California Statewide Eviction Moratorium Extension for Residential Tenants: To Forgive or Not to Forgive?

Brownstein Hyatt Farber Schreck
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Brownstein Hyatt Farber Schreck

On Jan. 29, 2021, Gov. Newsom signed legislation to extend California’s eviction moratorium through June 30, 2021.

Gov. Newsom originally enacted Statewide COVID-19 Tenant and Landlord Protection Legislation on Aug. 31, 2020, to protect residential tenants from being evicted due to the economic impacts of COVID-19. These protections apply to any tenant who is unable to pay all or part of their rent due to a COVID-19-related reason so long as they provide an economic hardship declaration.

Under the Aug. 31, 2020, legislation, a landlord could not evict a residential tenant before Feb. 1, 2021, if the inability to pay rent was due to a COVID-19-related hardship accrued between March 4–Aug. 31, 2020. Gov. Newsom’s Jan. 29, 2021, legislation extends this date. Now, no tenant can be evicted before June 30, 2021, if the eviction is a result of rent owed due to a COVID-19-related hardship. Additionally, no tenant can be evicted after June 30, 2021, if they pay 25% of the rent owed from September 2020 through June 30, 2021, either monthly or in a lump sum before the final day it is due and attests they face a financial hardship due to the pandemic. Landlords can recoup the remaining balance owed after June 30, 2021, but may not use nonpayment of rent as a basis for eviction.

Additional legal and financial protections for tenants include:

  • Extending the notice period for nonpayment of rent from three to 15 days to provide the tenant additional time to respond.
  • Protecting tenants against being evicted for “just cause” if the landlord is shown to be in effect evicting the tenant for COVID-19-related rent nonpayment.
  • Requiring landlords to provide tenants a notice detailing their rights under the act.

If rather than going through the required court process when legally permitted to do so, a landlord locks tenants out, removes personal property or disconnects utility services to evict a tenant, they could face fines between $1,000 and $2,500 per violation. These penalties are in effect until June 30, 2021.

Separately, under Senate Bill 91, landlords have the option to participate in a program whereby the state will use federal funds to cover 80% of a qualifying tenant’s unpaid rent from April 2020 through March 2021. All payments would be made to landlords directly. In order to be eligible, the landlord must forgive the remaining balance of owed rent and must not pursue an eviction. This would include rent, fees, interest or any other financial obligation under the lease. If federal funds remain available following March 2021, the state will continue to pay 25% of future rent for a period up to three months.

Whether it behooves a landlord to pursue federal funding to cover unpaid rent in exchange for rent forgiveness of course hinges on many factors, including cashflow and reserves, expectations of rent repayment, and myriad regulatory, legal and reputational implications. For these reasons, landlords should consult with counsel prior to engaging in any act related to nonpayment of rent by a tenant to avoid any kind of monetary penalty. Landlords should also consult with local counsel to investigate creative solutions including lease restructuring or to determine alternative remedies to eviction, including but not limited to opting into the program under Senate Bill 91.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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