Commercial and Residential Landlords Need to be Familiar with the California Relief Act
By Procopio Associate Pooja Pujara
Property owners and tenants find themselves in a changed legal landscape in 2021, as we recently reported. One significant change to California law that went into effect immediately after passage last year under an emergency statute was the Tenant, Homeowner, and Small Landlord Relief and Stabilization Act of 2020 (AB 3088). Part of its purpose was to provide continued protection to tenants for inability to make rent payments, especially as most local ordinances prohibiting rent non-payment evictions in California were set to expire on September 30, 2020.
AB 3088 made multiple changes to existing law, including adding in the COVID-19 Tenant Relief Act of 2020 (“CA Relief Act”) to the California Civil Code. Below we provide details on the CA Relief Act, also known as the “Tenant Act.” Note the CA Relief Act and the Centers for Disease Control and Prevention (CDC) Order defined below affects only residential tenants and landlords. Please contact us if you would like more information on how local ordinances may affect commercial tenants and landlords.
The CA Relief Act allows California tenants more time to repay rent accrued but not paid between March 1, 2020 and January 31, 2021 (the “Pandemic Period”), and protects tenants from eviction due to nonpayment of rent, subject to the requirements listed below.
To assist you, we’re providing a flow chart displaying tenant protections under the CA Relief Act and CDC Order.
Protected Time Period
The Act defines the period. Landlords may not begin eviction proceedings against a tenant before March 1, 2021 for nonpayment of rent accrued between March 1, 2020 and August 31, 2020 (the “Protected Time Period”), so long as the tenant returns a hardship declaration to the landlord within 15 days of receipt. If the tenant does not return the hardship declaration within 15 days of receipt, the landlord may begin eviction proceedings as early as October 1, 2020 for nonpayment of rent. For eviction restrictions for nonpayment of rent accrued after August 31, 2020, see “Transition Time Period” below.
Transition Time Period
The Act defines the period between September 1, 2020 and January 31, 2021 as the “Transition Time Period.” Landlords may not begin eviction proceedings against a tenant before February 1, 2021, for nonpayment of rent accrued during the transition time period, so long as the tenant (1) returns a hardship declaration to the landlord within 15 days of receipt, and (2) pays a minimum of 25% of outstanding rent monthly (or 25% of aggregate rent during the transition period) before January 31, 2021.
The CA Relief Act provides tenants a “backstop” to further gain relief by filing a petition with the court if they have good reason for not returning declaration in fifteen (15) days.
We’re providing a chart of important dates under the CA Relief Act and the CDC Order.
The protections of the CA Relief Act apply to all California residential tenants with unpaid rent during the Pandemic Period and do not supplant any greater protections enjoyed by tenants.
California tenants are also subject to the protections under the CDC’s Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19 (“CDC Order”), any California state laws or regulations, and any provisions in local ordinances that do not conflict with the CA Relief Act or that do provide stricter tenant protections. Any tenant not covered by the CA Relief Act would be protected under the CDC Order.
According to Governor Gavin Newsom, the CA Relief Act offers more protections, and therefore the CDC Order does not apply to California residents. While this presumption has its merits, it is the courts that will ultimately decide which rule offers more protection, and which rule has precedence. The CDC, in its clarification to the CDC Order, confirms that if there is a question about which rule applies, the courts have the authority to analyze which rule would provide the most protections and subsequently determine whether or not the CA Relief Act, the CDC Order, or a local ordinance will apply.
Most tenant advocacy groups are encouraging tenants and landlords to follow the declaration requirements under both Acts.
The CA Relief Act preempts any conflicting local ordinances, but local ordinances may supplement the CA Relief Act. Specifically, local ordinances cannot require repayment of rent before March 1, 2021 or after March 1, 2022, if the rent was accrued during the Pandemic Period. Under no circumstances can local eviction moratoria require repayment periods set to expire before March 1, 2021 or after March 1, 2022, regardless of when the local ordinance expires.
LANDLORD NOTICE REQUIREMENTS
Residential landlords in California are subject to stricter notice requirements under the CA Relief Act, including providing a tenant notice, form of declaration, and additional forms for any tenant with an annual household income of 130% of median, or more than $100,000 (“High-Income Tenant”). Each document is individually a “Landlord Notice Document,” and together “Landlord Notice Documents.” The landlord must provide translated versions of the Landlord Notice Documents if the tenant’s lease or agreement was written or negotiated in a language other than English.
The landlord must provide a separate notice for outstanding rent under the Protected Time Period and the Transition Time Period. These notices must include the tenant’s rights under the CA Relief Act and the outstanding amounts owed each month under the lease or agreement.
Form of Declaration
The language in the CA Relief Act requires that landlords provide a form of declaration for their tenants to sign, certifying that they are eligible for protections under the CA Relief Act. Tenants are eligible for protections under the CA Relief Act if the tenant certifies under penalty of perjury in the CA Declaration that a tenant has faced:
- Loss of income caused by the COVID-19 pandemic;
- Increased out-of-pocket expenses directly related to performing essential work during the COVID-19 pandemic;
- Increased expenses directly related to health impacts of the COVID-19 pandemic;
- Childcare responsibilities or responsibilities to care for an elderly, disabled, or sick family member directly related to the COVID-19 pandemic that limits Tenant’s ability to earn income;
- Increased costs for childcare or attending to an elderly, disabled, or sick family member directly related to the COVID-19 pandemic; or
- Other circumstances related to the COVID-19 pandemic that have reduced the tenant’s income or increased the tenant’s expenses, and certifies that any public assistance, including unemployment insurance, pandemic unemployment assistance, state disability insurance (SDI), or paid family leave received since the start of the COVID-19 pandemic does not fully make up for loss of income or increased expenses.
Tenants who do not qualify for the CA Relief Act may still be protected under the CDC Order.
High-Income Tenant Notice
High-income tenants may be required to provide additional documentation to prove that the tenant has suffered COVID-19 related financial distress. This proof can be in any objectively verifiable documentation such as proof of income, letter from employer, or unemployment insurance record. Landlords must provide any high-income tenants with a notice if the landlord already has some kind of proof of income that the tenant is a high-income tenant, but the landlord cannot demand proof of income for the purposes of determining whether the tenant is a high-income tenant.
We’ve provided a sample high-income tenant form and the Housing and Community Development State Income Limits for 2020.
EXCEPTIONS TO MORATORIUM
The CA Relief Act does not protect tenants for nonpayment of rent that accrued before the Pandemic Period, and landlords can begin eviction proceedings against these tenants on October 1, 2020. The CA Relief Act does not forgive rent, nor does it prohibit Landlords from collecting any fines or penalties based on late payment of rent, but tenants are not required to repay back rent until after March 21, 2021.
The California Legislature expanded the jurisdiction of Small Claims Court to allow Landlords to recover unpaid rent amounts by waiving the Small Claims Court’s threshold limits. Landlords can now recover the full amount of unpaid rent accrued during the Pandemic Period. Landlords may begin proceedings in Small Claims Court March 1, 2021, until the expiration of the CA Relief Act on February 1, 2025.
If a landlord violates the Act despite timely receipt of a tenant’s hardship declaration, AB 3088 would cause the landlord to be liable to the tenant for damages in an amount between $1,000 and $2,500 per occurrence, as determined by the trier of fact. This provision of AB 3088 shall remain in effect until February 1, 2021.
We’ve prepared a “cheat sheet” summarizing the applicability of the CA Relief Act and the CDC Order.
One could argue that the laws related to commercial and residential landlords and tenants in California has never been more complicated. That is particularly true in the case of AB 3088, in particular the CA Relief Act. Real estate owners are advised to consult with trusted legal advisors to ensure compliance with critical new statutes and regulations. Procopio’s Real Estate attorneys continue to monitor legislative and regulatory action as well as significant court cases to best serve their clients. Feel free to contact us to learn more about these and other developments in California real estate law.
Pooja Pujara is an Associate in Procopio’s Real Estate practice, assisting clients on a wide variety of real estate transactions, including financing, leasing, and real estate purchases and sales. Her practice involves assisting clients with the development of commercial, residential, and mixed-use real estate projects and related business matters, including the purchase and sale of real property, reviewing leases and easements, and obtaining commercial financing. As a law student she assisted nonprofits with the purchase and sale of real property, obtaining temporary and permanent financing, entity formation, and corporate governance.