SB 939 provides certain Covid-impacted tenants with the right to terminate their leases if they experience 40% monthly revenue declines (for details on the bill, see California Proposes Lease Termination Right For Covid-Impacted Tenants). Below is an update on the current status of SB 939.
SB 939 Approved By Judiciary Committee By 5-1 Vote: Last Friday, SB 939 faced its first key test when it was reviewed by the Senate Judiciary Committee. It passed by a 5-1 vote in the Committee. All five members who voted for the bill were Democrats, and the one vote against came from a Republican.
The 5-1 Vote Masks Some Weakness In Support for SB 939: The Democrats on the Judiciary Committee did not universally support SB 939. Two Democratic members of the Judiciary Committee apparently were not convinced and abstained from the vote (Tom Umberg and Henry Stern). A Republican member of the Judiciary Committee (Andreas Borgeas) appears to not have attended the hearing. Based on my review of Senator Borgeas voting record and positions, I believe he would have voted against passage of SB 939. Because of the three “non-votes,” the 5-1 vote was not as overwhelming as it appears.
SB 939 Requires Super-Majority To Pass, Not Simple Majority Vote: SB 939 contains an “urgency” clause, which provides that the law would go into effect immediately (rather than on January 1, 2021). Bills containing an urgency clause require 2/3 vote by both the California Senate and the California Assembly to pass, rather than a simple majority.
If SB 939 Becomes Law, it Could Take Effect in Late September: If SB 939 has sufficient support, it is unclear how long it would take for SB 939 to work its way through the Senate and Assembly. An author of SB 939 estimates that the earliest it would become law would be late September 2020. Because of the urgency clause in the bill, if passed, it would take effect immediately.
Conclusion: It is still very early to determine whether SB 939 will become law. The 5-1 vote in the Judiciary Committee caused alarm among many in the real estate industry. The vote was not as overwhelming as it appears for the reasons described above. The next step for SB 939 is review by the Appropriations Committee, which may occur on June 8. I will continue to provide updates on this important bill as the situation develops.
Excellent information/analysis
Thank you Usman
Thank you Mike!
Thanks for keep us posted. This is very interesting, and very bad for landlords. Hopefully, this appropriations committee will recognize the problems here. As far as I know, I don’t believe the banks/lenders are subject to any laws of allowing the landlords to not pay their mortgage payments. I don’t see how any one can logically think this is fair.
I guess it’s the politicians trying their best to get the public vote.
Thanks again for sharing!
Nice analysis Usman. Thanks for putting together.
Thank you Patrick.
I had read that Wiener was amending the bill to specify that the protections were for ONLY restaurants/bars/cafes, correcting earlier vague language that might have covered all small businesses, but I can’t find the updated bill text. Do you know if the bill that was voted on actually clarified this?
Yes, Senator Wiener had a quote of that nature. The bill was amended. A portion of the bill (the lease termination right) is now limited to restaurants/bars and entertainment venues, and the other portion of the bill (rent deferral, eviction limitations) applies to all industries.