Commercial lease provisions targeted by state legislatures

Over the last year, state legislatures across the country have been focused on pandemic recovery efforts, business continuity and budgets. ICSC has weighed in on specific legislation that seeks to change various provisions of a commercial lease for businesses impacted by COVID-19 mandated closures.

In recent months such bills were introduced (and subsequently stopped with opposition from ICSC and other business groups) in California and Hawaii. More recently, however, a bill in Maryland (HB 719) prohibiting enforcement of a personal guaranty clause for a period of time has cleared the legislature and is awaiting action by Governor Larry Hogan. ICSC has requested that the governor reject the measure but acknowledges the bill passed by a veto-proof margin. Similar legislation is pending in New York (SB 5144) and ICSC is mobilizing opposition in Albany.

“This legislation is intended to provide relief to commercial tenants, but in general we think it is going about it the wrong way. For states to start treading into long-established contract law is a dangerous precedent and raises constitutional concerns about impairment of contracts,” Betsy Laird, senior vice president for ICSC Global Public Policy, said.

“As well, lawmakers may not know the extent by which an overwhelming number of owner/developers, some small businesses themselves, have tried to reach some accommodation with tenants in the form of rent relief, rent deferrals, forgiveness, extended terms and other breaks depending on the tenant’s situation in the past year,” Jim Hill, ICSC vice president for State and Local Government Relations, said. “Legislative proposals allowing impacted commercial tenants to waive their contractual obligations, regardless of whether they have received assistance from their landlords or governmental aid and without any assessment of financial hardship, are quite problematic. They merely shift the financial burdens to the property owner.”

ICSC is in favor of legislation that would assist businesses in their economic recovery while at the same time allowing property owners to meet their debt obligations.

“We strongly support additional relief for businesses impacted by COVID-19 to help them get back on their feet,” Hill said. “ICSC believes that is a sound approach and have communicated our position to elected officials.”

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