This article is written by Todd M. Gee from Best Best & Krieger LLP

COVID-19 Rental Housing Recovery Act

In a continued effort to address what is expected to be an overwhelming number of residential evictions resulting from the COVID-19 pandemic and associated business closures, California Gov. Gavin Newsom signed Assembly Bill 832 enacting the COVID-19 Rental Housing Recovery Act. AB 832 extends eviction protections for residential tenants (including mobile home tenants) experiencing a financial hardship relating to COVID-19.

Specifically, AB 832 extends existing law prohibiting residential tenants from being evicted for failure to pay rent due to a COVID-19-related hardship between March 1, 2020 and Sept. 30, 2021. Residential tenants are still required to provide a Declaration of COVID-19-Related Financial Distress and pay at least 25 percent of past due rent by Sept. 30 to avoid eviction.

AB 832 preserves the jurisdiction of small claims court to allow landlords to file claims for unpaid rent related to COVID-19, regardless of the amount owed, until Oct. 1, 2025. The prohibition on commencing an action in small claims court to recover COVID-19 rental debt is extended until Nov. 1, 2021.

The new Act, signed into law on June 28, continues the Legislature’s policy to provide rent-relief uniformity throughout the State. Existing local ordinances may remain in place, but the Act prohibits cities and counties from adopting new eviction moratoria through March 2022. All existing and future local ordinances must also comply with AB 832’s repayment schedule provisions.

Implications for Residential Tenants

Residential tenants facing financial hardship due to COVID-19 should return hardship declaration forms, which landlords are required to provide, within 15 days of receiving the form. As long as a residential tenant follows the Act’s procedures, including paying at least 25 percent of all past due rent by Sept. 30, they will be protected from eviction for COVID-19-related non-payment of rent.

If a residential tenant does not pay at least 25 percent of back rent by the Sept. 30, 2021 deadline, the tenant can be evicted for non-payment of rent, even if caused by a COVID-19-related hardship.

Implications for Residential Landlords

AB 832 requires residential landlords to send a new Notice of Rent Delinquency to all tenants who missed rental payments between March 1, 2020 and Sept. 30, 2021. Landlords will need to provide the notice to all tenants with past due rent between March 2020 and July 2021 no later than July 31, 2021. The Act imposes specific notice requirements based on the period during which the unpaid rent became due. However, regardless of when the unpaid rent became due, any notice of rent delinquency or demands for unpaid rent from the periods between March 1, 2020 through Sept. 30, 2021 must:

• Encourage the tenant to sign and return the declaration of COVID-19 related financial distress;
• Inform the tenant that 25 percent of back rent must be repaid before Sept. 30, 2021 and
• Notify the tenant they may qualify for rental assistance and encourage them to apply.

The Act provides different notices that depend on the period in which the rent became due, so residential landlords should work closely with counsel to determine which notice must be sent.

Owners may begin to serve tenants with three-day notices to pay rent or quit on Oct. 1, 2021. Any notice demanding recovery of rent that came due between Oct. 1, 2021 and March 31, 2022 must include specific language informing the tenant regarding the availability of rental assistance, including a telephone number and a website where the tenant can start the application.  There is also a specific warning that must be included in BOLD text and at least 12-point font that must be included in the updated demands. Before filing an action for unlawful detainer, a residential landlord must wait 20 days and verify they have applied for rental relief funding. Rental relief under the new Act now covers 100 percent of back rent owed by qualifying tenants.

Commercial Properties

Consistent with previous Legislative acts, commercial properties are not covered by AB 832 and commercial tenants do not receive the same statewide eviction protections provided to residential tenants. Commercial landlords remain free to file unlawful detainer actions against their commercial tenants, unless the properties are located in a city or county that has an eviction moratorium of its own that extends to commercial tenants.

Some local ordinances also extend eviction protections to commercial tenants, but these generally have  either expired or have a shorter effective period than the new Act. Commercial tenants experiencing COVID-19-related financial distress should work closely with legal counsel to determine if a local ordinance might benefit them.

For commercial tenants experiencing COVID-19 hardships, the lack of a statewide framework for commercial tenancies leaves them to rely on local ordinances, which vary in scope and duration. Of course, commercial tenants may also have the alternative of negotiating mutually agreeable terms with their landlords for rent concessions, including abatement, deferral or reductions, to avoid eviction actions.

Note: The Act excludes tenants of commercial property, as such term is “defined in subdivision (c) of Section 1162 of the Civil Code.” In seeking to incorporate the definition of a commercial tenant, the Legislature included an incorrect code reference. The term “Commercial Tenant” is defined in section 1162(c) of the California Code of Civil Procedure, not Civil Code 1162(c) as referenced in the Act.

Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts, facts specific to your situation or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information herein.