CA Enacts SB 91 (COVID-19 Tenant Relief Act)

CA Enacts SB 91 (COVID-19 Tenant Relief Act)

By: By: D. Keith Dunnagan, Esq.

February 2, 2021

At the end of August 2020, California passed the COVID-19 Tenant Relief Act of 2020 (AB 3088). That legislation codified an “eviction” moratorium that ran through January 31, 2021. As part of that law, landlords were required to serve notices to pay or quit with 15 day response deadlines, provided tenants with the ability to complete a COVID-19 financial distress declaration, lower required rental payments in some situations, and placed restrictions on filing of eviction lawsuits until February 1, 2021.

The COVID-19 pandemic has been hard on not only tenants but also on landlords who depend on the rents to cover mortgage payments, pay insurance and property tax bills, and provides for income to live on. A recent survey from the National Multi Housing Council indicates that approximately 12% of renters made no rent payment during January 2021 and it unclear of the renters who made payments how many were full payments and how many were partial payments. Landlords who are collecting the limited 25% of contractual rents allowed under AB 3088 but still paying the expense of their rental properties were looking to the expiration of the moratorium on February 1, 2021, to be able to get the property back to full rent. Unfortunately, that will not be the case. On January 29, 2021, the Governor signed SB 91 into law.

While this statute is similar to the prior AB 3088 there are some very important distinctions that California landlords and property managers must be aware of. The most important item to understand is that under SB 91, the eviction moratorium that was to expire February 1, 2021, has now been extended to June 30, 2021. That means that so long as tenants comply with the declaration process related to COVID rental debt, that a landlord cannot file an eviction lawsuit before July 1, 2021 (Code of Civil Procedure “CCP” 1179.03(g)(2)(A)) nor can a tenant be found liable for unlawful detainer prior to June 30, 2021 if the tenant pays (through one or more payments) an amount equal to 25% of the rent for the period between Sept. 1, 2020 – June 30, 2021 (CCP 1179.03(g)(2)(B)). This law effectively extends the moratorium for another six (6) months.

In addition to the moratorium, like AB 3088, there are several notice restrictions that landlords must comply with related to non-payment of rent. Under 1179.03 there are two notices that must be given related to non-payment of rent that identify the 15 day time period to respond and notifying tenants that even if they pay the 25% reduced rent now, they will have to pay the full amount later. Additionally, the notices will now have to address to the possibility that tenants might have rental assistance available to them and provide information about where additional information can be located about rental assistance. Under the revised law, failure to properly provide this information (these new notices) will be a fatal flaw in a landlords eviction case, which means, that without strict compliance, the Court will not be able to find in favor of a landlord in an eviction action. (CCP 1179.03(a)(1)).

In addition to the above two notices that landlords are required to serve for non-payment of rent to preserve eviction rights, a third notice must also be served. Pursuant to CCP 1179.04(b) landlords are required to provide to “tenants who, as of February 1, 2021, have not paid one or more rental payments that came due during the covered time period (March 1, 2020 – June 30, 2021) a notice related to the passage of SB 91. This notice must be provided on or before February 28, 2021. A landlord cannot serve a non-payment of rent notice as until this new notice has first been served.

Further, the law extended the small claims jurisdiction of unpaid rent claims to July 1, 2025. Additionally, landlords cannot charge late fees related to non-payment of COVID-19 rental debt if the tenant has provided the COVID-19 financial distress declaration. (Civ. Code 1942.9(a)) and a landlord may not consider “alleged COVID-19 rental debt” as a negative factor when considering a prospective tenant. (Civ. Code 1785.20.4).

An important change to the law deals with the limitation on recovery of COVID-19 rental debt. Under CCP 871.10(a) the newly added section requires landlords to provide documentation showing how the landlord made a “good faith effort to investigate whether governmental rental assistance was available to the tenant, seek governmental rental assistance for the tenant, or cooperate with tenant’s efforts.” This statute goes further than most and requires a landlord to potentially seek the assistance on behalf of the tenant prior to any action. More problematic is that the statute gives the Court discretion to reduce damages for unpaid rent if the Court determines “that the landlord refused to obtain rental assistance from the state rental assistance program.” (CCP 871.10(b)).

This is of significant importance because SB 91 created the State Rental Assistance Program (“SRAP”), codified in the Health and Safety Code (“HSC”). Under this program, the State has allocated $1,500,000,000 towards rental assistance. Through the program the State has created a 3-round system for rental assistance. The first round is targeted to assist households with income less than 50% of the area median income; the second round is targeted to assist communities disproportionately impacted by COVID-19; and, the third round is targeted to assist households with an income less than 80% of the area median income. For informational purposes, the US Census Bureau reports that the median household income for 2019 in Sacramento County was $67,151.

The application process is to open on March 15, 2021 and for applications that are approved, funds disbursed are limited to use for rental arrears, prospective rent payments, utilities (arrears and prospective utility payments), and limited other housing expenses allowed under the Consolidated Appropriations Act. Rental arrears will only be allowed for the period between April 1, 2020 – March 31, 2021. If your tenant has arrearages that go back to before April 1, 2020, those are covered by this program. However, like every good governmental program, there are strings attached. For landlords that take advantage of this program, landlords will only be able to collect 80% of the eligible rental debt and as a condition of accepting the assistance payment, a landlord will be required to waive the remaining unpaid debt. (HSC 50897.1) This means that for the landlord who accepts the rental assistance they (1) cannot pursue the remaining unpaid rental debt, and (2) may not use the remaining unpaid rental debt as a basis for an eviction. (HSC 50897.1(d))

Additionally, a landlord seeking a judgment for unpaid rent must state under the penalty of perjury that (1) that the landlord has no pending applications for rental assistance; and (2) that the landlord has not received any rental assistance from any other source related to the amount sought under the complaint. (HSC 50897.3(e))

While landlords are not obligated to participate in SRAP, one thing to consider is the limitations related to Civ. Code 871 above. As discussed above a landlord’s failure to seek governmental assistance can be considered by the Court as a means to potentially reducing the amount of unpaid rental damages a landlord may be entitled too in the future. It’s a bit of an unintended “catch-22”.

SB 91 creates a complex web of requirements that landlords and property managers need to be aware of and comply with related to COVID-19 rental debt. There may be some benefits for landlords willing to compromise rental arrears for payment now related to eligible tenants. The attorneys at BPE Law are well versed in the ever-changing laws impacting landlords and their rental properties and routinely advise landlords and property managers on evictions and compliance matters.

If you would like a consultation with us, please contact our office at 916-966-2260.
The information presented in this article is not to be taken as legal advice. Every situation is different. If you are facing a legal issue of any kind, get competent legal advice in your state immediately so that you can determine your best options.

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