New Orders, Ordinances and Legislation Address Financial Impact of COVID-19 on Commercial and Residential Tenants and Landlords
Commercial and residential tenants and landlords seeking to address the financial impact of COVID-19 shelter in place orders and reopening plans have encountered a confusing maze of new laws at the city, county and State levels. Solving the problem has attracted widespread involvement — the Judicial Council issued an unlawful detainer moratorium, Governor Newsom issued and extended an order authorizing local government eviction moratoria, numerous bills are pending in the Legislature, and cities and counties have adopted different measures addressing various aspects of the issue, ranging from the timing of rent payments to the prohibition of late payment fees and halting evictions. Landlords, tenants and their counsel need to understand this developing patchwork of new laws in order to move forward in a rapidly evolving compliance arena.
Judicial Council Action
At the State level, the most sweeping action has been the Judicial Council’s April 6 adoption of an emergency rule restricting courts from issuing summons on unlawful detainer actions, as well as prohibiting entry of default judgments and setting trial dates for those actions. The rule broadly applies to all unlawful detainer cases, not just those related to COVID-19. While the rule does not forgive or reduce rents owed by commercial and residential tenants, it stops the ability of landlords to collect those unpaid rents until the end of the COVID-19 pandemic because the April 6 emergency rule remains in effect until 90 days after the Governor lifts his COVID-19 emergency order, notwithstanding any local measures allowing tenants additional time to pay back those rents. On June 10, the Judicial Council declined to end or adjust the emergency rule governing evictions.
The Governor also extended through July 28 his order issued at the beginning of the pandemic allowing local governments to halt evictions for commercial and residential tenants impacted by COVID-19. Many cities and counties have adopted their own eviction moratoria under the Governor’s order. On June 9, the City of San Francisco went so far as to permanently ban all evictions related to nonpayment of rent due to COVID-19. The City of Los Angeles recently amended its COVID-19 renter protection ordinance, which includes an eviction moratorium for nonpayment of rent during the Local Emergency Period and a tenant private right of action to institute legal proceedings against a landlord for violation of the ordinance. The City of Los Angeles also extended the period that renters have to pay back unpaid rent.
Another approach being taken by local governments is the use of emergency funds to assist distressed tenants. In April, the City of Los Angeles, where approximately 60% of the population are renters, created the COVID-19 Emergency Renters Relief Program to help residential tenants burdened by financial hardships due to COVID-19. This program was funded with approximately $3,000,000. Now, two months later, with the original allocation of funds spent and with tenants still struggling to pay rent, the City has proposed to inject the Program with an additional $100,000,000.
On May 27, Los Angeles City Council President Nury Martinez presented a motion to allocate $100,000,000 of the City’s funds received as part of the federal Coronavirus Aid, Relief and Economic Security (CARES) Act to the City’s COVID-19 Emergency Renters Relief Program. This boost to the Program is intended to help the City’s “most vulnerable communities” by providing a rent subsidy to applicable households in the City. Although the details have not been finalized, in order to qualify, tenants would have to prove that they earn 80% or less of the area’s median income (AMI) and an economic or health impact due to the coronavirus. A family of four would need to make $90,100 or less per year to be eligible, while an individual would need to make $63,100 or less per year to be eligible. Based on the requirements under the existing program, the rent subsidy would cover up to 50% of the monthly rent, with a maximum of $1,000 per month for up to three months through the expiration of the local declaration of emergency, with a maximum grant of $3,000 per household. Payments would be directly sent to an eligible household’s landlord. Based on data provided by the City’s Housing and Community Investment Department, with a fund of $100,000,000, a rental subsidy of $1,000 for 3 months would assist approximately 33,000 households.
While a program like the City of Los Angeles’ COVID-19 Emergency Renters Relief Program may indirectly help landlords also experiencing the financial toll of the pandemic, other jurisdictions have taken direct action to assist struggling rental property owners. For example, Los Angeles County, which passed its own Emergency Rental Assistance Program for tenants, also created a Rent Relief Program for landlords which provides rent payments to landlords on behalf of an income-eligible household. Los Angeles County’s Rent Relief Program is open to landlords meeting eligibility requirements with rental units located within the unincorporated areas of the First and Second Supervisorial Districts. The County’s Rent Relief Program would provide up to $1,000 toward monthly rent for up to 3 months for eligible landlords that (1) own 4 units or less, (2) occupy one of the rental units, (3) rely on the rent as their source of income and (4) have tenants that do not exceed preset limits of household size and annual income level prior to COVID-19.
A number of bills taking different approaches to the COVID-19 rental market crisis are pending in the State Legislature. SB-1410 (Caballero) would provide for the State to make direct payments to residential landlords covering 80% of tenant rent for up to three months, provided that landlords waive any additional rent and do not charge late fees to tenants. Another proposal by the Senate Democratic Caucus would allow tenants to pay rents to the State over a 10 year period without interest, with landlords receiving tax credits equal to the deferred rent payments. AB-2501 (Limón) would require a mortgage lender or servicer to provide a forbearance of up to one year to a landlord borrower for single family and multifamily rental properties, as long as the borrower provides “rent relief” to tenants in the property and does not evict tenants or apply late fees for nonpayment of rent during the forbearance period. SB-1431 (Glazer) would authorize landlords to apply for property tax reassessments when the landlord suffers losses in property value due to COVID-19. AB-828 (Ting, Gipson, Kalra) would place a moratorium on the filing of new unlawful detainer actions. SB-939 (Wiener, Gonzalez) is a COVID-19 commercial rent moratorium eviction bill that also contains a “walk-away” provision allowing commercial tenants to abrogate their leases without penalty if the landlord did not agree to a rent reduction. .
More To Come
State and local landlord-tenant measures relating to the COVID-19 pandemic will continue to move quickly, and landlords, tenants and their counsel will need to stay abreast of the rapid developments.