By: Jessica Cohen
This is a summary of current Washington State and Seattle governmental orders affecting commercial tenancies at this stage of the COVID-19 pandemic. Residential tenancies are not addressed in this article.
Washington State: Under Governor Inslee’s Proclamation 20-19.6, commercial landlords in Washington State are prohibited from increasing (or threatening to increase) rent or the amount of any deposit on commercial rental property if the commercial tenant has been materially impacted by COVID-19, whether the tenant (i) is personally impacted and unable to work, (ii) the business was deemed a “non-essential” business pursuant to the Stay Home – Stay Healthy Proclamation 20-25, or (iii) the business lost staff or customers due to the COVID-19 outbreak. The prohibition on increasing rents does not apply if rent increases were in a lease agreement executed prior to February 29, 2020. These protections are in effect until June 30, 2021.
King County: The King County’s Sheriff’s Office announced on March 17, 2020, that it is “temporarily suspending the service and enforcement of evictions until further notice.” The sheriff’s letter implies that it applies to commercial, residential, and post-foreclosure evictions.
City of Seattle:
- Under the City of Seattle’s Moratorium on Small Business Tenant Evictions, issued March 17, 2020, landlords are prohibited from evicting nonprofit entities and small business for non-payment of rent or due to the expiration of the term of the lease. The Seattle Order has been extended numerous times (the most recent extension was on March 15, 2021[i]) and is in effect until the earlier of June 30, 2021 or the termination of Mayor Durkan’s Proclamation of Civil Emergency, issued March 3, 2020.
- Under the City’s order, a small business is defined as a business that is owned and operated independently from all other businesses and that has 50 or fewer employees per premises.
- Landlords cannot impose late fees, interest, or other charges due to non-payment or late payment of rent while the moratorium is in effect.
- Landlords should endeavor to enter into a payment plan or a workout agreement to assist distressed small business owners.
- Seattle City Council Ordinance 126066, issued April 13, 2020, affirms the mayor’s order and also adds additional requirements.
- Landlords leasing on a month-to-month basis cannot increase rent charged to a small business or nonprofit until the mayor’s civil emergency order proclaimed on March 3, 2020, has been terminated.
- For a fixed-term lease, landlords are prohibited from (i) increasing the amount of rent charged, unless the increase was agreed to in the lease prior to April 13, 2020, or (ii) renewing the lease or entering into a new lease and increasing the rent amount.
- The ordinance places parameters around the repayment plan that the landlord and tenant must negotiate and memorialize in writing. A nonprofit or small business that did not pay (some or all) rent during the moratorium or within the six months after it is lifted may pay its overdue rent in installments pursuant to the written payment schedule, provided that (i) the schedule may not require the tenant to pay, in addition to rent due for that month, more than one-third of the owed rent within any month following the month for which full rent was not paid; and (ii) all rent in arrears must be paid back no later than one year after the termination of the mayor’s civil emergency order.
- Late fees, interest, or other charges due to late payment of rent shall not accrue during the moratorium or within one year after the expiration of the civil emergency order.
- For a small business to qualify, it must (1) be a business entity that is owned and operated independently from all other businesses (any franchisee that has five or fewer stores qualifies); (2) have 50 or fewer employees per establishment or premises; (3) have been forced to close due to Governor Inslee’s emergency order, or its gross receipts from the previous calendar month in 2020 are less than 70% of its gross receipts for the same month in 2019; and (4) be neither a general sales and service business with ten or more establishments in operation worldwide nor an entertainment use business with five or more establishments worldwide.
- City of Seattle Ordinance 126116, issued July 31, 2020, is an attempt to limit personal liability for small business and nonprofit tenants who default in their commercial leases. The ordinance prohibits enforcement of a “provision in a commercial lease or other commercial rental agreement that makes the tenant or one or more persons who are not the tenant wholly or partially personally liable for payment of rent, utility expenses, taxes, fees, or charges related to routine building maintenance for the leased premises.”
- This ordinance is effective during and within six months after the expiration of the mayor’s civil emergency order and applies if the tenant was subject to certain in-person limitations under Governor Inslee’s proclamations or if the business or nonprofit closed or ceased operations due to one of the governor’s proclamations.
- Under the ordinance, a “small business” is defined as an independently owned business entity with 50 or fewer employees per premises (as defined under RCW 19.85.020(3)). A nonprofit entity is defined under RCW 24.03.490.