COVID-19 and Real Estate Update For April 20, 2020
Today, we continue with our real estate COVID-19 updates. Placer County recently amended its shelter in place order to allow for in-person showings of real estate and the eviction moratoria continue to change. We will continue to monitor and provide updates as local, state and federal rules, orders, regulations, and laws continue to adapt in response to the COVID-19 outbreak.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing managing shareholder Keith Dunnagan at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation, please contact me to set up a date and time.
COVID-19 and Real Estate Update For April 20, 2020
By: D. Keith Dunnagan, Esq.
Update to Placer County Shelter in Place Order
Over the last several weeks, the people and businesses of California have been trying to navigate the various shelter in place rules that exist at both the State and County levels. Last week we looked at the revisions to the Sacramento and Placer County shelter in place orders and especially the change that deemed real estate services as essential services.
Those orders deemed real estate an essential business but restricted the ability to show most properties in person. The orders required that when a person is living in the property, that all showings must be virtual-only. Of course, this raised concerns among the real estate community, because, for most people, the purchase of a home is the single largest purchase they will make in their lifetime. It is just common sense that most buyers want to walk and see the property in person before making such a large purchase.
Placer County heeding the concerns of the industry on April 16, 2020, and amended its shelter in place order related to the showing of properties. The relevant text of the order is as follows:
Service providers that enable residential transactions such as rentals, leases, and home sales, including, but not limited to, real estate agents, escrow agents, notaries, and title companies, provided that appointments and residential viewings occur only virtually. If a virtual viewing is not feasible, viewings may occur by appointment with no more than two visitors who reside in the same household and one individual showing the unit at a time, and only if the unit is vacant, or the occupant has provided express written consent for the showing, and aside from walking no surfaces are touched during the showing.
The key text that has been added is the above bolded and underlined text. Under this revised text so long as the occupant provides written consent then the showing can occur. The devil is in the details here. Even if an in-person showing occurs, social distancing and CDC recommendations need to be followed and the persons viewing the property must be walking through the property only and not touching any surface areas. Additionally, make sure that the written permission that is received is from the occupant, who may sometimes be different from the seller. As an agent or buyer, make sure to inquire of the seller as to who resides in the property. If it is a tenant, that tenant will need to provide the permission for the showing.
This is a beneficial move that will help not only the real estate community but also sellers and buyers who wish to engage in real estate transactions during this market and take advantage of historically low mortgage interest rates.
While this change is currently limited to Placer County, I would expect other counties to follow suit. We are in uncharted territory, and many counties seem to watch what does and does not work in other counties and tend to adopt provisions that are working elsewhere.
Eviction Moratoria Update
Additionally, throughout the state eviction moratoria and rental restrictions continue to morph. Last week we discussed the changes to the court process based upon the Supreme Court and Judicial Council order. Today, we look at some regional rental restrictions that have popped up during this COVID-19 outbreak.
In the City of Davis rental relief has been provided to residential and commercial tenants who have an inability to pay as a result of COVID-19. Those tenants must provide documentation of the inability to pay, must notify the landlord within 30 days after the rent is due in writing and must repay the defaulted sums within 6 months after the state of emergency is lifted.
Grass Valley has instituted rental relief for residential and commercial tenants who notify their landlords of an inability to pay rent. If a business is closed by mandate or voluntarily closes to reduce the spread of COVID-19, the inability to pay is presumed. The tenant must notify the landlord in writing within 7 days after the rent is due and must repay the unpaid rents within 6 months after the state of emergency is lifted.
The City of Sacramento has provided relief to residential and commercial tenants who have a demonstrated inability to pay rent as a result of COVID-19. The tenant must notify the landlord before rent is due of the delayed rent and provide verifiable documentation of the inability to pay. The tenant must pay what they are able to pay, and they must repay the unpaid rent after the state of emergency expires.
Sacramento County has adopted rent relief and placed a moratorium on residential evictions when the Tenant has a COVID-19-related inability to pay rent. The tenant must document the claimed inability to pay before rent is due, and pay any amount of rent possible. Further, the tenant must pay the unpaid balance within 120 days after the expiration of the state of emergency.
In each instance, the tenant is given some temporary break on rent, and the landlord is restricted in its ability to add late fees, default penalties and collection fees. This may only be delaying the inevitable – each ordinance requires the tenant at some date certain in the future to repay the unpaid sums. Further, tenants who do not pay, will at some point be evicted for non-payment of rent. This pandemic will end, the Courts will re-open to evictions and the State of Emergency will be lifted and then the unpaid rents will become due.
But what does this mean from a legal perspective? We recall that statewide rent control was passed last year limiting the increase in rental rates and it is no secret that California has a significant housing supply problem. Estimates suggest that California is short more than 3 million housing units. This shortfall prompted Gov. Newsom, in 2019, to pledge reforms aimed at building 3.5 million housing units in the next 7 years. However, the recent rent control legislation will likely be the catalyst to significant rent increases this year. If tenants eventually get evicted for non-payment of rent, the landlord will be able to use that eviction to reset its rental value. With a dearth of supply statewide and high demand that will only get higher, rents will likely see increases as they did during the Great Recession.
Meanwhile, lenders are likely to see mortgage default rates climbing as a result of increasing unemployment due to shelter-in-place restrictions, and even more people will be thrust into the rental market. This will create an even greater demand on an already under-supplied market, pushing rental rates even higher.
Rather than taking advantage of these new local rent-deferral options, tenants who can pay even partial rent would do well to work with their landlords to ensure continuity of the lease and lease payments. While at first glance these tenant relief provisions may appear to grant tenants a windfall, there is a silver lining for landlords-defaulting tenants may ultimately provide an opportunity to increase rents in a future market.
The information contained in this post is informational in nature and not to be construed as legal advice. Each person’s scenario is different. If you are facing a legal issue of any kind, get competent legal advice in your state immediately to determine your best options.
——————————————————————————————————————
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business, and estate planning issues for over 20 years and have assisted numerous clients in probate, business, and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consults for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s 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.
Today, we continue with our real estate COVID-19 updates. Placer County recently amended its shelter in place order to allow for in-person showings of real estate and the eviction moratoria continue to change. We will continue to monitor and provide updates as local, state and federal rules, orders, regulations, and laws continue to adapt in response to the COVID-19 outbreak.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing managing shareholder Keith Dunnagan at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation, please contact me to set up a date and time.
COVID-19 and Real Estate Update For April 20, 2020
By: D. Keith Dunnagan, Esq.
Update to Placer County Shelter in Place Order
Over the last several weeks, the people and businesses of California have been trying to navigate the various shelter in place rules that exist at both the State and County levels. Last week we looked at the revisions to the Sacramento and Placer County shelter in place orders and especially the change that deemed real estate services as essential services.
Those orders deemed real estate an essential business but restricted the ability to show most properties in person. The orders required that when a person is living in the property, that all showings must be virtual-only. Of course, this raised concerns among the real estate community, because, for most people, the purchase of a home is the single largest purchase they will make in their lifetime. It is just common sense that most buyers want to walk and see the property in person before making such a large purchase.
Placer County heeding the concerns of the industry on April 16, 2020, and amended its shelter in place order related to the showing of properties. The relevant text of the order is as follows:
Service providers that enable residential transactions such as rentals, leases, and home sales, including, but not limited to, real estate agents, escrow agents, notaries, and title companies, provided that appointments and residential viewings occur only virtually. If a virtual viewing is not feasible, viewings may occur by appointment with no more than two visitors who reside in the same household and one individual showing the unit at a time, and only if the unit is vacant, or the occupant has provided express written consent for the showing, and aside from walking no surfaces are touched during the showing.
The key text that has been added is the above bolded and underlined text. Under this revised text so long as the occupant provides written consent then the showing can occur. The devil is in the details here. Even if an in-person showing occurs, social distancing and CDC recommendations need to be followed and the persons viewing the property must be walking through the property only and not touching any surface areas. Additionally, make sure that the written permission that is received is from the occupant, who may sometimes be different from the seller. As an agent or buyer, make sure to inquire of the seller as to who resides in the property. If it is a tenant, that tenant will need to provide the permission for the showing.
This is a beneficial move that will help not only the real estate community but also sellers and buyers who wish to engage in real estate transactions during this market and take advantage of historically low mortgage interest rates.
While this change is currently limited to Placer County, I would expect other counties to follow suit. We are in uncharted territory, and many counties seem to watch what does and does not work in other counties and tend to adopt provisions that are working elsewhere.
Eviction Moratoria Update
Additionally, throughout the state eviction moratoria and rental restrictions continue to morph. Last week we discussed the changes to the court process based upon the Supreme Court and Judicial Council order. Today, we look at some regional rental restrictions that have popped up during this COVID-19 outbreak.
In the City of Davis rental relief has been provided to residential and commercial tenants who have an inability to pay as a result of COVID-19. Those tenants must provide documentation of the inability to pay, must notify the landlord within 30 days after the rent is due in writing and must repay the defaulted sums within 6 months after the state of emergency is lifted.
Grass Valley has instituted rental relief for residential and commercial tenants who notify their landlords of an inability to pay rent. If a business is closed by mandate or voluntarily closes to reduce the spread of COVID-19, the inability to pay is presumed. The tenant must notify the landlord in writing within 7 days after the rent is due and must repay the unpaid rents within 6 months after the state of emergency is lifted.
The City of Sacramento has provided relief to residential and commercial tenants who have a demonstrated inability to pay rent as a result of COVID-19. The tenant must notify the landlord before rent is due of the delayed rent and provide verifiable documentation of the inability to pay. The tenant must pay what they are able to pay, and they must repay the unpaid rent after the state of emergency expires.
Sacramento County has adopted rent relief and placed a moratorium on residential evictions when the Tenant has a COVID-19-related inability to pay rent. The tenant must document the claimed inability to pay before rent is due, and pay any amount of rent possible. Further, the tenant must pay the unpaid balance within 120 days after the expiration of the state of emergency.
In each instance, the tenant is given some temporary break on rent, and the landlord is restricted in its ability to add late fees, default penalties and collection fees. This may only be delaying the inevitable – each ordinance requires the tenant at some date certain in the future to repay the unpaid sums. Further, tenants who do not pay, will at some point be evicted for non-payment of rent. This pandemic will end, the Courts will re-open to evictions and the State of Emergency will be lifted and then the unpaid rents will become due.
But what does this mean from a legal perspective? We recall that statewide rent control was passed last year limiting the increase in rental rates and it is no secret that California has a significant housing supply problem. Estimates suggest that California is short more than 3 million housing units. This shortfall prompted Gov. Newsom, in 2019, to pledge reforms aimed at building 3.5 million housing units in the next 7 years. However, the recent rent control legislation will likely be the catalyst to significant rent increases this year. If tenants eventually get evicted for non-payment of rent, the landlord will be able to use that eviction to reset its rental value. With a dearth of supply statewide and high demand that will only get higher, rents will likely see increases as they did during the Great Recession.
Meanwhile, lenders are likely to see mortgage default rates climbing as a result of increasing unemployment due to shelter-in-place restrictions, and even more people will be thrust into the rental market. This will create an even greater demand on an already under-supplied market, pushing rental rates even higher.
Rather than taking advantage of these new local rent-deferral options, tenants who can pay even partial rent would do well to work with their landlords to ensure continuity of the lease and lease payments. While at first glance these tenant relief provisions may appear to grant tenants a windfall, there is a silver lining for landlords-defaulting tenants may ultimately provide an opportunity to increase rents in a future market.
The information contained in this post is informational in nature and not to be construed as legal advice. Each person’s scenario is different. If you are facing a legal issue of any kind, get competent legal advice in your state immediately to determine your best options.
——————————————————————————————————————
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business, and estate planning issues for over 20 years and have assisted numerous clients in probate, business, and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consults for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s 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.