California SB 939—a new bill that will provide protections for commercial tenants impacted by the pandemic—has passed the Senate Judiciary Committee, and will go for a vote in the Committee on Appropriations later this month. The bill has been highly controversial, in that it will place a moratorium on commercial evictions and allow commercial tenants to open new negotiations on lease terms or terminate existing leases. However, the bill itself does not provide guidance on how landlords should renegotiate lease terms.

"SB-939 does not provide any guidance as to how landlords and tenants should renegotiate rent and other economic lease terms," Jonathan Zweig of Cox, Castle & Nicholson, tells GlobeSt.com. "Once a tenant is eligible under Section 1951.10, it can attempt to renegotiate by engaging in 'good faith negotiations.' However, this is a subjective standard that may provide a means for abuse, as tenants can engage in a renegotiation without any intent to continue the lease, and then terminate with minimal liability."

Until now, landlords have largely and willingly entered into lease negotiations with tenants to work through the economic fallout related to the pandemic. Most already have deferral plans in place. "I have found that landlords have been eager to help tenants through this unprecedented period and are willingly negotiating rent deferral plans with all sorts of tenants, ranging from national companies to mom-and-pop stores," says Zweig. "In my experience, these arrangements carefully balance the needs of both parties and typically include two to three months of base rent deferral—but not common area operating expenses, taxes or insurance—that is paid back in 12 monthly installments beginning on a specified date, usually in early 2021."