Pending Legislation in the Wake of COVID-19

The COVID-19 outbreak has sparked immense amount of legislation. Funding bills, eviction and foreclosure curtailments and others are getting constant attention. Today we look at legislation appropriating additional funds for the popular paycheck protection program and bills that have been put forth in California dealing with evictions and foreclosures. In the infamous words of Bob Dylan — “The Times They are a-Changin”.

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Pending Legislation in the Wake of COVID-19
By: D. Keith Dunnagan, Esq.

Senate Passes the Legislation to Increase Relief for Small Businesses

At the end of March 2020, the federal government enacted a 2.2 trillion dollar CARES Act stimulus package. Among the concessions in the bill was the Paycheck Protection Program that allocated $349 billion in potentially forgivable small business loans. The immensely popular program ran out of money in just 13 days and millions of impacted small businesses were unable to obtain relief.

On April 21, 2020, the U.S. Senate passed the Paycheck Protection Program and Health Care Enhancement Act. It is expected to pass the House this week. This bill will add, among other things, over $300 billion of additional funding to the Paycheck Protection Program. This will come as a huge relief for the millions of small businesses that were unable to secure funding during the first round of the program. However, much like the first round of funding, these additional funds will likely runout very quickly. You will want to make sure your applications have been submitted to your lender and that you are in line in the event this additional funding is approved.

This bill will provide additional funding for the popular EIDL grants increasing the allocation from $10 billion to $20 billion. This increase provides additional alternative sources of funding for small businesses impacted by the COVID-19 shutdowns.

Additionally, California has two bills (AB 828 and SB 1410) currently navigating the Assembly that, if passed, would directly impact the real estate industry.

Assembly Bill 828

AB 828 is crafted and directly targeted to issues arising out of the COVID-19 outbreak. This bill, if passed, will have major impacts on the mortgage and rental industries. Under the bill, a proposed new section will be added to the foreclosure statutes contained in the California Civil Code. The proposed Section 2944.11 would temporarily prevent a lender from taking any action to foreclose on a residential property. Such prohibited actions would include recording a notice of default, recording a notice of trustee sales, recording a trustees deed after sale, posting or publishing a notice of sale, and initiating or prosecuting an action to foreclose under Code of Civil Procedure (“CCP”) 725a (the judicial foreclosure statute). The proposed section would also prohibit judgment creditors from taking actions to levy on residential real property.

As currently drafted, this proposed section would automatically sunset on January 1, 2022, and the prohibitions contained in the proposed new section will be operative until 15 days after a state or locally declared COVID-19 related state of emergency ends. Importantly, this means that after the State lifts its statewide emergency order, a city or county could declare a local emergency and keep these provisions in place longer.

Additionally, the proposed language in this bill would place significant restrictions on evictions and landlords and gives the courts unprecedented authority to rewrite lease agreements. This bill also seeks to add new sections to CCP 1161. Under these proposed additions, neither the courts nor the sheriffs would be able to take any actions related to an eviction based upon a non-payment of rent. Further, under a proposed addition to CCP 1174, the court would be able to re-write leases by reducing rental rates by up to 25% for a 12 month period. If a landlord owned 10 or more rental units, there would be a presumption that issuance of such court orders would NOT cause material economic hardship to the landlord, and if a tenant violated the orders of the court, would require the landlord to take additional measures including providing notice to the tenant of the violation of the court order and seek further relief from the court. All of this would add more time and expense for a landlord that likely would never get reimbursed.

Most troubling with this proposed statute, is that while the courts would be given the authority to unilaterally re-write leases, there is no mechanism required of the court to make a determination that the tenant cannot pay the existing lease rate. A tenant must merely make a claim that they have an inability to pay the rent because of “increased costs for household expenses or reduced household earnings due to COVID-19.” The proposed language states that in the absence of evidence contradicting this claim, the “court shall presume” that claimed increased costs or reduction in earnings are due to COVID-19. Nothing requires documentary evidence supporting a tenant’s claims. Rather, the burden would be on the landlord to prove that the tenant can, in-fact, pay the full rental amount.

Two legal problems are created by this aspect of the proposed statute:

(1) Evictions are designed to be summary proceedings that are completed quickly. There is not much room for expensive discovery to gather the necessary evidence to address these issues, thereby placing a greater burden on landlords when contracts are not performed.

(2) Existing law, specifically CCP 3295, creates what is largely referred to by attorneys as the financial privacy right of defendants in litigation. CCP 3295 generally prevents a plaintiff from obtaining pre-trial discovery of the defendant’s financial condition. Thus, if under this proposed law the landlord must provide evidence of the tenant’s ability to pay, how do they obtain such evidence if other existing statutes generally prevent their ability to discover the tenant’s relevant financial condition?

Again, this proposed bill, if enacted would automatically sunset on January 1, 2022 and these proposals if passed would only be operative until 15 days after a state or locally declared emergency related to COVID-19 ends. Much of what is contained in AB 828 seems superfluous given the Judicial Council and the Chief Justice of the California Supreme Court’s order in early April to curtail evictions until 90 days after the state of emergency is lifted. The necessity of some of these draft provisions appears to be waning given what other branches of the government have already done.

Senate Bill 1410

The California Apartment Association recently released a statement that currently pending SB 1410 would be amended to address the COVID-19 outbreak as it affects landlords. This proposal, which is expected to be reflected in amendments to the bill in the next couple of weeks, would create a state funded-subsidy for housing providers that participate in a newly created program. Under the new program, housing providers that participate would receive at least 80% of the rental rate for tenants for up to 3 months, provided the housing providers agreed to: (i)not raise rents for a specified period of time, (ii) not assess or collect late fees for rents covered under the program, and (iii) waive unpaid portions of rent for the months paid by the program.

This proposal will need to be incorporated into the current text of SB 1410 and will need further review once done. But this seems to be a much better step to dealing with the current short-term rental issues resulting from the COVID-19 issues, as it relieves the burden on both tenants and landlords, rather than shifting all of the burden of COVID-19 inability to pay rent onto landlords.

At this time, these proposals are just that, proposals making their way through the legislative process. They will need continuous monitoring for amendments and the impacts created therefrom. Government responses will continue to morph and follow the impacts of this pandemic to both the economy at large and people at home. But lawmakers and the real estate industry must what consider not only the short-term implications, but also the long-term legal ramifications of these proposals.

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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 Our flat fee consult 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.