrease in net business income as a direct result of COVID-19 or the government’s response to COVID-19; and
  • • Provide the owner with documentation showing both that it (a) qualifies as a small business under the Urgency Ordinance and (b) its inability to pay rent is due to a decrease in net business income as a direct result of COVID-19 or the government’s response to COVID-19.

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What are examples of ways that a small business’s net income may have decreased as a direct result of COVID-19 or the federal, state, or local government response to COVID-19?

  • A decrease in net business income caused by COVID-19-related illness or an inability to work;
  • A reduction in, or elimination of, operating hours, available workforce, sales, or consumer demand;
  • Increases in the tenant’s health care expenses, including employee health care expenses for which the tenant is responsible, the tenant’s own health care expenses, or the health care expenses of the tenant’s family members;
  • Increases in the cost of supplies, services, or other overhead expenses necessary to carry out the tenant’s business; or
  • • Temporary closure of the tenant’s business.
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What forms of writing are acceptable for a qualifying small business commercial tenant to notify the property owner that it is unable to timely pay the full rent?

All forms of writing are acceptable, including letter, email or text.

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What are examples of written proof/documents that a commercial tenant could provide a property owner to show the commercial tenant qualifies as a small business under the Urgency Ordinance?

  • Bank statements;
  • Deposit information (cash and credit sales);
  • Income & expense statements, business ledger(s), or other bookkeeping records;
  • Tax returns; or
  • Statement under oath attesting to 2019 gross receipts, for example, a declaration signed under penalty of perjury stating the business’s 2019 gross receipts.

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What are examples of written proof/documents that a qualifying small business commercial tenant could provide a property owner to show a decrease in net income as a direct result of COVID-19 or the government’s response to COVID-19?

  • Profit and loss statements, income and expense statements, balance sheets, business ledger(s), or other bookkeeping records from before and after outbreak of the COVID-19 pandemic;
  • Bank statements from before and after outbreak of the COVID-19 pandemic;
  • Statement under oath attesting to an inability to pay rent due to a decrease in net income as a direct result of COVID-19, for example, a declaration signed under penalty of perjury explaining in detail why the commercial tenant’s net income has decreased (i.e., an inability to work due to illness or to care for a family member; a reduction in, or elimination of, operating hours, available workforce, sales, or consumer demand; increases in business expenses; or temporary closure of the tenant’s business, etc.) and what portion of rent, if any, the tenant is able to pay.

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Is the property owner required to keep confidential the written proof/documentation received from a commercial tenant showing the tenant’s inability to timely pay full rent due to COVID-19?

Yes. However, a property owner may be able submit the written proof/documentation received from a commercial tenant as evidence in a legal proceeding regarding applicability of the Urgency Ordinance.

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While the Urgency Ordinance is in effect, if a qualifying small business commercial tenant is able to pay a portion of rent due, is the commercial tenant required to do so?

Yes, to be eligible for protection from eviction under the Urgency Ordinance, qualifying small business commercial tenants must make partial monthly rent payments if and to the extent they are financially able to do so.

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Is a property owner required to provide a “Notice Re: San Mateo County Temporary Moratorium on Evictions for Nonpayment of Rent by Small Business Commercial Tenants” each month a qualifying small business commercial tenant fails to pay full rent due while the Urgency Ordinance remains in effect?

No, once a commercial tenant establishes that it qualifies as a small business under the Urgency Ordinance and is unable to pay full rent when due because of a decrease in net business income as a direct result of COVID-19 or the government’s response to COVID-19, the property owner is not required to provide a new Notice each month rent is due. However, if while the Urgency Ordinance remains in effect a qualifying small business commercial tenant regains the ability to make full rent payments when due and pays full rent when due for at least one month, the property owner must again provide the Notice before moving forward with an attempt to retake possession of the property based on non-payment of rent.

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If a qualifying small business commercial tenant does not pay rent based on the Urgency Ordinance, can the property owner charge or collect a late fee?

No, the property owner cannot charge or collect a late fee for any missed payment covered by the Urgency Ordinance.

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Is a qualifying small business commercial tenant who has a missed payment or payments covered by this Urgency Ordinance still responsible for the past due rent?

Yes, the Urgency Ordinance only temporarily suspends the payment of rent; it does not permanently discharge the payment obligation.

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How long does a qualifying small business commercial tenant have to repay any rent payments missed under the Urgency Ordinance?

A qualifying small business commercial tenant has up to 180 days after the Urgency Ordinance expires to pay the full amount of rent payments missed.

Specifically, within 90 days after the Urgency Ordinance expires, the commercial tenant must pay the full amount of missed rent payments, if able to do so. If the commercial tenant is still unable to fully repay the missed rent payments at the end of 90 days due to a decrease in net income as a direct result of COVID-19 or the government’s response to COVID-19, prior to the expiration of that 90 day period, the commercial tenant must provide the property owner another written notice and additional documentation that shows this continuing inability to fully repay the missed rent payments to extend the payment date an additional 30 days. The commercial tenant may provide additional written notices and documentation every 30 days to further extend the deadline to fully repay the missed rent payments, but under no circumstances is the property owner required to extend the deadline beyond 180 days after the Urgency Ordinance expires.

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Once the Urgency Ordinance expires, will a qualifying small business commercial tenant have to pay full rent on time?

Yes, the Urgency Ordinance does not apply to rent payments due after the Urgency Ordinance expires and a property owner may take action to evict a qualifying small business commercial tenant for failure to timely pay rent that comes due after the Urgency Ordinance expires.

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Can a qualifying small business commercial tenant be evicted for reasons other than non-payment of rent while the Urgency Ordinance is in effect?

Yes, the Urgency Ordinance only places a temporary moratorium on evictions for failure to pay rent when due.

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Does the Urgency Ordinance protect non-qualifying commercial tenants for non-payment of rent while the Urgency Ordinance is in place?

No, the Urgency Ordinance only protects qualifying small business commercial tenants from eviction for non-payment of rent.

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What can a qualifying small business commercial tenant do to enforce the Urgency Ordinance if the commercial tenant believes that the property owner has violated the Urgency Ordinance?

The commercial tenant may bring a lawsuit against the property owner to stop the property owner from continuing to violate the Urgency Ordinance and to recover money damages. If the commercial tenant prevails in such a lawsuit, the commercial tenant can recover reasonable attorney’s fees and costs with a court order. If the property owner prevails, the property owner can recover reasonable attorney’s fees and costs with a court order.

The commercial tenant can also raise the Urgency Ordinance as a legal defense to any legal proceedings initiated by a property owner in violation of the Urgency Ordinance.

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Would a property owner be violation of the Urgency Ordinance if the property owner took steps to evict a commercial tenant before knowing the commercial tenant qualifies for protection under the Urgency Ordinance?

No, the Urgency Ordinance makes clear that any action taken by a property owner to evict a qualifying small business commercial tenant will not be considered a violation where the action was taken before the tenant provided the owner a written notice of inability to pay full rent due and supporting documentation, provided that the owner does not take any further actions to evict the tenant after receiving the written notice and documentation.

However, now that the Urgency Ordinance is in effect, a property owner must send all commercial tenants the “Notice Re: San Mateo County Temporary Moratorium on Evictions for Nonpayment of Rent by Small Business Commercial Tenants” when seeking to evict or otherwise take steps to recover possession of the property.

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