As April rent came due, we armed you with what California landlords and property managers need to know to formulate their business strategy. (Click to see Part 1.) Payment of rent on April 1 turned out to be a mixed bag, with some properties experiencing a high level of payment or partial payment and some not. Payment of May rent is expected to be worse than April.
In this Part 2, we update you as the pandemic continues.
Moratorium on Evictions
- California's March 27 executive order from Governor Gavin Newsom remains in effect. It bans the enforcement of eviction orders for renters affected by COVID-19. The executive order applies only to residential tenants. Importantly, it does not exempt tenants from paying rent. It merely grants a 60-day extension for qualifying tenants to respond to unlawful detainer complaints and prevents enforcement of eviction orders through May 31, 2020.
- Governor Newsom has not enacted a similar statewide moratorium on evictions of commercial tenants, yet that remains as a potential additional measure.
- Previously, on March 16, 2020, Governor Newsom issued an executive order that authorized local governments to halt evictions for renters impacted by the pandemic. This resulted in cities and counties throughout the state implementing their own moratoria. with varying criteria for both residential and commercial tenants.
California Judicial Council
On April 6, 2020, the Judicial Council of California placed on hold nearly all evictions in the state.
- The council's vote, at an emergency meeting, effectively suspended all unlawful detainer actions until 90 days after California's COVID-19 state of emergency ends.
- The vote goes much further than Gov. Gavin Newsom's eviction moratorium. The rules approved by the council do the following:
- Suspend the issuance of a summons in an unlawful detainer action, unless the court finds there is a health and safety reason. This means new unlawful detainer cases cannot be filed in most circumstances.
- Prevent entry of default and/or default judgments in unlawful detainer cases, unless the court finds there is a health and safety reason and the defendant has not appeared.
- Mandate that unlawful detainer trials be set no earlier than 60 days after a request for trial, again unless there is a health and safety reason. All trials on calendar as of April 1 will be continued for at least 60 days.
The rules are applicable to all courts and to all eviction cases, whether they are based on a tenant's missed rent payment or are brought for another reason.
Los Angeles County
- On April 14, 2020, the Los Angeles County Board of Supervisors issued an executive order, which expands an existing temporary rent freeze and moratorium on evictions in parts of Los Angeles County in response to the COVID-19 health emergency.
- The new order expands the temporary eviction moratorium to cover all residential and commercial tenants in Los Angeles County, except those who live or conduct business in cities that have already enacted their own eviction moratoria.
- The moratorium includes a ban on evictions for:
- Nonpayment of rent, if the tenant can show they have been financially impacted by the health emergency;
- No-fault reasons, such as owner/relative move-in or Ellis Act evictions; and
- Violations due to additional occupants, pets, or nuisance related to COVID-19.
- The expanded temporary rent freeze now prohibits owners of mobile home parks in unincorporated areas of Los Angeles County from increasing the space rent for their tenants during the moratorium period.
- This executive order is retroactive to March 4 and extends to May 31, 2020.
Los Angeles City
- On March 27, 2020, the Los Angeles City Council unanimously approved a far-reaching urgency ordinance (Ordinance No. 186585) that prohibits landowners from evicting many residential and commercial tenants for the non-payment of rent during the City's declared COVID-19 Local Emergency Period. The "Local Emergency Period" is defined in the ordinance as extending from March 4, 2020 to the end of the local emergency as identified by the mayor.
- On April 10, 2020, the mayor extended his "Safer At Home" Emergency Order until May 15, 2020, and it may be extended again prior to May 15.
- The city ordinance codifies many of the tenant protections already provided by previous public orders issued by Mayor Garcetti since the March 4, 2020 declaration of a local emergency, and Mayor Garcetti has since rescinded those previous public orders to avoid conflict with the ordinance.
- In order to qualify for this eviction protection, a tenant must be unable to pay rent because of circumstances related to the COVID-19 pandemic, including loss of income due to a COVID-19-related workplace closure, child care expenditures due to school closures, healthcare expenses related to being ill with COVID-19 or caring for a member of the tenant's household or family who is ill with COVID-19, or reasonable expenditures that stem from government-ordered emergency measures.
- Landlords must deliver written notice of the protections provided by the ordinance to residential tenants no later than April 30, 2020.
- Owners may not charge interest or late fees on unpaid rent during the Local Emergency Period.
- The restrictions are retroactive to March 4, 2020 and apply to nonpayment eviction notices, no-fault eviction notices, and unlawful detainer actions issued or filed on or after the commencement of the Local Emergency Period.
- The ordinance provides residential tenants with up to 12 months following the expiration of the Local Emergency Period to pay past due rent.
- Owners of residential real property are prohibited from removing any occupied unit from the rental market under the Ellis Act for a period of sixty (60) days following the expiration of the local emergency period.
- The ordinance expressly contemplates that the City's Housing and Community Investment Department (HCID) will promulgate options to help landlords and residential tenants mutually agree upon a payment plan within ninety (90) days of the first missed rent payment or expiration of the local emergency period.
- Commercial tenants are provided 3 months following the expiration of the Local Emergency Period to pay past due rent.
- The restrictions do not apply to commercial property leased by a tenant that is a "multi-national company, a publicly traded company, or a company that employs more than 500 employees." The city ordinance does not address whether commercial property leased to subsidiaries of such large tenants would also be excluded.
Tenant Access to Capital
- CARES Act. Funds made available to small businesses by Congress through its CARES Act forgivable loan program are now spoken for. All eyes are on Congress for the next round of stimulus funds.
Landlords should be preparing for the inevitable tenant bankruptcy filings. Resolving the issue of possession with a tenant before it files a bankruptcy petition can give a landlord a significant advantage. Many landlords will have questions about applying cash security deposits and drawing letters of credit. Consult a real estate bankruptcy lawyer for questions about these matters.
Mortgage Loan Relief
On March 25, Governor Newsom struck a deal with several major banks in the state to suspend residential mortgage payments for 90 days for those impacted by the coronavirus crisis. Four of the five largest banks in the state—Citigroup, JPMorgan Chase, U.S. Bancorp, and Wells Fargo—agreed to provide a 3-month grace period for mortgage payments. This leaves it to California homeowners to proactively seek mortgage relief themselves. Lenders offer a variety of packages. As of April 4, nearly 400 state-chartered banks and credit unions have agreed to provide relief.
As of now, relief is available only for residential mortgages, although the state is urging financial institutions to work with business owners to curb the effects of a looming economic recession.
For guidance from the District of Columbia, Maryland, and Virginia, click here.