San Jose enterprise house owners onerous hit by COVID-19 now have one other concern – the top of an eviction moratorium
Companies that barely survived 2020 will face another major blow – the end of the district’s eviction moratorium.
The measure prevents landlords from evicting commercial tenants who have not paid their rent. It will expire on March 31st, and if it does, companies that have not paid rent will have to pay all of their outstanding rent back within one year.
Given that the economy is still stuttering, unemployment is still high, and the COVID-19 outbreak has worsened dramatically – which may continue to weigh on business – many local business owners are concerned about the moratorium’s expiration, say Advocates.
“There is still a lot of fear, and this is just the beginning,” said Dennis King, director of the Silicon Valley Small Business Development Center. “Rent is just another one of the broader financial crises they are facing.”
Santa Clara County passed the eviction moratorium in March by order of Governor Gavin Newsom, allowing him and other counties to put such bans in place. It protects small businesses that cannot pay their rent because they have suffered “significant” income or illness losses due to the pandemic. The district has extended the moratorium several times, most recently in November when it postponed the expiry until the end of March.
After the moratorium has expired, companies must pay at least 50% of their overdue rent within six months. You have six months to repay the rest.
The pandemic has hit small businesses – and their landlords – hard
Manley’s donuts in San Jose’s Willow Glen neighborhood saw business collapse during the pandemic and barely made enough money to pay the rent, owner Judy Chhay said. Photo by Grace Stetson.
While the moratorium has helped some local businesses keep their doors open for the time being, many of those businesses could find themselves in dire straits after the deadline. The county’s instructions to fight the pandemic have kept many companies from staying open, let alone making money. If the pandemic continues to thwart small business owners’ efforts to generate revenue, many will be in even worse financial shape after the moratorium expires.
“Turning nail salons, beauty salons, and restaurants on and off has been very detrimental,” King said.
Judy Chhay, who has owned Manley’s donut shop in downtown Willow Glen with her husband for five years, is one of those local business owners struggling to make ends meet. Chhay continued to pay rent, but it was tough.
While Manley’s clients have been supportive – some have even given Chhay $ 20 tips – business declined with the pandemic outbreak and has slowed down recently.
“We have enough and work seven days (a week),” she said. “We barely have enough for the rent.”
Small business struggles have affected many of their landlords. While they may not receive rent from some of their tenants, their own creditors are not giving them a break, said Dennis Wang, president of the San Jose Sino-US Chamber of Commerce.
“We don’t get a break on the landlord, insurance, mortgage, tax, and other side,” Wang said. “You pay in full or you get a late charge or bad credit report or foreclosure.”
Wang is concerned that things could get worse for both tenants and landlords. The county’s updated stay at home order, which went into effect December 4, forced many businesses to close their doors and others to reduce the number of people who can serve them at the same time. That makes it difficult for entrepreneurs to repay the rent they owe from the moratorium period, he said.
“If you’re trying to get the return rent, it’s very difficult,” he said. “If the deadline comes and (business owners) can’t pay the rent, what will you do?”
Governor Gavin Newsom and the county could extend the moratorium if the pandemic continues to threaten small businesses over the next year. But it is not certain that they will.
Vic Farlie, a senior executive analyst at the San Jose Economic Development Office, said it was a good idea for business owners and their landlords to communicate and try to work out an agreement on outstanding rents before the moratorium expires.
“As challenging as it is, this is preferable to litigation, which can be expensive and time-consuming,” he said. “In current economic conditions, the real estate market is best served when both parties can negotiate an agreement.”
Contact Grace Stetson at [email protected] and follow her @grace_m_stetson on Twitter.