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Commercial Landlords and Tenants at Odds Over Urgency Ordinance
Commercial landlords and tenants presented opposing views during a special City Council study session on May 5. The topic at hand: revisions to the Urgency Ordinance enacted by the City in response to the COVID-19 pandemic.
Landlords will likely get a reprieve when an amended ordinance is taken up at the May 19 City Council meeting. The revised ordinance is expected to include additional provisions related to commercial tenants and the eviction moratorium. It will also address rent forbearance for certain commercial tenants and clarify a rent repayment schedule for all tenants.
“Please don’t put the City in a position of picking winners and losers,” urged Douglas Emmett CEO Jordan Kaplan, one of the largest property owners in Beverly Hills. Emmet, who estimated that one-third of his office tenants were delinquent in rent payments, was among eight people who called in to voice their opinions on the matter at the study session. “Many high net worth office tenants are taking advantage of this ordinance to withhold rent even though they can obviously afford to make the payment.”
While the City’s ordinance was not intended to relieve tenants of their obligation to pay rent, landlords have been vocal that the ordinance’s provision to restrict an owner’s ability to evict a tenant for non-payment of rent has proven problematic. Multiple landlords have stated that the unintended consequence is that tenants are choosing to simply not pay rent, despite the ordinance’s mandate that a tenant must demonstrate that the failure to pay is due to financial impacts related to COVID-19. Landlords are further concerned that once the state of emergency is no longer in effect, tenants will simply choose to forgo paying past rent and move out of the space entirely.
“It was never the intention of myself, or I think any of my colleagues, that this was going to be a free rent for anyone that needs it,” said Mayor Lester Friedman.
“Our intent always has been that people should pay what they have an ability to pay,” Vice Mayor Bob Wunderlich emphasized.
The Council was united in its commitment to reduce the amount of time that commercial tenants now have to repay their forborne rent from 12 months to between three to six months. The Council was also united on its commitment that tenants should pay what they are able to pay during this time.
Property owner Steve Gordon, chairman of Domino Realty, argued that many of his high net worth office tenants, including venture capital firms, banks, and hedge funds, were “taking advantage” of the ordinance to withhold rent even though they could afford to make payments. He estimated that over one-third of his rental income was delinquent.
Melanie Brandman, whose eponymous Brandman Agency has its office in the Douglas Emmett-owned office building at 8484 Wilshire Blvd., and who has not paid rent since the moratorium went into effect, told the City Council that 95 percent of her business had been lost as a result of the COVID-19 pandemic. “All of our clients have said they will return, it’s really just a matter of when,” she said.
The revised ordinance will also differentiate retail tenants from office and restaurant tenants.
“I do believe we’re trying to find a way to make this work as best as possible for everyone,” Councilwoman Lili Bosse said.