The Judicial Council’s delay until 90-days after the COVID emergency is lifted to open the courts to hear eviction cases will devastate landlords, tenants and their families, the wellbeing of innocent tax-paying, by-standing citizens, plus people’s, the City’s and the State’s economies and, ultimately, the cause of justice.
- It doesn’t take a crystal ball to know the 90-day delay will almost guarantee massive hurt to all parties on all sides of the COVID-19 rent deferment equation. Why? Let’s take as an example an average $1,500 a month Los Angeles renter who is approaching his third month of deferral.
- Provided the emergency is lifted by June 30th 2020, he will owe his landlord $4500. If it goes longer, as it well might, he goes even deeper into debt, albeit payable twelve months thereafter.
- If after the emergency is lifted, new monthly rent is not paid on time, the already cash-strapped landlord has little choice but to issue a 3-Day Notice on the new arrears.
- Little choice because, having been denied seeing proof of the tenant’s alleged COVID-19 financial impairment, the landlord can’t be sure if he’s being compassionate or conned. Trials require ‘discovery’ – the exchange of evidence – for good reason.
- Without data how can the landlord decide whether to allow the already sizable unpaid debt to multiply monthly? Is this tenant the type who will remain unemployed? Who, if given a break on this month’s rent, will stiff the landlord anyway on the three months, rent that is due in 12 months?
- Even if the landlord desires to extend credit, his cash, if any, is limited. Which deferred tenant does he bet on? Whose life does he improve; whose does he ignore? How does he avoid having tenants go to war? It’s an awful responsibility.
- Once that 3-Day Notice is issued, the landlord must immediately reject any rent, new or old, from the tenant. So that immediately stops the landlord’s family sustenance, his operating cash flow, and funds with which to potentially enter any negotiated settlement.
- Even assuming that the UD action is the first on the Court’s docket on September 1, 2020, and the eviction prevails, the tenant’s debt load would be a whopping $9,000.00; consisting of $4,500 ($1,500 each for July, August and September 2020) plus the April, May, and June 2020 arrears of $4,500 due in 2021 = for a minimum total of $9,000.
- The tenant has two options: start payments to make good on a minimum $9,000 debt – perhaps the largest debt of his life – or flee the apartment. Presented with the choice of paying $9,000 toward a $1,500 a month apartment, what would most tenants do? What could they afford to do, especially if they legitimately have been, or still are, out of work? Answer: They’d move out after delaying the day of reckoning for as long as the system will allow.
- Neither party is being malicious. They’re both desperate, but the Courts have given neither an option. The standoff is counterproductive and will subvert the time-honored, Constitutional right to a speedy trial. The UD adjudication backup will move at a worse-than-ever snail’s pace.
- For the defendant tenant there’d be no risk and little or no cost — only free housing to be had while his extortionist “pro bono” lawyers waste eons demanding an owner-underwritten jury trial. Or, as some on the City Council have proposed, LA itself would pay for the eviction defense lawyer. Either way, the case will be continued until the court system itself snaps. (It was already severely frayed before COVID-19 ever happened.)
- When and if the tenant loses the eviction, that’s when the tenant finally will leave – taking with him all of the landlord’s hope of eventual repayment.
- Vacancies will flood the market. Even if Costa Hawkins ‘vacancy decontrol’ is still the law, landlords who somehow managed to survive this far, will not have the money to invest in repairing, painting, even changing the toilet seat in their vacancies; costs which can easily exceed several month’s rental income. And it would take a month at minimum to complete the work and re-rent the vacant unit.
- If ‘vacancy control’ is enacted – as seemed more and more certain before COVID-19 struck – it would guarantee minus-zero return on every penny invested by the landlord. So why would he invest? (That’s why the value of New York City rent-controlled multi-family real estate plummeted since control was expanded early this year.)
- L.A.’s tens of thousands of tradespeople who have diligently performed all these maintenance services will be wanting for work. So will the stores selling the supplies.
- Landlords will be justifiably reluctant to rent to new tenant applicants who have bad credit and a history of skipping out on their landlords.
- New applicants will be reluctant to rent a messy, in-need-of-repair and perhaps COVID-infected apartment that could be worse than the one just vacated.
- Landlords may become concerned about liability if a new tenant, upon moving in, contracts COVID-19 and sues the landlord for inadequate disinfecting. The whole COVID-19 arena of tort law is just getting started.
- So – going back to that average tenant that lawmakers are 100% positive the landlord is hell-bent on evicting, (after all, all their voting tenants told them so) – his minimum debt is higher than what the landlord could recoup in small claims court.
- Even if the debt stays an all UD debt, $9000 won’t cover the cost of a lawyer pursuing blood-from-a-rock in a BASTA-demanded jury trial in the overwhelmed UD court system.
- Every landlord is a businessperson; he knows if there are no persons in his unit, he has no business. Every day empty is a day with lost pay. The only thing worse is housing people who you are certain are never going to pay. So why not just replace them with paying tenants? He can’t! Why? Because you can’t force a tenant to leave without first getting a Court Judgment. Hello, court-condoned Catch 22.
- Landlords who hope to recoup these last-ditch arrears – because after all those years of rewarding, rent controlled ownership, they’re now worried about their own next meal – they will have to wait until June or July 2021 to initiate action. By that point, with the non-paying tenant deeply rooted in the residence, the rent arrears will have mushroomed an additional $15,000, for a total of $24,000 owed to the landlord.
- With the market for multifamily housing having collapsed, the landlord has no choice but to go bankrupt.
- What happens to all the other tenants who continuously paid their rent during the COVID-19 crisis, but who now can’t get their toilets fixed?
- How many months will it take the banks to foreclose and put the properties and vacant units back on the market? Four? Six? More?
- Countless foreclosures might be gobbled up on the cheap by either voracious hedge funds and/or unscrupulous slumlords.
- Even the most opportunistic investors might not want such worthless, thankless, hopeless, investment “opportunities.” And do voting Angelinos want to live with the disruptive, destructive corruption they bring?
- Tax revenues and the vibrancy of SoCal life will evaporate as businesses and work-starved residents escape the state.
- Where are all the tenants who abandoned their COVID-rent-deferred apartments now supposed to move with their families?
- And no, as Chase bank told mortgage-holders when asked for mortgage forbearance: “Neither Governor Newsom or Mayor Garcetti can tell federally chartered banks to defer anything” – not that a deferred mortgage would help much under the circumstances.
- If for some reason you think the solution will be delaying all evictions even further, you missed the point: the deeper the tenants’ hole, the more assured their flight and the more assured and quicker the landlords’ – and City’s – demise. The length of the COVID crisis itself will have little to do with it. Our example here was a mere three months; pray it doesn’t go six.
- If, like L.A. City Councilman Mike Bonin, you think the City should swoop in and scoop up all the dirt-cheap multifamily buildings, I respectfully ask: using what money – Councilperson’s salaries? Or should we redirect the billions voters have granted the City over the years for Housing the Homeless – if there’s any remaining balance after the mismanagement which cost taxpayers an outrageous $500,000+ per unit, for a paltry few units. That’s right, half a million bucks for an apartment!
- Well, Mr. Bonin, buying up foreclosed multi-family buildings would be, for the most part, Housing the Already Housed.
- Plus, there’d be the added overhead of no one to reliably manage that housing – to collect rents, of course, but also to fix things, to buy and replace appliances, to arrange pest control, to settle internecine squabbles about everything from parking spots and dog poop to controlling weekend raves. Being a landlord is not as glamorous as it looks.
- It goes beyond that, as has been seen countless times throughout the past and in cities throughout the world: Publicly owned, government-managed housing projects seem destined to deteriorate into the turf of self-appointed alpha tenants and/or tagged as gang territory (“Hello, LAPD”).
- And if, like U.S. Congressperson AOC, you think all tenants have a right to free rent, and a landlord is obligated to accept an outright taking of his property by government, I invite you and her to read the United States Constitution and the oath she took to uphold it.
WE INTERRUPT FOR THIS NEWS FLASH
Remarkably, miraculously, as this is being written, a reasonable, potential win-win-win solution was proposed by the Honorable, Senator Lena Gonzalez (D, Long Beach). It is called SB 1410, the COVID-19 Emergency Rental Assistance Program.
- In short, under SB 1410, the state will pay consenting landlords 80% of missed rents for seven months, if a tenant demonstrates that are unable to pay due to COVID-19. (The state is smart enough to demand it, but LA City denied this critical data to landlords.)
[AOA’s Note: Unfortunately 80% of current rent does not pay all the bills. AOA is demanding 100% as we deliver 100% of our property to our renters and have a contract to do just that!]
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- The landlord agrees to forego the other 20%; he won’t collect late fees until October 31, 2020; and he won’t increase rent until December 31, 2020. (That’s moot here because the L.A. City Council has already extended the rent increase freeze for one year after the lifting of the local emergency – but only for the most consistently maligned, unfairly treated landlords in town – those with pre-1978 RSO units. But that’s a fight for another time.)
Thank you Senator Gonzalez, Chair of the CA State Senate Special Committee on Pandemic Emergency Response. We applaud you for your courage, your service and your smarts. You have the gratitude of our ailing, flailing cities, state, country and, most importantly, people.
Let us hope your fellow legislators, especially the local ones, know to grab a lifesaver when it hits them on the head. (That was local, not loco. Or was it?)
Thank you for caring. Stay safe.