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CARES Act and New Court Rules Impose Further Restrictions on Evictions

By Procopio Associate Sara G. Neva and Partner Robert J. Brown

Commercial and residential landlords should be aware that both a new federal law addressing the economic impact of COVID-19, as well as new emergency court rules, have imposed new restrictions on their operations. Two sections of the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law on March 27, 2020, are of particular importance.

Section 4024 of the CARES Act establishes a 120 day moratorium on eviction filings (beginning March 27, 2020 and lasting until July 25, 2020) for (A) properties subject to a federally backed mortgage loan or federally backed multifamily loans or (B) properties that participate in a “covered housing program” (as defined in the Violence Against Women Act). Loans falling into these categories include loans administered by, purchased or securitized by the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae).

Under these regulations, landlords may not initiate action to recover possession from tenants for nonpayment of rent or other fees, nor may landlords charge fees or penalties related to such non-payment of rent until after July 25, 2020. This restriction applies in addition to any state or local ordinances limiting evictions.

Landlords should also be aware of Section 4023 of the CARES Act, which provides protections and rights for landlords of multifamily properties comprised of five or more dwelling units that are subject to federally backed multifamily mortgage loans. If those landlords were current on loan payments as of February 1, 2020, then those landlords may request forbearance for a period of thirty (30) days with up to two (2) thirty (30) day extensions upon request. However, while in forbearance (i.e., the 12 month period after forbearance ends), a landlord may not initiate or issue an eviction of a tenant solely for non-payment of rent nor may a landlord charge any fees for late payment of rent.   Landlords should keep in mind that this may have the effect of substantially extending the period in which tenants may not be evicted, and potentially putting landlords in a worse position than they would have been without loan forbearance (if such could be avoided).

When considering whether to request forbearance under the CARES Act, California landlords should also be aware of new emergency California Rules of Court adopted April 6, 2020. The emergency rules provide that all California Superior Courts are precluded from issuing a summons on an unlawful detainer complaint unless the court finds, in its discretion and on the record, that the action is necessary to protect public health and safety. California Superior Courts also may not enter a default or a default judgment for restitution in an unlawful detainer action for a defendant’s failure to appear unless the action is necessary to protect public health and safety. These rules remain in effect until 90 days after Governor Gavin Newsom declares that the COVID-19 state of emergency is lifted (as opposed to when the stay at home order is lifted) or until amended or repealed by the California Judicial Council.

Rules and regulations for landlords at the federal and state level are likely to remain in flux while the COVID-19 pandemic continues. We’ll be providing readers updates on those developments on our dedicated COVID-19 website page, which includes a breakdown of eviction restrictions across San Diego County.

 

Sara G. Neva is an Associate on Procopio's Real Estate team. She counsels clients on real estate, finance and general business transactions. Her practice involves real estate property purchase and sale, commercial leases and easements, joint venture formation and other equity investments, financing, land use and entitlements. Sara is experienced with developers, builders, lenders, borrowers, commercial real estate investors, entrepreneurs, non-profit organizations and commercial landlords and tenants. She was named a 2019 Leaders in Law Rising Star by the San Diego Business Journal.

Robert J. Brown is a Partner on Procopio's Real Estate team. He counsels clients on corporate and securities, real estate and tax. Robert’s practice focuses on tax and transactional planning and consulting over a broad range of business matters. He is experienced in tax planning, financing and structuring for real estate, joint ventures, private placement, as well as negotiating land acquisitions and financing. He was named a 2019 West Coast Top Rated Lawyer by American Lawyer Magazine.