In just a few weeks, San Jose businesses could be on the hook for rent they couldn’t pay during the pandemic when an eviction ban expires.
Unlike an eviction ban for renters that’s been extended until June, a similar safety net for small businesses, many badly impacted by COVID, is still set to expire March 31.
Jerry Wang, owner of Paper Moon Cafe in downtown San Jose, has lost his patience.
“All the promises the government has been saying since December—it’s now going into April, and we still haven’t seen anything yet,” Wang said. “My trust level with the government has been really, really low lately.”
The city’s economic development department and small business consultant Start Small Think Big will be hosting a Zoom webinar at 3:30 p.m. Thursday to update business owners on the commercial eviction moratorium. The city hopes to prepare business owners for a potential end to the order with training on negotiation tactics with landlords and other tools.
“We have seen new businesses open downtown during the pandemic, so we are cautiously optimistic,” Elisabeth Handler, a spokeswoman for the city’s economic development department, said about the city’s small business recovery. “We are also seeing landlords and tenants proactively negotiating with each other to prevent evictions, which is a clear win-win.”
Santa Clara County adopted its eviction moratorium in March 2020, following an executive order from Gov. Gavin Newsom. The moratorium protects small businesses that are unable to pay their rent because they’ve suffered a “substantial” loss of income or faced medical expenses due to the pandemic. The county in November extended the moratorium until the end of this month.
Some businesses are hoping the city takes the same measures it took for renters—namely, extend the eviction ban for commercial buildings. So far, however, that hasn’t panned out. There have been no updates from the state or county to extend the moratorium, according to Handler.
Some of the hardest-hit are downtown nightlife businesses.
Bars and clubs that don’t serve food haven’t been able to reopen since the initial shelter in place order went into effect a year ago. The businesses have lost revenue from big earning nights, including New Year’s Eve and now two St. Patrick’s Days. Those that serve food shifted to to-go orders to keep revenue flowing. It’s not the model business for which owners budgeted.
“When we move into these kinds of businesses, we build them contingent on a certain capacity,” said George Lahlouh, who along with business partners Dan Phan and Johnny Wang, co-own Paper Plane, Miniboss, Original Gravity Public House and SuperGood Kitchen, four bars located in the heart of downtown’s nightlife scene on First Street.
The trio is reopening its bars, which also serve food, on Thursday with a limited capacity as allowed by public health restrictions. Lahlouh is grateful that his employees can get back to work, but he fears that he still won’t be able to make rent should no extension be granted. According to Lahlouh, rent is approximately $14,000 a month just for Paper Plane.
“Reopening at 25% capacity doesn’t really help,” he said. “You can’t pay these types of rents on 25% capacity.”
Once the moratorium expires, businesses are required to pay at least 50% of their past-due rent within six months. They will have another six months to pay back the rest.
Another element to add is the relationship between tenants and landlords. According to Nate LeBlanc of the San Jose Downtown Association, businesses most likely to survive are ones that have a good working relationship with their landlords or ones that have struck a deal to suspend payments until a personally-agreed upon date.
“The level of communication between tenants and landlords is the defining factor,” LeBlanc said. “Some landlords were more willing to work with tenants than others.”
LeBlanc, the association’s business development manager, has been tasked with helping business owners apply the state’s and federal government’s business aid programs.
“I’ve filled out people’s grant applications. I’ve been the long-distance shoulder to cry on for a lot of people,” LeBlanc said.
Wang and Lahlouh’s landlords have been particularly sympathetic to their situations, they said, although they expect their landlords will ask for the full amount of suspended rent once the moratorium is over.
“If it’s 25% capacity,” Lahlouh joked, “maybe we should be charged 25% rent.”