Commercial landlords would be prohibited from evicting tenants under a bill Hawaii lawmakers took up last week to try to assist businesses reeling from the economic fallout from the coronavirus pandemic.
Senate Bill 563, which passed out of the Senate Committee on Commerce, Consumer Protection and Health on Tuesday, also would prohibit landlords from trying to collect back rent from businesses for 12 months after expiration of the last emergency proclamation relating to the pandemic.
Tenants would be able to terminate leases without penalty if negotiations with landlords to amend contract terms are unsuccessful. And if landlords violate prohibitions in the proposed bill, tenants could sue for actual damages, seek $2,000 for each incident constituting a violation and collect attorneys fees.
There are one-third fewer businesses open in Hawaii compared to pre-pandemic numbers, according to data from the University of Hawaii Economic Research Organization. It’s not clear how many of those have permanently closed.
Restaurants have been particularly hard hit, with more than half expected to close permanently by April if tourism doesn’t significantly increase, according to a December survey by the University of Hawaii’s Public Policy Center. The vast majority of restaurant owners said they won’t have the means to start over if their business fails.
S.B. 563 has attracted support from small business owners who told legislators in testimony about the struggles they’ve faced to stay afloat, but is being strongly opposed by landlords who say shifting the financial burden onto them isn’t the answer.
Mark Hagadone, who leases commercial space to tenants in Kaimuki, said that cutting off rental income would harm lessors who need to pay mortgages, property managers, building maintenance fees and property taxes.
“There’s no one deep pocket in this situation,” he told lawmakers. “We are all in this together in Hawaii.”
Landlords and property owners stressed that the bill would limit their ability to negotiate with lessees.
“We are listening to tenant requests for help, working with them to find rent relief solutions that sustain their businesses, and supporting their efforts to obtain financial assistance through government programs,” wrote Nicole Nakano of the Building Owners and Managers Association of Hawaii, a trade group for commercial property owners and managers.
Nakano said the bill would be a disincentive to a collaborative approach. “It would hamper progress more than provide protections,” she wrote.
The association’s opposition to the bill was echoed by a long list of property owners and trade groups for developers and landlords who submitted testimony in opposition to the measure, including Kapolei Shops, the Hawaii chapter of the Commercial Real Estate Development Association and Land Use Research Foundation. The Hawaii Bankers Association also testified against the bill.
While landlords stressed they are working to provide options for struggling tenants, businesses said property owners haven’t always been flexible.
Melissa Bow, owner of Via Gelato in Kaimuki and president of the Kaimuki Business and Professional Association, said it wasn’t fair or “morally right” for all the risk to be shouldered by tenants.
“It is reasonable to create emergency laws to protect against the mass default and subsequent lawsuits and indelible stain of bankruptcies of small businesses and non-profits failing during this situation of Covid-19,” she wrote in testimony supporting the bill.
William Moore told legislators that his business is among the casualties of the pandemic. Leading Importers LLC, now closed, operated out of Ward Village. He said he’d lost $260,000 due to the pandemic and owed another $100,000 in remaining rent. He said his landlord was inflexible when it came to negotiating or letting him out of the lease without penalties.
“My situation is already done. My business is lost. I can’t do anything,” said Moore. But he stressed the state needs to step in to stop large corporations from continuing to profit off of people like him.
Francis Cofran, vice president of operations at Ward Village, said in response that the company provides its merchants with information on loans and government relief programs, and supports efforts to adapt to the pandemic, such as providing online promotions and dedicated stalls for order pick-ups.
“We continue to navigate these challenging times together, working to engage, support and find creative solutions for the benefit of our Ward Village community,” she said in a statement.