Posted on January 17, 2023 by Harman Bual
Mayor Bruce Harrell officially ended the City of Seattle Civil Emergency Proclamation on October 31, 2022, which affects the requirement for landlords to negotiate payment plans with commercial tenants that qualify as a small businesses or nonprofit organization.
Despite the end of the eviction moratorium and the lifting of the COVID-19 Emergency Orders, commercial landlords are still restricted by City of Seattle Ordinance 126116 which prohibits commercial landlords (for one year following the lifted emergency proclamation) from raising rent and charging late fees and interest accrued during the COVID-19 state of emergency and the six months following (i.e. through April 30, 2023), and requires landlords to enter into payment plans for overdue rent with small business/nonprofit tenants.
What are small businesses and nonprofits covered by the ordinance?
A “small business” means any type of business entity (including a sole proprietorship, corporation, partnership, or other legal entity) that meets all of the following requirements:
- Owned and operated independently from all other businesses (including a franchisee with five or fewer franchise units);
- Has fifty (50) or fewer employees per establishment or premises;
- One of the following applies:
- Has been forced to close due to an emergency order by Governor Inslee or Mayor Durkan; or
- Has gross receipts in any calendar month of 2020 that are less than seventy percent (70%) of the gross receipts for the same month in 2019; and
- Is neither:
- A general sales and service business with ten (10) or more establishments worldwide; nor
- An entertainment use business with five (5) or more establishments worldwide.
A “nonprofit” means an entity that: (1) is a “not for profit corporation” or “nonprofit corporation” under RCW 24.03.005(16) or is designated a “public benefit not for profit corporation” or “public benefit nonprofit corporation” under RCW 5 24.03.490; and (2) holds tax-exempt status under 26 U.S.C. § 501(c)(3).
What type of payment plans are required?
Under Ordinance 126116, commercial landlords are required to offer small business/nonprofit tenants a written installment payment arrangement for any unpaid rent accrued between March 3, 2020, and April 30, 2023 (i.e. the 6 month period following the lifting of emergency COVID-19 orders).
For any delinquent rent subject to the ordinance and unless the landlord and tenant agree otherwise, a landlord cannot require the tenant to pay more than the scheduled rent owed for the month or period plus 1/3 of late rent due at the time of the negotiated repayment plan. However, the good news for landlords is that any late rent must be paid in full no later than one year after the end of the emergency (i.e. October 31, 2023).
Contact the Real Estate team at LHSE to further discuss your commercial lease issues including the negotiation of repayment plans and the eviction of commercial tenants.