|June 11, 2020
UPDATE ON SB 939 – TEMPORARILY SUSPENDED
This bill has been temporarily suspended. We will continue to post updates as we receive them.
Opposition to SB 939 (Wiener) continues to grow as the bill moves to Senate suspense file
SB 939 allows virtually all commercial property tenants to walk away from their lease obligations altogether
Sacramento — Opponents of SB 939 (Wiener), including minority business groups like California Black Chamber of Commerce, California Asian Pacific Chamber of Commerce, Hispanic 100, and TELACU again warned Sacramento lawmakers that instead of helping struggling businesses affected by the pandemic, SB 939 will make the problem much worse by leading to widespread commercial property foreclosures and lost jobs.
SB 939 was put on the Senate Appropriations “suspense” file today. Opponents are urging the Senate Appropriations Committee to hold the bill on suspense when it comes up again for a vote on June 18/19 and keep it there indefinitely.
SB 939 would allow businesses large and small to withhold rent indefinitely regardless of how profitable they are and creates a new, special protected class of businesses that can to walk away from lease obligations altogether, transferring the debt to the property owner. While the bill has been characterized as applying only to restaurants and select small businesses, it in fact applies to virtually all California commercial leases.
“This bill goes way too far. Property owners still have to pay their mortgages, utilities, property taxes and other expenses and they’re doing it with vastly reduced rental income now,” said Rex S. Hime, President and CEO, California Business Properties Association (CBPA). “This bill will allow nearly all commercial tenants to walk away from their lease contracts and make an existing problem go from bad to worse. Bottom line, it will slow our state’s economic recovery.”
Continued Hime, “The coronavirus threw us all for a loop but measures have been underway for weeks by property owners to negotiate rents with their tenants to keep them in place. Property owners have every incentive to keep existing tenants, not evict them. It’s extremely costly to have spaces sit vacant while finding new tenants. No one wants that. It’s not just businesses that will be hurt. SB 939 also negatively impacts state and local government coffers.”
Below is more background on SB 939.
Myth: SB 939 only applies to restaurants and other struggling small businesses.
FACT: As currently drafted SB 939 applies to every California-based commercial lease in the state regardless of the type of business, its size or documented lost business due to COVID-19. There are two sections of the bill.
Myth: SB 939 is just temporary to allow struggling small businesses to get back on their feet.
FACT: There is no end date or sunset on SB 939 – it is tied to the State’s Emergency Order. The future of COVID-19 and the status of the State’s Emergency Order remain very uncertain and both could last well into 2021. As explained above, even if the Emergency Order is lifted at the end of this year, SB 939 would allow even sizable businesses that generate healthy profits in 2020 and 2021 to operate in their spaces without any obligation to pay rent until 2022. All businesses in California are suffering under the state’s shelter-in-place orders. And according to the Small Business Association, nearly 41,000 real estate companies in the California shopping center sector alone have fewer than 20 employees and are themselves “small businesses.” It is simply unrealistic to expect any company to cover the contractual debt obligation for another for an extended or undetermined amount of time. And, banks and mortgage holders will undoubtedly call loans into default.
Myth: SB 939 is needed to force commercial property owners to keep tenants.
FACT: Property owners are already incentivized to keep existing tenants: Nobody wants an empty building. And trying to find new tenants is far more costly than finding creative ways to keep current tenants. Most property owners are working with their renters and tenants to provide relief while keeping them in their spaces.
Myth: Commercial property owners and landlords are all large multi-national corporations.
FACT: Not true. According to the Small Business Association, nearly 41,000 real estate companies in the California shopping center industry alone have fewer than 20 employees. And just that sector of the industry has already lost $3.5 billion in rent revenue, resulting in less tax revenues for communities. CalPERS and CalSTRS also own millions of dollars worth of commercial property; it is these investments providing retired California workers and educators an income and health care.
Myth: SB 939 will help small businesses; it won’t hurt them.
FACT: SB 939 tries to help some small businesses by shifting the financial burden onto others already struggling. The bill empowers some renters to walk from the leases or significantly reduce their financial contractual obligations but does nothing to reduce the mortgage payment or other financial obligations still owed by the property owner. Property owners, like businesses and restaurant owners, come in all shapes and sizes. But they all rely on rent from their tenants to pay their mortgage, property taxes, building maintenance and utilities.
Myth: SB 939 will help jumpstart our economy by removing the burden of rent on small businesses.
FACT: SB 939 flies in the face of basic economics and will do the exact opposite. It will trigger a commercial mortgage default crisis that will thwart economic growth for years and stall our recovery. Thousands of mortgages will go unpaid, property values and local and state property taxes will further plummet and millions of square feet of empty office and retail space will sit empty for an extended period of time.
There are better, and more balanced approaches to addressing this problem:
|COVID-19 resources and information for property managers
Property managers around the world are concerned about the health and well-being of their tenants and residents, as well as operational and business implications, related to the spread of the Coronavirus (COVID-19).
IREM continues to provide updates and create resources helpful for members and property managers across the globe. These are resources you can use now, in your jobs, to help address some of the unprecedented things happening in your business.
For more information please visit irem.org/learning/coronavirus.
|From the Front Lines: CARES Act|
|Featuring Ted Thurn, IREM Director, Government Affairs
“From the Front Lines” is a new series of short 10-15-minute videos that IREM will be sharing on a regular basis in the coming weeks on topics related to helping you manage your business.
On Friday, March 27th, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES act is a $2 trillion stimulus package to aid individuals and businesses amid the COVID-19 pandemic. How does this impact property managers? IREM Government Affairs Director, Ted Thurn, provides an overview of the package and what it means for you and your businesses in this special edition of From the Front Lines.
|Advocacy actions on COVID-19|
|IREM has signed on to several letters to the White House,Congress, the Department of Homeland Security, the Treasury, and the IRS advocating for aid to residents and businesses, designating construction of single-family and multifamily housing as an “essential infrastructure business,” and extending the deadline for 1031 like-kind exchanges and Opportunity Zone participants.
The full letters can be read on IREM’s COVID-19 page.
IREM and CCIM also partnered to issue calls to action asking members to urge their legislators to support a measure for federal relief for commercial and residential properties. Check out IREM’s campaign page to view the call to action message or tell your federal legislators how this pandemic has affected your business.
|2020 Capitol Hill Fly-in recap|
|At our 2020 Fly-in, held March 10-11, over 50 members attended and conducted over 100 meetings with legislators to discuss the importance of reauthorizing and reforming the National Flood Insurance Program (NFIP), and supporting the “Secure and Fair Enforcement (SAFE) Banking Act,” (H.R. 1595, S. 1200).
To learn more about issues we discussed with legislators, watch the recording of our webinar “Capitol Hill Fly-in: Issues to discuss with legislators and their staff.”
|IREM Member Spotlight
From the Front Lines: Rent abatement and concessions
|Featuring IREM President-Elect Chip Watts, CPM®, CCIM and Mindy Gronbeck, CPM®, CSM, CSX discussing rent abatement and concessions.|
|House passes yes in my backyard act|
|Governor executive orders in response to the coronavirus and COVID-19
Commercial & Residential – COVID-19
Trump signs $2T coronavirus relief package
Opinion: What’s driving rental affordability in Atlanta
CRE associations ask government for help with CMBS liquidity
Legislative Updates as of February 14, 2020
As the 2020 election season is now in full swing, it is imperative that our industry is up to speed on the proposed “Split Roll Tax”, and the disastrous affect it will have on our businesses, and the state as a whole, if it passes in the November 2020 General Election.
Please take some time to educate yourself and others on the “Split Roll Tax”. The proponents neglect to mention the negative fallout of increased property taxes on commercial properties which are significant. This will overly burden small businesses and ultimately result in higher prices paid by all consumers.
In addition, everyone in our industry should be voting NO on the new Proposition 13 on the upcoming March 3rd ballot. In a potentially deliberate ploy to confuse voters, this proposition number is being reused to create a new taxation unconnected to the original Proposition 13. Please plan on educating others to vote “NO” on Proposition 13 on BOTH the March 3rd AND November 3rd ballot.
The following websites offer specific information that can also be shared with others:
Legislative Updates as of January 23, 2020
“The legislative session for 2019 has come to a close and there are many new laws that will significantly impact California landlords, including AB 1482, California’s statewide rent caps and just cause eviction law.” Read more by following the link below.
Additional updates are available for review and can be found by visiting the following sites.
Legislative Updates as of September 5, 2019
To all IREM-OC Members and Industry Partners
As you may already be aware, the California Legislature is moving closer to enacting statewide rent caps and burdensome “just cause” eviction standards. If enacted, AB 1482 will cap rent increases at 5% plus inflation, with a maximum total of 10% and it will apply to rental properties more than 15 years old.
As IREM is opposed to all forms of rent control, we strongly oppose this bill. Rent control has been shown time and time again to have many detrimental consequences. According to a survey held by the American Economic Association, 93% of economists agreed that rent control has a negative effect on development. In addition, the “just cause” eviction standards will add to the problem rather than relieve it.
We are asking you as IREM Members to contact your state legislators as soon as possible and urge them to vote “no” on this harmful legislation known as AB 1482. Since this bill would affect everyone, you may want to forward this call to action to any California residents.
How you can help – use these links:
Thank you for your support.
John Thomas Koss, CPM, CCIM
VP of Legislative Affairs
Legislative Updates as of September 5, 2019
Below is a summary of bills that we are focused on that impact
the commercial, industrial, and retail real estate sectors, during the final two weeks of the
At the end you will find the list of bills we have worked on that are dead for the year but may
come back in 2020.
ON THE SENATE FLOOR
AB 5 (Gonzalez D) Worker status: employees and independent contractors.
Summary: Addresses the Dynamex Court case on independent contractors.
Amendments exempting commercial real estate brokers and brokerage firms are in the bill.
Negotiating final amendments regarding business-to-business transactions and other technical
Position: SUPPORT IF AMENDED
AB 170 (Gonzalez D) Employment: harassment: liability.
Summary: Increases the amount of time employers can be sued and sets new standards for liability of
sexual harassment in the workplace. Will increase litigation.
AB 485 (Medina D) Local government: economic development subsidies.
Summary: Requires local governments to receive comprehensive information about
warehouse projects prior to releasing economic development incentives.
Position: Mon/OPP. Negotiated AMENDMENTS to lessen burden of information.
AB 520 (Kalra D) Public works: public subsidy.
Summary: Defines “public works” to include a project that receives a de minimis public subsidy less
than $500,000 and 2% of the total project cost.
AB 547 (Gonzalez D) Janitorial workers: sexual violence and harassment prevention training.
Summary: Requires Janitorial Companies to provide specified training on sexual
violence and harassment prevention. Position: NEUTRAL. Negotiated AMENDEMENTS.
AB 684 (Levine D) Building standards: electric vehicle charging infrastructure. Summary: requires the state to propose building standards for the installation of electric vehicle
(EV) charging infrastructure for parking spaces for existing multifamily and non-residential
Position: NEUTRAL. Assured bill doesn’t create a mandate or put building code in statute.
AB 1080 (Gonzalez D) California Circular Economy and Plastic Pollution Reduction Act.
Summary: Would enact the California Circular Economy and Plastic Pollution
Reduction Act, increasing fees and responsibilities of property owners to recycle and compost.
AB 1100 (Kamlager-Dove D) Electric vehicles: parking requirements.
Summary: Allows EV parking space to be counted as at least one standard automobile
parking space for the purpose of complying with any local minimum parking requirements.
AB 1188 (Gabriel D) Dwelling units: persons at risk of homelessness.
Summary: Puts requirements on residential landlords to allow tenant to allow people not
on the lease to stay in dwelling.
AB 1281 (Chau D) Privacy: facial recognition technology: disclosure.
Summary: Requires a business in California that uses facial recognition technology to disclose that
usage in a physical sign that is clear and conspicuous at the entrance of every location.
AB 1478 (Carrillo D) Employment discrimination.
Summary: Creates a private cause of action against an employer for disputes regarding the right
under the law to time off or reasonable accommodations to deal with issues such as jury service or
related to being a victim of domestic violence, sexual assault, or stalking.
ON ASSEMBLY FLOOR
SB 1 (Atkins D) California Environmental, Public Health, and Workers Defense Act of 2019.
Summary: Require agencies to take prescribed actions regarding certain federal requirements and
standards pertaining to air, water, and protected species. Position: OPPOSE.
SB 5 (Beall D) Affordable Housing and Community Development Investment Program.
Summary: Makes changes to the Enhanced Infrastructure Finance District (EIFD) law
and Redevelopment 2.0. Makes it easier for local district to set up Tax Increment
Financing for infrastructure.
Position: NEUTRAL. Working on language to protect against unnecessary tax increases.
SB 44 (Skinner D) Medium- and heavy-duty vehicles: comprehensive strategy.
Summary: Requires the Air Resources Board (ARB) to update its 2016 mobile source
strategy to include a comprehensive strategy for the deployment of medium- and heavy- duty vehicles
in the state.
SB 54 (Allen D) California Circular Economy and Plastic Pollution Reduction Act.
Summary: Enacts the law to achieve a 75% reduction in single-use packaging and
priority single-use plastic products by 2030. Puts onerous requirements on property owners and
SB 127 (Wiener D) Transportation funding: active transportation: complete streets.
Summary: Requires CalTrans to design bicycle and pedestrian facilities on all projects the state
undertakes. Estimated cost is in the billions to the state.
SB 142 (Wiener D) Employees: lactation accommodation.
Summary: Expands current lactation accommodation mandates for employers and
requires the Building Standards Commission to design a guidance document. We negotiated
significant amendments to this bill, including removing the mandatory building code provisions,
however the employer requirements are onerous and expensive and increases potential for lawsuits.
SB 190 (Dodd D) Fire safety: building standards: defensible space program.
Summary: Requires the Office of the State Fire Marshal to develop, in consultation with
our industry, a model defensible space program to reduce threat of wildfire.
SB 531 (Glazer D) Local agencies: retailers.
Summary: Prohibits local agencies from entering into certain economic development agreements with
companies for locating in the local jurisdiction.
SB 638 (Allen D) Leases: electric vehicle charging stations: insurance coverage.
Summary: Enables installation of EV chargers by removing the requirement to obtain a
general liability insurance policy and instead require personal liability coverage
Position: NEUTRAL. Assured bill stayed focused on past agreements.
DEAD BILLS/HELD ON SUSPENSE
AB 349 (Choi R) Building standards: garages. Summary: Would mandate additional egress from garages. Puts building code in statute
and unnecessarily increases construction costs. Negotiated amendments to lessen these impacts.
Position: NEUTRAL after NEGOTIATED AMENDMENTS. Held on Suspense
AB 393 (Nazarian D) Building codes: earthquake safety: functional recovery standard.
Summary: Would require the state to adopt stringent building codes above and beyond
the current Earthquake standards requiring. Increases costs and codifies building standards that
have not gone through the stakeholder process.
Position: NEUTRAL after NEGOTIATED AMENDMENTS. Held on Suspense
AB 516 (Chiu D) Authority to remove vehicles.
Summary: Removes the ability of local governments to enforce parking laws in
residential and commercial areas, limits the ability to tow vehicles, and bans the use of
immobility devices for parking violations.
Position: OPPOSE. Held on Suspense.
AB 628 (Bonta D) Employment: victims of sexual harassment: protections.
Summary: Puts onerous requirements on employers if they have an employee who is a
victim of domestic violence, sexual assault, or stalking
Position: OPPOSE. Failed First House.
AB 724 (Wicks D) Rental property data registry.
Summary: Requires the state to create a rental registry online, which would be designed to receive
specified information from landlords regarding their residential tenancies and to disseminate this
information to the general public.
Position: OPPOSE. Failed First House.
AB 725 (Wicks D) General plans: housing elements.
Summary: Prohibits more than 20% of a suburban or metropolitan jurisdiction’s share of the regional
housing need for above moderate-income housing from being allocated to sites with zoning restricted
to single-family development.
Position: OPPOSE. Failed in Committee.
AB 1046 (Ting D) Air Quality Improvement Program: Clean Vehicle Rebate Project.
Summary: Would increase fees by requiring the State Air Resources Board to develop a plan to
provide for the continuous funding of the Clean Vehicle Rebate Project.
Position: MON/OPP. Held on Suspense.
AB 1481 (Grayson D) Tenancy termination: just cause.
Summary: Would, with certain exceptions, prohibit a lessor of residential property from
terminating the lease without just cause, as defined, stated in the written notice to
Position: OPPOSE. Failed first house. Provisions now in AB 1482.
SB 135 (Jackson D) Paid family leave.
Summary: Expand the scope of current Paid Family Leave provisions for an employer with 5 or more
employees to refuse to grant an employee a request to take up to 12 weeks Position: OPPOSE
Legislative Updates as of August 27, 2019
California lawmakers are set to make a decision this week about a statewide rent control and “just cause” eviction bill. The Senate Appropriations Committee will hear Assembly Bill 1482 on August 30, and decide whether or not to move the bill out of suspense file status for the rest of 2019.
Last week, the committee voted to place the bill on suspense. That means a bill is set aside to order to consider its financial impact on the state.
AB 1482, authored by Assemblyman David Chiu, would cap annual rent increases at 7% plus the consumer price index, and would apply nearly all of California’s rental units, including apartments and some single-family homes. Additionally, the bill would apply in jurisdictions where voters and local elected leaders have rejected rent control policies, though would not supersede locally-passed rent control laws.
Besides capping rents, AB 1482 would apply “just cause” eviction policies statewide.
Lawmakers must make a decision by September 12 whether to send the bill to the governor this year. If AB 1482 isn’t moved off suspense August 30, it would die for the year and become a two-year bill.
The California Apartment Association is lobbying for bill amendments including:
- A requirement that a tenant occupy the property for 24 months before the “just cause” and relocation provisions apply, rather than the current 12 months
- Housing that has been issues a certificate of occupancy within the previous 20 years is exempt from the provisions of the bill, rather than the currently-proposed rent cap of 10 years after construction.
- The provisions within the bill will remain in effect until January 1, 2027, rather than presently proposed to sunset after three years.
- Clarify provisions within the bill to ensure local governments cannot impose stricter regulations on housing affected by AB 1482
- Clarify the vacancy decontrol provisions, and provide clarifying language relating to “just cause”, rent and lease provisions
Legislative Updates as of August 22, 2019
New Proposition 65 Requirements for California Residential Landlords
By: Keith Walker
Pursuant to Proposition 65, notice must be provided prior to exposing anyone to chemicals known to the State of California to cause cancer or reproductive harm. Recent changes to the requirements imposed by Proposition 65’s safe harbor warning guidelines affect the compliance approach for residential landlords in California.
Specifically, California Health and Safety Code sections 25607.34 and 25607.35, which became effective July 1, 2019, require that warnings be provided to new tenants and other adult occupants in specific formats, at lease inception and again each year during the tenancy.
Pursuant to new requirements issued by the State of California’s Office of Environmental Health Hazard Assessment (OEHHA), the warnings need to be conveyed annually (i) in a letter delivered to the rental property and addressed to all known adult tenants; (ii) in an email sent to all of the email addresses that the landlord uses to communicate with tenants; or (iii) in the lease agreement.
With respect to the content of the required warnings, they must include the following information:
- the symbol
- the word “WARNING” in all capital letters and bold print
- the following text:
- [Name of one or more exposure sources(s)] on this property can expose you to [name of one or more chemicals] which is [are] known to the State of California to cause [“cancer,” “birth defects or other reproductive harm,” or “cancer and birth defects or other reproductive harm”]. Talk to your landlord or the building owner about how and when you could be exposed to this chemical in your building. For additional information go to www.P65Warnings.ca.gov/apartments.
OEHHA is also the agency charged with maintaining and updating the list of chemicals that gives rise to the notification requirements discussed above. In a residential context, OEHHA has provided the following examples of potential “exposure source(s)” for residential rental properties:
- fireplaces or unvented gas space heaters;
- paint chips and dust from lead-containing paint;
- use of lead-containing plumbing materials;
- imported vinyl miniblinds manufactured prior to 1997;
- building materials containing urea-formaldehyde resins; and
- asbestos-containing materials, including some ceiling coatings on the property, if such materials are disturbed.
Other Proposition 65-listed chemicals that are often found in apartments and other residential rental properties include asbestos, carbon monoxide, formaldehyde, carbon monoxide, and lead.
For questions regarding compliance with Proposition 65 and designing an effective strategy for completing the required notifications, whether for a single property or a portfolio made up or dozens or hundreds of residential assets, please contact Keith Walker at (310) 284 – 2230 or email@example.com.
Legislative Updates as of August 14, 2019
Commercial, Industrial, Retail Real Estate Leaders!
Lots has happened to day with Split Roll. See below for more information on all the back and forth!
- Summary from Rex about our plan of action
- Split Roll Proponent’s press release announcing have decided to rewrite and refile their Split Roll Initiative
- Politico Story (below)
- OUR RESPONSE: SPLIT ROLL OPPONENTS DEMAND FLAWED MEASURE BE PULLED FROM BALLOT
More refined talking points will follow, but this basic response is that this is not a surprise because the initiative is flawed as its based on a faulty premise. The proponents themselves have acknowledged that and they should pull this measure from the ballot immediately.
Legislative Updates as of July 26, 2019