Two organizations representing San Francisco property owners sued the city over a law that gives businesses an excuse to not pay back rent if they were fully shut down during the pandemic.
Legal experts had predicted the controversial measure, which tips the scales of rent negotiation in favor of tenants instead of landlords, would draw challenges. The first was filed in San Francisco Superior Court by the San Francisco Apartment Association and the Small Property Owners of San Francisco Institute on Tuesday.
The legislation under fire was proposed by Supervisor Dean Preston and passed unanimously by the Board of Supervisors in July. It’s based on a state law excusing a party from a contract if fulfilling it becomes impossible. The city ordinance creates a presumption, which could be challenged in court, that the law applies to rent for small businesses during the time they were completely shut down during the pandemic due to the city’s health orders, unless their leases specifically state otherwise. The law largely benefits hair salons, tattoo shops, entertainment venues and gyms.
The plaintiff’s complaint said that many property owners are also small business owners hurt by lockdowns.
“The pandemic affected property owners and tenants alike, and many property owners are small businesses who rely on rent to maintain the property or as a financial lifeline,” one of their attorneys, Cody Harris of Keker, Van Nest & Peters LLP, said in an email. “But the City’s ordinance unfairly seeks to relieve tenants of their contractual obligations without compensating property owners at all. The ordinance is also unlawful.”
The complaint called the local law a “ham-fisted, vague, and ultimately illegal Ordinance that unfairly puts its thumb on the scale in favor of one side of countless two-party contracts.”
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