What California Landlords and Property Managers Need to Know as April Rent Comes Due

6 min

April rents are now due, and the big question on everyone's mind is whether, and how many, tenants will pay their rent. Here is what commercial and residential landlords and property managers in California need to know to formulate their business strategy.

Moratorium on Evictions

  • On March 27, by Executive Order, Governor Gavin Newsom banned the enforcement of eviction orders for renters affected by COVID-19. The Order will apply through May 31, 2020. The Order provides immediate relief to tenants for whom rent is due on April 1. It applies only to residences or dwelling units.
  • The Order prohibits landlords from evicting tenants for nonpayment of rent and prohibits enforcement of evictions by law enforcement or courts. It also requires tenants to declare in writing, no more than seven days after the rent comes due, that the tenant cannot pay all or part of their rent because of COVID-19.
  • The tenant would be required to retain documentation but would not be required to submit it to the landlord in advance. Moreover, the tenant would remain obligated to pay the full rent in a timely manner and could still face eviction after the enforcement moratorium is lifted if deferred rent is not paid in a timely manner.
  • The Governor's Executive Order builds on his previous executive order dated March 23, 2020, authorizing local governments to halt evictions for renters impacted by the pandemic.
  • Several cities, including Los Angeles, San Francisco, and San Diego, have put their own moratoriums in place for both residential and commercial tenants.
Los Angeles
  • On March 31, 2020 Los Angeles Mayor Eric Garcetti signed a City Council ordinance that is retroactive to March 4, 2020. The ordinance prohibits landlords from evicting residential tenants for non-payment if the tenant is unable to pay rent because of COVID-19. While tenants are still responsible for ultimately paying the past-due rent, they will have up to 12 months following the expiration of the emergency period to pay past-due rent. Landlords are prohibited from charging interest or a late fee.
  • The ordinance also prohibits commercial evictions if the reason for the eviction is non-payment of rent and the reason for the non-payment is related to COVID-19. Commercial tenants will need to pay the past-due rent within 3 months following the expiration of the emergency period. Commercial landlords are also prohibited from charging interest or a late fee for this deferred rent.
  • 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 City Ordinance.
San Francisco
  • On March 23, 2020, San Francisco Mayor London M. Breed ordered that no landlord may attempt to recover possession of a residential unit unless it is being done because of violence, threats of violence, or health and safety issues. This moratorium will last for 60 days after the Mayor's Order expires. The Order is set to expire on April 22, 2020, which means the moratorium will last until June 21, 2020, unless the Mayor extends the expiration date further. The March 23 Order replaces a prior mayoral order dated March 13 to establish a new and expanded procedure for when a tenant has missed a rent payment because of the financial impacts of the COVID-19 crisis.
  • On March 17, 2020, the mayor issued a moratorium on commercial evictions for small and medium-sized businesses related to financial impacts caused by COVID-19. The moratorium will prevent any small to medium-sized business from being evicted because of a loss of income related to lost revenue or other economic impacts caused by the COVID-19 pandemic.
    • This commercial eviction moratorium will apply to businesses with a license to operate in San Francisco that have less than $25 million in annual gross receipts. This follows a moratorium on residential evictions that Mayor Breed announced on March 13.
    • The small and medium-sized business eviction moratorium will be in effect for 30 days, and can be extended by the mayor for another 30 days through an executive order. If the local emergency declared by the mayor is rescinded at any point, the moratorium will cease to be in effect.

General Considerations

Tenant Access to Capital
  • CARES Act. As a result of Congress's passage of the CARES Act and other national and state stimuli, some tenants, large and small, will have access to funds. A portion of the funds can be used to pay rent without jeopardizing their ability to obtain loan forgiveness. We recommend that landlords and property managers distribute information regarding national and local programs to tenants.
  • Small Business Administration Loans. The CARES Act significantly relaxed the normal conditions and procedures for small businesses (under 500 employees) to obtain loans from banks and non-bank lenders that are authorized to make Small Business Administration (SBA) loans. More information can be found here.
  • California Economic Relief. On April 2, 2020, Governor Newsom unveiled a series of new resources to aid small businesses and help California workers who have lost work because of COVID-19.
    • Beginning April 3, 2020, California small businesses impacted by the COVID-19 crisis can apply for a loan from the federal government for up to $10 million. Importantly, the program is first come, first served, and the governor encourages all eligible California small businesses to contact their lender to learn more.
    • On April 2, 2020, the governor also announced that the state is allocating $50 million to the California Infrastructure and Economic Development Bank for loan guarantees to small businesses to help eliminate barriers to capital for individuals who do not qualify for federal funds, including low-wealth and undocumented immigrant communities. The state is also allowing small businesses to defer payment of sales and use taxes of up to $50,000, for up to 12 months.
    • The same day, Governor Newsom also announced $17.8 million in new state initiatives to support California workers impacted by COVID-19. The allocation will come from Workforce Innovation and Opportunity Act funds, with $7.8 million going to the Los Angeles region and $10 million made available statewide.
    • On March 30, Governor Newsom signed an executive order to help small businesses, granting a 90-day extension for small businesses to pay sales taxes.
  • Mortgage Loan Relief. On March 26, Governor Newsom struck a deal with several major banks in the state to suspend 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—have agreed to provide a three-month grace period for mortgage payments, and nearly 200 state-chartered banks and credit unions have agreed to do the same.

For guidance from the District of Columbia, Maryland, and Virginia, click here.

For guidance from New York, click here.