The COVID-19 pandemic reared its ugly head in March of 2020. Very shortly thereafter, on April 6, 2020, the Judicial Council of California, which governs all the courts in California, responded by stopping all unlawful detainer actions except when the health and safety of other renters at a property are at issue.

AB 3088, which went into effect on September 1, 2020, allowed evictions to go forward, both residential and commercial, but with strict guidelines. It decreed that any rent not paid prior to September 1, 2020 due to COVID-19-related financial distress could not be used as grounds for evicting a tenant for non-payment of rent. It further stipulated that a tenant who paid a minimum of 25% of the back rent owed between September 1, 2020 and January 31, 2021, could not be evicted for non-payment of rent if the default was related to COVID-19.

AB 3088 expired on February 1, 2021. In its place, the Legislature passed and Governor Newsom signed Senate Bill 91, a new law that extends AB 3088, with similar prohibitions on eviction for COVID-19-related non-payment of rent and similar forms and declarations, but extended deadlines. The landlord is still required to give the tenant at least 15-days’ notice for non-payment of rent. In addition, the landlord must give the tenant a blank Declaration of Hardship Due to COVID-19-Related Financial Distress, which must be returned to the landlord within 15 days (not including weekends or holidays). 

Relevant dates have changed Under AB 3088, tenants had until January 31, 2021 to pay at least 25% of the total monthly rent they had missed since September 1, 2020. Under SB 91, tenants now have until June 30, 2021 to pay at least this minimum amount. It should be stressed that the form entitled “15-Day Notice to Pay Rent or Quit” does not, as the title implies, give the landlord the right to evict the tenant for failure to meet this requirement. It simply puts the tenant on notice that once the moratorium is lifted, the owner is lawfully entitled to proceed with an unlawful detainer action against the tenant, as well as take legal action to attempt to collect the rent owed.

It bears repeating that the owner may not take or threaten to take any of the following actions because the tenant is not paying rent:

  • reduce housing services;
  • lock the tenant out;
  • empty the unit of the tenant’s possessions, or
  • threaten to contact immigration authorities. 

Doing so can trigger stiff state and federal penalties. Other just-cause and no-fault evictions SB 91 only regulates evictions for nonpayment of rent due to COVID-19 financial hardship. So in theory, all other just causes for eviction —breach of contract, nuisance, criminal activity on the premises, subletting, damage to the unit, failure to return the Declaration of Hardship, and presumably, even non-payment of rent not due to COVID-19 hardship—remain in force, allowing the landlord to proceed with eviction without waiting for lifting of the moratorium.

The same is true for a no-fault eviction based on any of the following grounds:

  • the owner or a direct relative intends to move into the unit
  • the unit requires substantial renovation due to habitability issues (cosmetic renovation does not qualify);
  • the unit is being sold, and the new owner intends to move in
  • the landlord intends to withdraw from the rental
  • business by invoking the Ellis Act.

Other Changes Under SB 91

  • Security deposit:  Landlords may not use the tenant’s security deposit to cover back rent unless approved in writing by tenant.
  • Small claims court:  The date when landlords can pursue unpaid rent in small claims court has been moved from March 1, 2021 to August 1, 2021.
  • Small claims court monetary limits lifted: There is no longer a limit to the dollar amount of back rent the landlord can seek in small claims court. Landlords are also no longer limited to using small claims court only twice in a calendar year to recover rent owed. 
  • Late fees prohibited:  Late fees cannot be tacked on to back rent owed.
  • COVID-19 debt is not allowed as a factor in tenant screening:  Housing providers and tenant screening companies are now prohibited from using “alleged” COVID-19 rental debt as a negative factor for the purpose of evaluating a prospective housing application or as the basis for refusing to rent a dwelling unit to an otherwise-qualified prospective tenant.

State Rental Assistance Program

SB 91 establishes a rental subsidy program, utilizing funds from the Federal stimulus bill passed by Congress last December. Of the $25 billion allocated, up to $2.61 billion goes to the State of California, of which $1.5 billion will be set aside for the state’s Rental Assistance Program.

Eligibility for the Rental Assistance Program is based on Federal eligibility rules. Funding will first be made available to those with household income of less than 50% of the Area Median Income (AMI) for the county where the rental unit is located, second to communities disproportionately impacted by COVID-19, and SB 91 only regulates evictions for nonpayment of rent due to COVID-19 financial hardship and third to those with a household income of less than 80% of AMI. The funds go directly to the landlord, and can be used for back or prospective (future) rent. 

For purposes of this program, “rental debt” includes all rent, fees, interest or any other financial obligations owed pursuant to a lease; it does not include amounts owed for damages or tort claims.

For back rent owed for the period of April 1, 2020 through March 31, 2021, landlords who agree to accept funds from the Rental Assistance Program must agree to accept only 80% of the back rent owed and to not pursue the remaining 20% in an unlawful detainer action or evict the tenant for any other curable breach of the lease. The 20% forfeited becomes a “write-off” for the landlord.

Alternatively, If the landlord decides not to accept the rental assistance funds covering 80% of rental debt owed between April 1, 2020 and March 31, 2021, the renter may still apply for rental assistance to cover 25% of rent owed between September 1, 2020 and March 31, 2021, and may also seek rental assistance to cover 25% of rental debt owed from April 1, 2021 to June 30, 2021 to avoid eviction. 

Under SB 91, if a renter provides a landlord with a signed Declaration of COVID-19-Related Financial Distress and pays at least 25% of rent due by June 30, 2021, the landlord may not seek an unlawful detainer (eviction) for the balance of rent then due. The 75% balance is then converted into consumer debt that may be pursued in small claims court or Superior Court.

Full cooperation of the renter is essential The California Department of Housing and Community

Development, responsible for disbursing the rental assistance funds, allows landlords to apply directly on behalf of their tenants. The application process requires household and financial information that can be gleaned only when landlord and renter work together.

While it would seem that a renter in default would welcome assistance and thus have every incentive to cooperate, some may not for a variety of reasons. The process of applying, documentation requirements, and timing of applications has yet to be determined, but it is expected that protocols will be in place sometime in March. 

To learn more, visit http://housingiskey.com or call (833) 422-4255.

 

Should a Landlord Accept the 80%?

The decision as to whether to accept the 80% back rent and forfeit the remaining unpaid 20% is one only the landlord can make. However, here’s one practical way to look at it: Collecting what has become thousands of dollars of rental debt will be challenging. Renters who ultimately vacate their rental units due to mounting rental debt, or that have timely completed and returned Declarations of COVID-19-Related Financial Distress covering March 1, 2020 through August

31, 2020 (“the protected period”), and/or who pay at least 25% of rental debt owed for the period of September 1, 2020 through June 30, 2021 along with returning the Declaration, are protected from eviction, and any rental debt becomes consumer debt (as discussed above), which can be problematic to collect later, particularly in full.

In addition, the courts can penalize landlords who fail to help tenants obtain rental relief. Under SB 91, the courts are empowered to reduce the damages awarded if the court determines that a landlord refused to obtain rental assistance from the State Rental Assistance Program in instances where the tenant has met the eligibility requirements and where funding was available.

 

[Editor’s Note:  The required SB 91 forms may be found at www.aoausa.com.]  

 

Gideon Kramer is the Editor of the SPOSFI News. This summary is not meant to be comprehensive. SB 91 is new and fluid. Owners should seek advice from an attorney well versed in this area of the law when making decisions about how to proceed with an eviction or attempting to collect rental debt owed, or with respect to any other matter impacting their lease or relationship with their renters. Owners are encouraged to cooperate with their renters to seek funding from the state/local government.

Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) NewsFor more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org or call (415) 647-2419.