California’s COVID-19 Tenant Relief Act (AB 3088) Impact on Landlords
On August 31, 2020, California Governor Gavin Newsom signed AB 3088 into law, providing state-wide protections for tenants and landlords in the face of the ongoing coronavirus pandemic. The safeguards extended to tenants worrying about evictions and to landlords concerned about foreclosures.
Signed on January 29th, 2021, Senate Bill 91 (SB 91) extended AB3088 until June 30th, 2021, enacted new protections for renters, and established a rental assistance program. SB 91 also extended the Just Cause Eviction Protections provided by California’s AB 1482 Tenant Protection Act to all single-family homes and new constructions until June 30th, 2021.
Moratorium Eviction Extended
AB 3088 limits a landlord’s ability to evict a tenant for non-payment of rent. To make use of this protection, the first eviction moratorium extension stipulated that tenants must submit a declaration signed under oath of COVID-19-related financial hardship due to the financial burden experienced between March 4 – August 31. A valid declaration prevented evictions from occurring before February 1, 2021.
For hardship stemming from the coronavirus pandemic between September 1, 2020 – January 31, 2021, tenants were expected to pay 25% of expected rent to avoid eviction by January 31, 2021.
Second Moratorium Eviction Extension
On or before February 28th, 2021, SB 91 requires that this informational notice be sent to all tenants who have one or more outstanding rental payments due on or after March 1st, 2020. Not sending this notice in time may compromise a landlord's ability to evict a tenant who doesn't comply with the COVID-19 Tenant Relief Act (CTRA).
If the rental/lease agreement was negotiated in a language other than English, then the CTRA notice must also be provided in that language. Translations of the notice are available here.
Do Tenants Pay Rent?
The expectation of rent has not been eliminated. Instead, unpaid rent cannot be the reason for eviction for tenants that have experienced COVID-19-related financial hardship and submitted a valid declaration. Tenants will still be responsible for paying back rent to landlords, who can begin to recover their debts through a civil small claims lawsuit on March 1, 2021.
The jurisdiction of small claims courts will be temporarily expanded to allow landlords to recover unpaid rents.
Unpaid rent isn't waived under AB 3088. Instead, it's converted into consumer debt collected in small claims court as early as March 1, 2021. If a tenant cannot meet the 25% rent minimum, AB 3088 would only provide eviction protection until February 1, 2021. SB91 extended protections until June 30, 2021. A lump-sum payment can be made until June 30, 2021.
Suppose a landlord attempts to use extrajudicial self-help, such as shutting off utilities, threats, or coercion, to generate an eviction. In that case, the landlord may face penalties as high as $1,000 to $2,500.
California's COVID-19 Tenant Relief Act Tenant Protections Provided by AB 3088 and SB91
The following legal and financial protections will be extended to tenants :
- The notice period for nonpayment of rent will increase from three days to 15 court days so that tenants have more time to respond to the landlord's notice to pay rent or leave.
- Hardship declaration forms must be provided with any eviction notices for a failure to pay rent.
- The hardship declaration forms provided by landlords must be provided in the language in which the rental agreement was negotiated.
- Landlords are also required to provide tenants with a disclosure explaining their rights under AB 3088.
- Expands the "just cause" protections described in AB 1482 to all tenancies, including tenancies less than one year, affordable housing, new construction, and single-family homes.
- Local ordinances that were in effect as of August 19, 2020, will remain in effect until their expiration, while future ordinances cannot undermine AB 3088.
- Landlords cannot charge late fees.
- Landlords cannot increase the charges of any fees agreed to in the lease, nor can they add new fees.
- Debt collection cannot start until July, although some cases filed before October 2020 may continue.
- Landlords who want to collect unpaid rent using court action have to first apply for or look into rental assistance payments. Landlords cannot collect any unpaid rent using court action if the landlords turned down rental assistance.
- Landlords who choose to reject the up to 80% rental assistance payment and forgive remaining past due rent will only get 25% of past-due rent.
- Lawyer fees paid to recover past due rent is capped (consistent with most court rules).
- Credit reports of rental debt due to the pandemic cannot be used as justification to deny tenants future housing by landlords of screening services.
- Landlords can only sell or assign pandemic rental debt after June 31st, 2021.
- Landlords can't use a security deposit toward unpaid rent unless the tenant grants permission.
- Landlords can only apply rent payment toward the coming month's rent unless the tenant permits in writing to do otherwise.
AB 3088's protections are extended to most tenants if they sign a declaration that they've been financially impacted due to the pandemic. What constitutes "COVID-19-related financial distress" includes:
- Increased expenses due to the health impacts of the COVID-19 pandemic
- Increased childcare or eldercare responsibilities directly related to the COVID-19 pandemic.
- Loss of Income caused by the COVID-19 pandemic.
- Higher-income tenants (those whose household income is over $100,000 or with over 130% of median household income) must provide documented proof of financial loss related to COVID-19.
California's COVID-19 Tenant Relief Act Eviction Notices
When a landlord delivers an eviction notice for failure to pay rent, a financial distress form must be provided. The tenant has 15 days to sign and return the financial distress form. The economic distress form does not cover months to come, so that the process may be repeated on a month-to-month basis. The declaration is signed under "penalty of perjury," so if a tenant provides knowingly false information, they can be charged with perjury.
Lawful eviction that has nothing to do with unpaid rent caused by the coronavirus pandemic can move forward as early as September 2, 2020. That means landlords will be able to pursue:
- Eviction against nonresidential tenants
- Evictions for lease defaults stemming from reasons other than nonpayment of rent.
- Evictions for missed rent payments before March 2020
- Evictions for nonpayment of rent unrelated to the coronavirus pandemic.
- Evictions against tenants willfully damaging property.
- Evictions against tenants engaged in criminal activity.
- Evictions against tenants who violate the lease or rental agreement in other ways.
Evictions for unpaid rent will resume on October 5, 2020, for tenants that do not submit a financial distress declaration.
Evictions for reasons other than nonpayment of rent cannot be performed as retaliation against nonpayment of rent due to the coronavirus pandemic.
Individual cities may have their own eviction moratoriums and tenant and landlord protections that may be more robust than that provided by AB 3088. For this reason, it's critical to consult both the stipulations outlined by AB 3088 and the stipulations, if any, of one's local jurisdiction.
If a locality passed a new moratorium after August 19, 2020, then it cannot take effect until February 1, 2021. Ordinances that expire before February 1, 2021, cannot be extended until February 1, 2021. Finally, if a local jurisdiction establishes its repayment period, it must begin on or before March 1, 2021.
Given the complicated nature of the law, it's advised that tenants contact an attorney if a landlord provides notice of eviction. There are many free legal aid foundations to reach out to. The Legal Aid Foundation of Los Angeles, for example, offers free legal services to over 100,000 residents of the greater Los Angeles area.
California's COVID-19 Tenant Relief Act Landlord Protections Provided by AB 3088 and SB91
- AB 3088 does not protect landlords from foreclosures, nor does it require banks to provide forbearance. Instead, mortgage servicers must contact borrowers before pursuing foreclosure proceedings with forbearance options.
- Dual tracking, when a provider initiates foreclosure proceedings while considering loan modifications with the borrower, is also forbidden.
- If forbearance is not an option for a small landlord, then the mortgage servicer must provide a written explanation. These protections extend to January 1, 2023.
- Landlords can receive upwards of 80% of unpaid rent between April 2020 to March 31, 2021, from state/federal funds. The remainder of the rent during this time must be forgiven. The rental assistance payment will be made straight to the landlord.
- Additional funds are available to local governments.
- Federal/state funds may also be applied to upwards of 25% of three months max future unpaid rent. Additional funds are contingent upon availability.
- Monthly reporting from the state agency in charge of the funds will be sent to the Legislature.
- Tenants who do not respond to notices are subject to unlawful detainer cases.
- Under local rent control laws, a landlord is not considered to have reduced amenities if the government-mandated certain services are reduced (like closing swimming pools, communal spaces, etc.)
- When considering tenants' eligibility for federal funds, the state administration will use a hybrid model that provides funds for households at or below 80% of the area median income (AMI) for the 2020 calendar year and the current monthly income. This should increase tenant household eligibility.
How do AB 3088 or SB 91 affect AB 1492?
California’s AB 1482 Tenant Protection Act established state-wide rental control in California. The bill limits rent hikes to 5% annually plus inflation as determined by the consumer price index (CPI), with some significant exceptions. Given that AB 1492 concerns rental increases and eviction protections, it’s important for property managers, real estate investors, and tenants to understand the contents of AB 1492 and the bill’s interplay with AB 3088 and SB91,
AB 1492 has three primary components.
Just Cause Eviction Protections
The Just Cause Eviction Protection Ordinance gives tenants the right to renew their lease at the end of their tenancy so long as the tenant has not violated any of the lease agreements provisions. Although, this rule does not apply in the event of several exceptions.
- Intent to demolish or perform substantial improvement
- Ceasing to rent it
- Owner or relative occupancy
- Government order
- The first 12 months of tenancy
Lease Agreement Disclosures
As of July 1st, 2020, three new disclosures must be included in your lease agreement. These should be easy to do using free rental agreement templates.
- Your tenant must be informed that the rental unit they’re living in is subject to a statewide rent cap.
- Your tenant must be informed that if you or a family member want to turn their rental unit into a primary residence at the end of the lease, the tenant will have to vacate. If this disclosure is not included in the rental agreement, then the exemption cannot be employed.
- Your tenant must be informed that their rental unit is subject to rent control. If your investment property is a single-family home, condo, or townhouse, then your property is exempt so long as this disclosure is in the lease agreement. Otherwise, you do not get to make an exemption.
Exemptions to AB 1492
There are several exemptions to AB1492. These exemptions cover everything in the bill, including the Just Cause Eviction Ordinance.
- If your single-family investment property is owned by a real estate investment trust (REIT), a corporation, or an LLC where one of the members is a corporation, it is not exempt. Otherwise, it is.
- New constructions are exempt so long as they are under 15 years of age and you’ve gotten your certificate of occupancy. This applies even if you live in a portion of the housing.
- Student rental housing
- Transient housing
- Deed-restricted low-income affordable housing units
- Extended care and residential care facilities for the elderly
- Duplexes where the property owner lives in one of the properties.
- A room rented out of your primary residence.
- If a more restrictive local rent control ordinance regulates your property.
- Both properties will be subject to AB 1482 if you construct an accessory dwelling unit (ADU) that's either connected to a single-family home or not connected. Once your ADU receives a certificate of occupancy, it may qualify for the 15-year new property exception once it gets a certificate of occupancy.
How AB 3088 and SB 91 affect AB 1492
The protections afforded by the Just Cause Eviction Ordinance were extended to all single-family homes and new constructions irrespective of who owns them by SB 91 until June 30th, 2021. So long as your rental increases obey the rules established by AB 1482. However, they are not forbidden by either SB 91 or AB 3088. The disclosures dictated by AB 1492 must also still be made in all lease agreements.
Bottom Line on AB 3088 and SB 91
Due to AB 3088, California will keep a dramatic increase in residential evictions at bay through the first half of 2021. SB91 extended these protections through June 31st, 2021, while adding landlords opportunities for relief as well. Further action by the federal government is required to ward off the true extent of the pandemic's effects.
If you have rental properties, your property manager should be able to support you in navigating the changing regulations around tenant protections. To learn more about Mynd Management's services, contact email@example.com