By Michelle E. Roberson for Santa Barbara Lawyer Magazine

In March 2020, the reality of the global pandemic suddenly hit California. With it came a series of executive orders, ordinances, and moratoriums. As it relates to residential rental property, Governor Newsom immediately issued an executive order allowing local governments to halt evictions due to nonpayment of rent related to COVID-19 if the tenant had paid pursuant to the lease agreement prior to March 27, 2020.

Shortly thereafter, local cities and counties passed their own local laws originally set to expire at the end of May 2020 or extended per Gov. Newsom’s future orders, of which there were several. Most of these local provisions provided a timeframe of twelve-months in which a tenant has to repay the deferred rental amount due.

Meanwhile, on April 6, 2020, the Judicial Council adopted an emergency court rule that prohibited the issuance of “…a summons on a complaint about unlawful detainer (“UD”) unless the court [found], in its discretion and on the record, that the action [was] necessary to protect public health and safety.” This rule was to remain in effect for an additional 90 days after the Governor declared the state of emergency related to the pandemic was lifted or as amended or repealed by the Judicial Council.

Claims ensued, arguing, among other things, that the Judicial Council lacked the power to adopt the emergency rule under the California Constitution as the Council is only to “adopt rules for court administration, practice, and procedure, and perform other functions prescribed by statute” under Cal. Const. art. VI, section 6(d). The claim was that the emergency rule went further by adopting a rule that was inconsistent with existing statutes, which is the legislature’s duty to write, and the court’s duty to uphold.

On August 13, 2020, the Judicial Council voted 19-1 to have the emergency rules stay in effect only through September 1, 2020, with Chief Justice Cantil-Sakauye stating that “[t]he judicial branch cannot usurp the responsibility of the other two branches on a long-term basis to deal with the myriad impacts of the pandemic.”

Shortly thereafter, Assembly Bill 3088 received legislative approval was signed by the Governor on August 31, 2020. Confusion arose as the feds also implemented and amended their own protections; many legal scholars have concluded would not supersede California’s laws as they are more protective.

AB3088 had several acts that came into play, which includes the Tenant, Homeowner, and Small Landlord Relief and Stabilization Act of 2020, offering protections to first-lien mortgage or deed of trust secured by certain small properties if occupied by a tenant. The Small Landlord and Homeowner Relief Act of 2020 requires mortgage servicers to provide certain notices if they deny forbearance during an effective time period as it relates to the COVID-19 emergency. And it enacted the COVID-19 Tenant Relief Act of 2020 (“Tenant Act”), which changes the former three days’ notice for payment of rent. AB3088 also has various statutory additions throughout, such as the small claims court’s jurisdictional authority, sealing of certain court files, and amendments to the Tenant Protection Act of 2019, known as AB1482. This article focuses on the Tenant Act as it relates to residential units.

COVID-19 Tenant Relief Act of 2020

The Tenant Act covers a period from March 1, 2020, and January 31, 2020 (covered period) in which the payment of rents was impacted due to COVID-19-related financial distress as defined. The Tenant Act comes with various new rules for the court, landlord, and tenant, including temporary court rules that end on October 5, 2020, and UD processes; various notices that differ depending on when unpaid rent was due, level of income, and finally; how to handle local rules that were in effect prior to the Tenant Act with regard to deferred rent repayment options.

Temporary UD Ban through October 5, 2020, and other Restrictions

The Tenant Act begins in Chapter 1179.01 of the civil code and starts by instructing the court to (1) not issue any summons on a UD if it seeks possession of a residential unit in whole or in part due to nonpayment of rent or other charges; (2) enter a default or default judgment based in whole or in part on nonpayment of rent or other charges; (3) require a UD plaintiff to file a cover sheet that indicates whether the action is seeking possession of real property and if it is based in whole or part on the default of payment of rent or other charges.

This new requirement was only in effect through October 5, 2020, to allow the courts adequate time to implement new procedures as it relates to the payment of rent, but allows the court to issue summons on a UD for other reasons.

Notwithstanding, a court may not find a tenant guilty of a UD prior to February 1, 2021, unless (1) the tenant was guilty of the UD prior to March 1, 2020; (2) the tenant failed to comply with the requirements of 1179.03 after receiving the notice described below; (3) the tenancy was terminated for an at-fault reason, no-fault just cause under 1946.2 (2) (b), other than an intent to demolish or substantially remodel, unless necessary to maintain compliance with certain laws governing the habitability of residential units; the owner entered into a contract or sale with a buyer that intends to occupy the property and certain requirements are satisfied. The landlord is also precluded from recovering any COVID-19 rental debt in connection with an award of damages unless the tenant failed to comply with the requirements under the Tenant Act.

Notices for Payment of Rent

All notices that demand payment of rents during the covered period require that the standard three-day notice would have covered now must be no shorter than 15 days, excluding Saturdays, Sundays, and other judicial holidays. The Notice must still state the amount of rent demanded and the date each amount became due. Additionally, the notice must now also advise that the tenant, in very specific language and font size, that cannot be evicted for failure to comply with the notice if the tenant delivers a signed declaration of COVID-19-related financial distress to the landlord on or before the notice expires. These notices differ depending on whether the payment came due during the protected time period or the transitionary time period.

Additionally, the statute requires that a landlord must provide any tenant, who as of September 1, 2020, has not paid one or more rental payments that came due during the protected time period, a special notice on or before September 30, 2020. This notice, again with the specific language required to be provided in 12-point font, advises tenants of the Tenant Act and their rights thereto. A landlord may not serve any 15-day notice to pay rent during the covered period without first providing this special notice, which could be provided concurrently if the 15-day notice is served on or before September 30, 2020. There appears to be some ambiguity in this provision as it relates to rents due during the Transition Time Period as there is no requirement to mail notice if they did not owe rent prior to September 1, 2020, but does require a notice be sent in advance prior to serving any 15-day notice. It is silent on whether it could be sent concurrently for the Transition Time Period rents due notice.

Finally, a blank declaration of COVID-19-related financial distress (“Declaration”) must be provided by the landlord to the tenant to allow them to sign and return it on or before the notice to pay rent or quit expires. Note that even if the tenant fails to comply with returning a Declaration, they may still be permitted to file one with the Court in response to a UD, in which case the court may dismiss the case if the failure to return the declaration was a result of a mistake, inadvertence, surprise, or excusable neglect.

Protected Time Period: Rents due March 1, 2020, through August 31, 2020.

A landlord must have provided a tenant that had rents due during the protected time period a copy of their rights by September 30, 2020.  Should a 15-day notice be subsequently provided for the non-payment of rent during the protected period with the appropriate supporting notices, and the tenant returns a signed Declaration, the tenant may not be found guilty of a UD. The landlord may collect the rent through small claims under the new Code of Civil Procedure section 116.223, which gives the smalls claims court jurisdiction in any action for recovery of COVID-19 rental debt under the Tenant Act, regardless of the amount demanded. These claims may not be brought prior to March 1, 2021, and is in effect through February 1, 2025.

Transition Time Period: Rents due September 1, 2020, through January 31, 2021

Tenants that have received a notice to pay or quit for rents due during the transition time period must also pay an amount of rent that is equal to at least 25% of each rental payment that came due or will come due during this period by January 31, 2021. Should they have made a rental payment of this amount by January 31, 2021, for rents due during the transition period and provided the necessary Declaration, then the tenant may not be evicted for nonpayment of rent during the covered period.

High-Income Tenants

There are special rules for high-income tenants that are defined to have “an annual household income of 130 percent of the median income,” that includes all occupants of the residential unit to determine the household size, but “shall not include a tenant with a household income of less than one hundred thousand dollars ($100,000).” Should the landlord have proof of income, they may require the high-income tenant that is served notice to submit, in addition to the declaration, documentation supporting the claim of the COVID-19-related financial distress.

Should the tenant fail to comply by submitting their declaration and proof of loss of income upon receipt of the special high-income notice, they will not have the protections of 1179.03(g).

One must proceed with caution, however. While a landlord is authorized to proceed with a UD and alleges that the tenant is high income, the tenant may still submit rebuttal evidence with regard to their income status. Should the court find that at the time notice was served, the landlord did not have proof of income establishing the tenant is a high-income tenant, the court shall award attorney’s fees to the prevailing party.

Local Regulations

As previously discussed, many of the local ordinances enacted early during the emergency period required a twelve-month repayment period for deferred rents prior to AB3088. Section 1179.05 allows for any local ordinance, resolution, regulation, or administrative action adopted by a local jurisdiction in response to the pandemic to protect tenants from eviction could keep their local regulation, so long as it does not extend past March 31, 2022.

The effect of this is that many landlords may not bring an action, as now allowed in small claims, to recoup the deferred rents until the expiration of the repayment period depending on whether the local law requires equal installments or a lump sum at the end of the period. Conclusion The various new laws are challenging to navigate for skilled attorneys, but a lay-person may have more trouble keeping track of the various notice requirements.

Many tenants are finding it challenging to understand the various notices they are now receiving and have opted to pay the back rent upon receipt of a 15-day notice instead of signing the Declaration for lack of understanding. While this was a good effort to stabilize housing for many impacted by the pandemic, the above is not the end, as the discussion is now starting on the next round of laws being drafted to take effect after January 31, 2021, and local government is continuing to amend or otherwise add new laws to their books.

There has also been federal funding provided to tenants locally for payment of rents, which assisted both tenants and landlords alike, but funding was limited. Individual landlords that continue to have high carrying costs and are unaware of the notice requirements continue to be at risk. These new laws leave them exposed to only being able to collect 1.25 months of rent for the period of March 2020 through January 31, 2021, and uncertainty of being able to recover the rent debt owed during the covered period for a myriad of reasons, such as bankruptcy, tenant vanishing, or simply not knowing how to navigate the claims process properly.

We shall stay tuned.

 

Michelle Roberson is the President/CEO of Sierra Property Group, Inc. that manages well-over 1,000 units between Carpinteria and Goleta. She serves on the Board for the Santa Barbara County Bar Association, Santa Barbara Rental Property Association, and City of Santa Barbara Rental Housing Mediation Board, the latter of which has her volunteering her time mediating landlord/tenant disputes.