Rules and regulations for Business Stabilization Grants

Saturday, November 2, 2024

Scope

These rules and regulations apply to Business Stabilization Grants to Landlords and their Legacy Business tenants, as set forth at Administrative Code Section 2A.246 (“Legacy Business Assistance Program”). The Office of Small Business manages grants through the Legacy Business Assistance Program.

The Business Stabilization Grant is eligible only to Qualified Landlords who lease property to a Registered Legacy Business in the City and County of San Francisco.

Qualifications for Grant

Subject to the budgetary and fiscal provisions of the City Charter, the Office of Small Business shall award an annual grant to a landlord that, on or after January 1, 2016, enters into an agreement with a Legacy Business that leases real property in San Francisco to the Legacy Business for a term of at least 10 years or extends the term of the Legacy Business's existing lease to at least 10 years, for each year of a lease entered into on or after January 1, 2016, or each year that was added to an existing lease on or after January 1, 2016 (e.g., an existing five-year lease that is extended to 20 years on January 1, 2016 would entitle the landlord to 15 years of grants), as calculated in Section 4 below (“Amount of Grant”), provided that: (A) the landlord files an initial application for the grant with the Office of Small Business after execution of the qualifying lease, and annually files an application for the grant prior to the anniversary date of the landlord's first grant payment; (B) the lease meets all other criteria required by these rules and regulations of the Small Business Commission, including any criteria tied to the amount of rent and other lease provisions that may impact the long-term stability of the Legacy Business; (C) the landlord has no amounts owed to the City as a result of fines, penalties, interest, assessments, taxes, fees, or any other financial obligations imposed by law, regulation, or contract that were Page 2 November 2, 2024 delinquent as of the date of application; (D) the landlord is not related by ownership, either directly or indirectly, to the Legacy Business to which the landlord leases the property; and (E) the landlord meets all other requirements for the grant established by Administrative Code Section 2A.246 and by these rules and regulations of the Small Business Commission. A landlord qualifying under Section 2 shall be referred to as a "Qualified Landlord" for purposes of Administrative Code Section 2A.246.

Grant Application

A landlord seeking a grant under Section 2 shall submit an application on a form prepared by the Office of Small Business, and shall include:

a certification of the total square footage of the improvements in San Francisco leased to the Legacy Business from which the Legacy Business operates its business;
a copy of the lease with the Legacy Business; and
a certification that the landlord meets all of the requirements for the grant established by these Rules and Regulations by the Small Business Commission.

The landlord shall submit any subsequent annual applications for grants under Section 2 by the anniversary date of their first grant payment under Section 2 on a form prepared by the Office of Small Business, and shall include:

a certification of the total square footage of the improvements in San Francisco leased to the Legacy Business from which the Legacy Business operates its business;
a certification that there have been no changes to the lease that would impact the Qualified Landlord's eligibility for the grant; and
a certification that the Qualified Landlord continues to meet all of the requirements for the grant established by these Rules and Regulations of the Small Business Commission.

The Office of Small Business must comply with the California Public Records Act, the San Francisco Sunshine Ordinance, all other applicable federal, state, and local laws, as well as any applicable court orders.

If the Office of Small Business denies a landlord's application for a grant, the Office of Small Business shall, to the extent permitted by law, keep confidential any lease submitted by that landlord under this Section 3 in connection with the application.

If the Office of Small Business approves a landlord's application for a grant, the Office of Small Business shall, to the extent permitted by law, keep confidential all provisions in any lease submitted by that landlord under this Section 3 in connection with the application to the extent that such provisions did not form some or all of the basis for the Office of Small Business's decision to award the grant to the landlord.

Amount of Grant

Following a landlord's initial application and on the anniversary date of a Qualified Landlord's first grant payment thereafter, the Office of Small Business shall pay to a Qualified Landlord a grant equal to $4.50 per square foot, up to a maximum of 5,000 square feet per location, of the improvements in San Francisco leased to the Legacy Business from which the Legacy Business operates its business, except that the total grants paid to all Qualified Landlords in a fiscal year shall not exceed the appropriations into the Legacy Business Assistance Program Fund that are allocated for the Business Stabilization Grant. The Office of Small Business shall allocate funds from the Legacy Business Assistance Program Fund among Qualified Landlords as follows:

The Office of Small Business shall first allocate amounts in the Legacy Business Assistance Program Fund (Business Stabilization Grant allocation) to cover all grants to be made during the fiscal year to Qualified Landlords from prior years that have years remaining on their leases with respect to which the Qualified Landlords are entitled to grants. If sufficient funds do not exist to cover all grants to be made during the fiscal year to these Qualified Landlords from prior years, the Office of Small Business shall allocate the amount in the Legacy Business Assistance Program Fund (Business Stabilization Grant allocation) to these Qualified Landlords from prior years proportionately based on the square footage of the improvements in San Francisco leased to the Legacy Businesses from which the Legacy Businesses operate their businesses.
If there are sufficient funds in the Legacy Business Assistance Program Fund (Business Stabilization Grant allocation) to pay all grants during the fiscal year to Qualified Landlords from prior years, grants to new Qualified Landlords will be made out of any amount remaining in the Legacy Business Assistance Program Fund (Business Stabilization Grant allocation), after subtracting amounts necessary to pay all grants during the fiscal year to Qualified Landlords from prior years, in the order that the Office of Small Business receives the Qualified Landlords' completed grant applications, beginning on July 1 of each fiscal year. If any Qualified Landlord from a prior year fails to apply for a grant in a subsequent year or fails to qualify in a subsequent year, the amount of funds that would have been paid to that previously Qualified Landlord shall be available to pay grants to new Qualified Landlords under this Subsection 3(B).

General Qualifications for Landlords

Qualified Landlords must satisfy all of the following criteria:

No Amounts Owed to City Landlords must certify that they do not owe any amounts to the City as a result of fines, penalties, interest, assessments, taxes, fees, or any other financial obligations imposed by law, regulation, or contract that were delinquent as of the date of the Landlord’s application for a grant.
Business Registration: Landlords must certify that they have complied with any requirement to register as a business with the Office of the Treasurer and Tax Collector.
Office of Labor Standards Enforcement Investigations: Landlords must certify that they are not the subject of an OLSE investigation or enforcement action.
Landlord and Legacy Business Legal Relationship: The Landlord must not be related by ownership either directly or indirectly, to the Legacy Business to which the Landlord leases property. A Landlord is related by ownership to a Legacy Business if any of the following criteria are satisfied:

The Landlord holds any ownership interest in the Legacy Business.
The Legacy Business holds any ownership interest in the Landlord.
A third-party entity holds an ownership interest in both the Legacy Business and the Landlord.
The Landlord holds any beneficial interest in any entity (including, but not limited to, a beneficial interest in a trust) that holds an ownership interest in the Legacy Business.
The Legacy Business holds any beneficial interest in any entity (including, but not limited to, a beneficial interest in a trust) that holds an ownership interest in the Landlord.
The Landlord, or any person who holds an ownership or beneficial interest in the Landlord, is in an immediate family relationship with any person who holds an ownership or beneficial interest in the Legacy Business.

The phrase “immediate family relationship” includes the relationships between spouses, domestic partners, parents or guardians and children (including step-parents and step-children, or adoptive parents and adoptive children), grandparents and grandchildren, siblings (including step-siblings or adoptive siblings), aunts or uncles and nieces or nephews, great-aunts or great-uncles and grand-nieces or grandnephews, and first or second cousins. The phrase also includes the relationship with the parent, grandparent, or sibling of one’s spouse or domestic partner, or the spouse or domestic partner of one’s child, grandchild, or sibling.

Categories of Ineligible Landlords

A Qualified Landlord may not be a department, agency, commission, or other entity within the City and County of San Francisco (including, but not limited to, the Real Estate Division, the Port of San Francisco, or the San Francisco Municipal Transportation Agency).
A Qualified Landlord may not be any other local, state, or federal government; any entity within any other local, state, or federal government; or any special district created by state law (including, but not limited to, the Bay Area Rapid Transit District).
A Qualified Landlord may not have entered into a lease agreement with a Legacy Business that had previously owned the real property that is the subject of that lease agreement.

Successors to Qualified Landlords

Whenever a new Landlord assumes the obligations of a lease that previously qualified the prior Landlord for a grant under Administrative Code Section 2A.246, and the new Landlord does not renegotiate or otherwise change the terms and conditions of that lease, the new Landlord shall Page 6 November 2, 2024 be eligible to be a Qualified Landlord, and to receive a grant under Administrative Code Section 2A.246, without entering into a new lease or lease extension of the kind described in Section 2. The new Landlord must still satisfy all other requirements to be a Qualified Landlord and to receive a grant, other than the requirement to enter into a new lease or lease extension.

Conditions for Leases

Options to Renew: To qualify for a grant under Administrative Code Section 2A.246, a Landlord must (on or after January 1, 2016) enter into a lease agreement with a Legacy Business “for a term of at least 10 years,” or “extend the term of the Legacy Business’s existing lease to at least 10 years.” For this purpose, any number of years for which the Legacy Business has an option to renew the lease shall count towards the term of the lease, provided that the option to renew can be exercised at the Legacy Business’s sole discretion. For example, a five-year lease in which the Legacy Business (at its sole discretion) may extend the lease for an additional five years would qualify a Landlord for a grant under Administrative Code Section 2A.246.
Retroactivity The grant shall be retroactive to the fiscal year (July through June) in which the Legacy Business was listed on the Legacy Business Registry. For example, if a Legacy Business was listed on the Legacy Business Registry in November 2024, which is fiscal year 2024-25 (July through June), and the qualifying lease is a new 10- year lease that commenced July 1, 2023, and ends June 30, 2033, the Landlord would be eligible for 9 years’ of grants retroactive to July 1, 2024, the same fiscal year the Legacy Business was listed on the Legacy Business Registry.
Signing of the Lease The Landlord and Legacy Business must sign the lease and any required addenda before the Landlord applies for a grant under Administrative Code Section 2A.246, and the Landlord must submit the executed lease and any required addenda with its grant application.
Disclosure to Legacy Business Prior to applying for a Business Stabilization Grant, the Landlord must inform the Legacy Business the following in writing: (1) that the Landlord is applying for a Business Stabilization Grant and; (2) that the City and County of San Francisco does not guarantee it will have sufficient appropriations in the Legacy Business Assistance Program Fund to fully fund Business Stabilization Grants; (3) and that the City does not guarantee that it will award any grant of any amount under Administrative Code Section 2A.246.
Additional Application Certifications In submitting an application for a grant under Administrative Code Section 2A.246, a Landlord must certify:

The Landlord is aware that the grant is an annual grant and that the Landlord must reapply to receive continued funding.
That any failure to reapply for an annual grant may deprive the Landlord of its status as a Qualified Landlord from “prior years” within the meaning of Section 4.
That both the Landlord and Legacy Business understand that the amount of the grant could vary and might be less than $4.50 per square foot due to funding constraints.
That the Landlord must meet all of the requirements for a grant in order to be awarded the grant.

Advance Payments

A lease or lease extension that satisfies the criteria for a grant under Administrative Code Section 2A.246 shall render a landlord eligible to receive a grant under Section 2A.246 as early as the fiscal year in which the lease or lease extension is executed, even if the lease or lease extension does not take effect until a later fiscal year. A Qualified Landlord need not wait for the qualifying lease or lease extension to take effect before applying for or receiving a grant. The maximum allowable time between the Qualified Landlord receiving a grant and the qualifying lease or lease extension taking effect shall be three years. If, however, the Qualified Landlord applies for a grant before the lease or lease extension has taken effect, the landlord must—as a condition of receiving a grant—agree to return the entire amount of the grant in the event that the qualifying lease or lease extension does not take effect, unless the Qualified Landlord shows, to the satisfaction of the Office of Small Business, that the Qualified Page 8 November 2, 2024 Landlord is not responsible for the fact that the qualifying lease or lease extension does not take effect.

Lease Cancellations

A Qualified Landlord must certify that they have not cancelled an existing lease or lease extension with a Legacy Business that was not eligible for a Business Stabilization Grant and executed a new lease or lease extension that is eligible for a Business Stabilization Grant for the sole purpose of applying for and receiving a grant. If an existing lease or lease extension that was not eligible for a Business Stabilization Grant is replaced with a new lease or lease extension that is eligible for a Business Stabilization Grant, the Qualified Landlord must show, to the satisfaction of the Office of Small Business, that the replacement was not conducted for the sole purpose of applying for and receiving a grant.

Authorized Use of Funds

A grant under Administrative Code Section 2A.246 is awarded directly to the Qualified Landlord. The Qualified Landlord must provide the Legacy Business with at least 50 percent of the grant to offset the Legacy Business’s rent, as a direct payment to the Legacy Business, or as some other method of payment to the Legacy Business that is acceptable to the Legacy Business.

Confidentiality

Whenever an application for a grant under Administrative Code Section 2A.246 is approved, the Office of Small Business shall, to the extent permitted by law, keep confidential all provisions in any lease submitted by a Landlord in connection with the application, except to the extent that the Office of Small Business relied on the content of any such provisions in deciding to award a grant to the applicant Landlord.

Whenever an application for a grant under Administrative Code Section 2A.246 is denied, or before such an application has been either approved or denied, the Office of Small Business shall, to the extent permitted by law, keep confidential the entirety of any lease submitted by the Landlord in connection with the application.

Notification of Funding Allocations to Prior Year Qualified Landlords

On or before August 1 of each fiscal year, the Office of Small Business shall notify all Qualified Landlords from the prior fiscal year of the annual grant the Landlord will receive for the current fiscal year when the Qualified Landlord reapplies. The Office of Small Business will also notify the Legacy Business of the annual grant amount the Landlord will receive.

Receipt of Grant Payment

To be paid, Grantees must become City Suppliers. The Legacy Business Program Manager may assist Applicants in completing the registration requirements for becoming City Suppliers, as needed.

Verification of Information

The Office of Small Business shall have the authority to verify all information provided by a Landlord in connection with an application for a grant under Administrative Code Section 2A.246. Failure of a Landlord to comply with information requests from the Office of Small Business, or the provision of false information in connection with an application or in response to such requests, shall result in the denial of a grant application.

Sanctions for Willful or Material Misrepresentation

Whenever the Office of Small Business learns that a Landlord who has received a grant under Administrative Code Section 2A.246 materially or willfully misrepresented any information in any application for such a grant, the Office of Small Business may terminate any pending grant to that Landlord, order the Landlord to return any grants previously awarded, or prohibit the Landlord (conditionally or otherwise) from applying for future grants for any period of time.

Appeals

Applicants for grants under Administrative Code Section 2A.246 may appeal any adverse decision by the Office of Small Business (including the decision to deny a grant application, the decision to terminate or revoke any grant previously approved, or the decision to prohibit a Landlord from applying for a future grant) to the Small Business Commission.

Changes to These Regulations

The Small Business Commission may revise these regulations at any time, for any reason. The Commission may, but need not, provide that future revisions of these regulations shall be prospective only, and shall not apply to existing Qualified Landlords. Alternatively, the Commission may require that all Landlords (including existing Qualified Landlords) satisfy any new or revised regulations that the Commission chooses to adopt.

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Business Stabilization Grant Rules and Regulations