On April 13, 2020, the Seattle City Council passed Council Bill No. 119766, which imposes commercial rent control and other protections for small businesses affected by COVID-19. The ordinance may have significant impacts for commercial landlords renting to small businesses in Seattle.
Who does this Ordinance Apply to?
The ordinance is intended to protect small businesses in Seattle, affected by COVID-19. Under the ordinance, a “small business” generally means any business with 50 or less employees that has been forced to close due to a state or local order or has seen gross receipts drop by 30 percent compared to the same month in 2019.
What does the Ordinance do?
Generally, the ordinance provides protections for Seattle small businesses in the form of rent control, repayment plan requirements, and prohibition on late fees, interest, and other charges.
With respect to rent control, the ordinance:
- Prohibits a landlord from increasing rent during the lease term unless the increase was authorized in a written lease in effect before April 13, 2020; and
- Prohibits a landlord from renewing a “lease or enter[ing] into a new lease with the small business . . . if the new lease requires a rental payment that exceeds the payment due under the expired lease.”
These prohibitions shall remain in place until the civil emergency proclaimed by Mayor Jenny Durkan on March 3, 2020 (“Emergency Proclamation”) is terminated.
Repayment Plan Options for Seattle Small Business Tenants
Additionally, the ordinance provides Seattle small businesses who fail to pay rent “during or within six months after the termination of” the Emergency Proclamation the option to pay overdue rent incurred during the above period on a repayment plan schedule. The ordinance requires the landlord and Seattle small business tenant to enter into a written installment payment schedule which: (1) may not require the tenant to pay, in addition to their regular monthly rent, more than 1/3 of late rent for any month rent was not paid; (2) requires the tenant to pay back rent in full within 1 year after the termination of the Emergency Proclamation.
Prohibition on Late Fees, Interest, or Other Charges
Finally, the ordinance prohibits the application of late fees, interest, or other charges due to late payment of rent “during or within one year after the termination of” the Emergency Proclamation.
COVID-19’s impact on landlords and business tenants is far reaching, and State and local officials have issued a tangled web of protections aimed at mitigating COVID-19’s economic effects. In fact, in addition to Seattle’s small business specific ordinance, Governor Inslee’s Proclamation 2019.1 casually provides that landlords cannot increase or threaten to increase rent for “commercial rentals” if the “commercial tenant has been materially impacted by the COVID19.” Governor Inslee’s proclamation does not identify what comprises a ‘material impact’ caused by COVID-19, whether the proclamation applies to parties renewing their leases, or whether the proclamation applies to leases with previously scheduled rent escalators. This lack of clarity, combined with the interplay between State and local ordinances, orders, and proclamations, underscores the need for advice from trusted legal counsel.
Please contact one of MPBA’s skilled landlord tenant attorneys, including Scott Feir and Chris Reed with questions concerning how to navigate landlord tenant issues during COVID-19 in light of ever-changing State and local authority.