Businesses that barely survived 2020 have another tough blow ahead — the end of the county’s moratorium on evictions.
The measure bars landlords from evicting commercial tenants who haven’t been paying their rent. It expires on March 31 and, when it does, businesses that haven’t paid rent are on the hook for paying all of their outstanding back rent within a year.
Given that the economy is still sputtering, unemployment is still high, and the COVID-19 outbreak has worsened dramatically — potentially depressing business still further — many local business owners are worried about the moratorium’s expiration, advocates say.
“There is still great fear, and this is just the beginning,” said Dennis King, director of the Silicon Valley Small Business Development Center. “The rent is just one more of the overall financial crises that they’re facing.”
Santa Clara County adopted the eviction moratorium in March, following an executive order from Gov. Gavin Newsom that allowed it and other counties to enact such prohibitions. It protects small businesses that are unable to pay their rent because they’ve suffered “substantial” loss of income or medical expenses due to the pandemic. The county has extended the moratorium several times, most recently in November, when it pushed back the expiration until the end of March.
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.
The pandemic has been hard on small businesses — and their landlords
While the moratorium has helped some local businesses keep their doors open for the time being, many such businesses could be in dire straits when it expires. The stay-in-place orders issued by the county to try to control the pandemic have prevented many businesses from staying open, much less making money. Should the pandemic continue to thwart small business owners’ efforts to generate revenue, many will be in even worse financial shape when the moratorium ends.
“The on-again, off-again for nail salons, beauty salons, and restaurants has been very detrimental,” King said.
Judy Chhay, who has co-owned Manley’s Donut Shop in downtown Willow Glen with her husband for five years, is among the local business operators who have been struggling to make ends meet. Chhay has continued to pay rent, but it’s been tough.
While Manley’s customers have been supportive — some have even given Chhay $20 tips — business dropped off with the onset of the pandemic and has been slowing again lately.
“We’ve got enough, working seven days (per week),” she said. “We have barely enough for the rent.”
The struggles of small businesses have affected many of their landlords. While they may not be getting rent from some of their tenants, their own creditors aren’t giving them a break, said Dennis Wang, president of San Jose’s Chinese American Chamber of Commerce.
“On the landlord’s side, the insurance, the mortgage company, the taxes and everything, we don’t get a break,” Wang said. “You pay in full, otherwise you get a late charge or bad credit report or a foreclosure.”
Wang’s worried that things could get worse for both tenants and landlords. The county’s updated stay-at-home order, which took effect Dec. 4, forced many businesses to close their doors again and others to reduce the number of people they can serve at any one time. That makes it difficult for business owners to pay back rent they owe from the moratorium period, he said.
“When you try to get the back rent, it’s very tough,” he said. “When the deadline comes and (business owners) aren’t able to pay the rent, what are you going to do?”
Gov. Gavin Newsom and the county could extend the moratorium if the pandemic continues to threaten small businesses next year. But it’s not certain they will do so.
Vic Farlie, a senior executive analyst in San Jose’s Office of Economic Development, said it’s a good idea for business owners and their landlords to communicate with each other and try to work out an arrangement for outstanding rent before the moratorium expires.
“However challenging, this is preferable to litigation which can be expensive and time consuming,” he said. “In the current economic conditions the property market is best served when both parties can negotiate an agreement.”