SF businesses owe up to $400 million in rent, but proposed legislation could offer major relief

ByLuz Pena KGO logo

Wednesday, May 26, 2021

COVID-19 impact: SF businesses owe up to $400 million in rent

A proposed legislation could bring rent relief to many San Francisco businesses.

SAN FRANCISCO (KGO) -- Today a San Francisco supervisor is introducing legislation that if approved, he says would forgive backed up rent for thousands of businesses that had to close during the pandemic.

"If they were completely shut down they are free from paying that rent," said San Francisco Supervisor Dean Preston.

For the past 12 years Ysa Mohamath has been busy with a clippers in hand. Now, he mostly waits for customers.

"I get like one customer or two customers a day and I still pay the rent full," said Ysa Mohamath, owner of YSA Barbershop.

In the back of his mind he has months of backed up rent and utility bills to pay.

"The first time it closed for almost seven months," said Mohamath. "The first 3 months I still paid full the rent, but after 3 months the landlord gave me a break, a discount. We reopened again and the business is like, dying. So I don't have enough money to pay the rent, but I don't want to close the business."

Today Supervisor Dean Preston is introducing a legislation that could forgive backed up rent for businesses like Ysa's barbershop.

"The COVID pandemic was a situation that lead to health orders that made it impossible for these businesses to be open, and frustrated the very purpose of these contracts," said Preston.

The latest San Francisco data estimates that businesses owe up to $400 million dollars in rent. So how many businesses will this legislation help?

"We are working on trying to get a more specific number of how many businesses will be impacted," said Preston.

The legislation is targeting businesses that made $25 million dollars or less in gross receipts and had to completely shut their doors to follow the health and safety orders.

"With an exclusion for office spaces," said Preston. "There are very few offices that would qualify. It would be for certain non-profits. Also if a business has a specific contract provision that deals with this exact situation that says in the event of a pandemic, or something similar to that, the rent is still owed."

Hans Hansson, President of Starboard Commercial Real Estate, represents between 60 and 70 San Francisco independent landlords and says the aid needs to be equitable.

"If supervisor Preston said 'look I want to give relief to both sides' the logical way to do that would be to give property tax relief to the landlord in exchange for rent relief that would certainly be something to consider," said Hansson.

Supervisor Preston said they are open to address mortgage relief for landlords.

"We will hear from the landlords I'm sure in response to this," said Preston. "If there are ways to mitigate the impact, our office is open to that. We don't control the mortgage payment. If there is a path to legislatively addressing some mortgage relief we are open to that."

Hansson says this legislation, if approved, will lead to lawsuits.

"Force majeure, if that happens then frankly it's going to open up the flood gates to the landlords suing the city saying you forced force majeure on me," said Hansson. "You now have damaged me and I want restitution. We live off property taxes as a city. If I turn around and lose my income, the first thing I'm going to do is I'm going to go to the assessor's office and try to lower my taxes."

Supervisor said that the City Attorney's Office reviewed the legislation and said "It's consistent with the law," and added, "I don't think they would have any grounds to sue and win."

The initial committee vote will take place in a month. If approved by the majority of the board, this legislation could go into effect in July.

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