Since the onset of COVID-19, the country has seen a surge of unemployment claims, with California accounting for a large percentage of such claims filed across the country. Unemployment has led to many consequences, including defaults in rent obligations and the corresponding need for landlords and lenders to exercise their remedies. In response to the crisis, and citing substantial losses of income arising from business closures and layoffs related to COVID-19, on March 27, 2020, Governor Newsom issued Executive Order N-37-20 (“Governor’s Order”), which seeks to minimize residential evictions stemming from the nonpayment of rent due to COVID-19, with a sunset date of May 31, 2020. The full text of the Governor’s Order can be found here.
Though the Governor’s Order fell short of an outright moratorium on residential evictions, it set out to accomplish several key goals, including (1) extending the deadline for a tenant to formally respond to an eviction complaint from 5 days to 60 days if the tenant meets certain conditions related to the impact of COVID-19 on the tenant’s ability to pay rent, and (2) temporarily prohibiting the eviction of a residential tenant who is able to demonstrate that nonpayment of rent is directly caused by COVID-19-related reasons. Local governments implemented such protections inconsistently and with differing conditions or requirements, creating much confusion across California. While the protections afforded under the Governor’s Order were welcome by individuals affected by the pandemic, commercial tenants were left with no recourse in most cases.
In order to create consistency in the courts, affirm the underlying protections for commercial tenants, and address the related area of foreclosures which would also naturally stem from increasing unemployment, on April 6, 2020, the Judicial Council of California unanimously voted to adopt eleven emergency rules (the “Judicial Rules”) in an effort to alleviate some of the unintended consequences arising from the various local and state orders enacted to combat the pandemic. Building on the Governor’s Order, the Judicial Rules are broader in scope and provide a consistent framework for how unlawful detainer and judicial foreclosure actions should be handled in courts across California, providing much needed direction to courts that were previously pulled in different directions due to the variability of city and county ordinances dealing with eviction moratoriums. The full text of the Judicial Rules can be found here.
Key highlights of the Judicial Rules include:
- A court may not issue a summons on a complaint for an unlawful detainer action, unless the court finds, in its discretion, that the action is necessary to protect public health and safety. It is important to note here that this applies to all unlawful detainer actions, not just unlawful detainer actions arising from the nonpayment of rent due to COVID-19 reasons. In addition, the Judicial Rules go a step further than the Governor’s Order in another key aspect. Instead of extending the timeframe in which to respond to a filed eviction complaint, the Judicial Rules suggest that a tenant’s timeframe to respond to an eviction complaint will be tolled until the Governor declares that the state of emergency related to the COVID-19 pandemic has been lifted.
- A court is prohibited from entering a default or default judgment against a tenant in an unlawful detainer action for failure to respond to an eviction complaint, unless such action is necessary to protect public health and safety and the tenant has not appeared in the action within the time period provided by law.
- For unlawful detainer actions where a tenant has already appeared in the eviction proceeding, a court may not set a trial date earlier than 60 days after a request for trial has been made, unless such court finds that an earlier trial date is necessary to protect public health and safety. Any trial date that has been set in an unlawful detainer action as of April 6, 2020 must be continued for at least 60 days.
- The Judicial Rules will remain in effect until 90 days after the Governor declares that the state of emergency related to the COVID-19 pandemic has been lifted in California.
In addition to the protections afforded to tenants, the Judicial Rules also aim to protect borrowers in judicial foreclosure actions. Such protections include the following:
- A court may not issue any decision or judgment in a judicial foreclosure action until 90 days after the Governor declares that the state of emergency related to the COVID-19 pandemic has been lifted, unless the court finds that the action is required to further public health and safety. Note that these rules do not apply to non-judicial foreclosures, which is the most common way a lender pursues its collateral in California.
- Any statute of limitations governing a judicial foreclosure action is tolled until 90 days after the Governor declares that the statement of emergency related to the COVID-19 pandemic has been lifted.
- All periods for electing/exercising any rights in a judicial foreclosure action is extended until 90 days after the Governor declares that the statement of emergency related to the COVID-19 pandemic has been lifted.
The Judicial Rules make it clear that evictions and judicial foreclosures will remain on hold in California while the legislature aims to come up with a long-term plan to handle the multitude of evictions and judicial foreclosure actions that are bound to emerge when the courts resume normal business after the COVID-19 pandemic subsides. And although the various rules and orders now in effect may seem confusing or inconsistent, it is always a good thing to apply a practical approach and consider their purpose in the context of the current climate. The pandemic is a new and unique challenge, and there is hardly any precedent from which authorities could rely on in drafting such rules or orders. Courts will appreciate much less an aptitude for “identifying a loophole” than they will appreciate the fact that these orders were intended to be read broadly for maximum effect. Protect your business by considering the purpose of today’s restrictions before you act and don’t lose sight of the forest for all of the new trees.
It should be noted that the Judicial Rules also address the logistics and processes in connection with court appearances, emergency bail procedures, juvenile proceedings, restraining/protective orders, and statutes of limitations, which are not covered in this article.