California extends eviction moratorium and approves rental assistance

The California Legislature extended the state's existing eviction moratorium and approved new rental assistance legislation on Jan. 28, just days before the State's existing COVID-19 Tenant Relief Act was set to expire. The legislation, Senate Bill 91, enacts a wide variety of important changes to unlawful detainer law of which attorneys for both landlords and tenants need to be aware. For the first time since the pandemic began, the state adopted legislation that includes both financial assistance to landlords and restrictions on tenant evictions in its response to the COVID-19 pandemic.

Four Important Changes in SB 91

There are four main components of SB 91: (1) a five month extension, until June 30, 2021, of the existing prohibition on evictions of residential tenants who are economically affected by COVID-19 and have paid at least 25% of their rent, (2) a new state rental assistance program funded by recent federal stimulus funds providing assistance for many low income tenants, (3) new requirements for landlord collection of COVID-19 rental debt, and (4) new protections for tenants affected by COVID-19.

SB 91 Extends Assembly Bill 3088

Assembly Bill 3088, adopted in August 2020, provides eviction protections to residential tenants who submit declarations to their landlords claiming a financial hardship related to COVID-19. Under AB 3088, tenants who timely submit their hardship declaration cannot be evicted for failing to pay rent due between March 2020 and August 2020. In addition, AB 3088 provided that tenants who submit the hardship declaration cannot be evicted for failing to pay rent due between September 2020 and January 2021, so long as the tenants pay at least 25% of the rent due during that period. SB 91 extends that eviction protection through June 30, 2021, requiring that tenants pay at least 25% of rent due prior to June 30, 2021. AB 3088 allowed landlords to begin collecting COVID-19 rent as consumer debt in small claims court beginning March 1, 2021. SB 91 extends that date to Aug. 1, 2021. New breach of contract actions can also be filed in Superior Court beginning July 1, 2021.

New State Rental Assistance Program

The new rental assistance program applies $1.4 billion of California's share of federal rental relief funds to pay rental debt of tenants who meet three criteria: (1) a member of the household is unemployed or has been financially impacted by COVID-19, (2) the household is at risk of homelessness or housing instability, and (3) the tenant earns less than 80% of the area median income. The program is scheduled to begin by March 15, but is not guaranteed to have sufficient funds to assist all tenants who meet these criteria. First priority will be given to tenants earning up to 50% of area median income, and second to residents of communities disproportionately impacted by COVID-19.

Landlords will be able to apply directly to the state on behalf of their tenants for payments of rental debt. The program will pay landlords up to 80% of tenant rental debt accumulated from April 1, 2020 to March 31, 2021. As a condition of accepting state rental assistance, landlords must agree to release all other outstanding debt owed by the tenant for the period covered by the rental assistance. If a landlord does not apply to the state program, the tenant may apply instead, but state rental assistance to the tenant will be limited to 25% of rental debt. Landlords who refuse to participate may jeopardize their future recovery of rental debt, as courts will look to whether the landlord sought state rental assistance when determining the landlord's recovery.

Notice to Tenants by Feb. 28

The most urgent of SB 91's provisions is a requirement that landlords must send a notice by Feb. 28 describing changes in the law to all tenants who are behind in rent for the period of March 1, 2020 to Feb. 1, 2021. Failure to send the notice by the Feb. 28 deadline may affect landlords' ability to exercise unlawful detainer remedies against tenants. The notices are available on the California Apartment Association website for no charge.

Actions to Recover COVID-19 Rental Debt

SB 91's new rules for COVID-19 rental debt collection include a requirement that landlords file a declaration that they have attempted to assist the tenant with obtaining state rental assistance funds. The new legislation also adopts a cap on attorneys' fees of $500 for uncontested cases and $1,000 for contested cases, with judges retaining discretion to award higher fees for more complex cases.

Additional Restrictions and Requirements for Landlords

SB 91 also adopts new rules prohibiting landlords from imposing or collecting late fees for COVID-19 rent debt, as well as prohibiting landlords from increasing fees or imposing new fees for services previously provided for free. Landlords are directed to apply tenant rent payments to future periods rather than paying off past COVID-19 rent debt, and are also prevented from applying security deposits to pay COVID-19 rent debt. Landlords and tenant screening services may not use unpaid COVID-19 rent debt as a negative factor in tenant screening, and landlords are prohibited from selling COVID-19 rent debt to collection companies until July 1, 2021.

Impact on Local Eviction Laws

Similar to AB 3088, SB 91 pauses any new local eviction moratoriums passed between Aug. 19, 2020 and June 30, 2021. Those ordinances cannot take effect until July 1, 2021.

Impact on Commercial Evictions

AB 91 does not apply to commercial unlawful detainers, meaning that commercial evictions can occur. However, locally enacted moratoriums may protect certain commercial tenants. For example, Los Angeles County's eviction moratorium, which applies to both unincorporated County areas as well as incorporated cities in the County without their own commercial eviction moratorium, prohibits evictions for commercial tenants unable to pay rent due to the COVID-19 pandemic. As with many California cities and counties, the Los Angeles County ordinance is limited to small businesses. Ordinances vary substantially, as do the respective termination dates for the eviction bans, so determining the procedural and substantive rights of the parties requires careful review.

Impact of Federal Centers for Disease Control and Prevention Eviction Moratorium

On Sept. 2, 2020 the U.S. Centers for Disease Control and Prevention issued a public health order to temporarily stop landlords from evicting residential tenants who provide a declaration that they are unable to pay rent. Recently extended by a new CDC order, tenants who provide this declaration to their landlord may not be evicted for failure to pay rent through March 31, 2021. While it is unclear how this law applies to individual cases in California, it may protect tenants who are not covered by the state law.

Impact on Advice and Counsel

SB 91's requirements are complex and are likely to cause confusion for landlords, tenants and courts. This complex, albeit temporary, set of rules relating to the eviction process and related legal proceedings in the COVID-19 environment will be subject to interpretation by courts and will continue to change. Landlords, tenants and their counsel need to precisely follow all statutorily required procedures and stay abreast of potential future developments in the law. 