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COVID-19 Update for Property Managers & Landlords in February 2021 (+ Webinar Replay)

February 11, 2021 0 Comment Category: Real Estate

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As many may have heard, there have been some recent developments in the last week with respect to the extension of last year’s Assembly Bill 3088 (“AB3088”), which the legislature passed last Thursday in Senate Bill 91. While it will continue with some of the aspects that you are already used to from AB3088, we wanted to summarize some of the main points that you will need to know going forward.

Nuisance Tenants or Tenants breaching leases for non-monetary issues: Nothing has changed with respect to tenants who are a nuisance or those who are otherwise breaching the lease for a non-monetary reason and you may still immediately proceed with evictions against them.

Removal of Services to Comply with COVID Orders: One silver lining to this bill is that if you temporarily remove any amenity or service in order to comply with any local, state, or federal COVID order, that is NOT considered a breach of the lease and it does NOT constitute a basis to reduce the maximum allowable rent you can charge to the tenant, in other words, you cannot get in trouble for reducing a service or amenity to comply with COVID orders.

Assignment of COVID Debt: you cannot sell or assign COVID debt until after July 1, 2021, or, if the family whose debt you are seeking to sell or assign would have qualified for federal assistance and the family has lower than 80% AMI income, you can never assign or sell that debt.

Retaliation/Discrimination: you cannot use a prospective tenant’s having COVID debt as a negative factor in evaluations, nor can you use an existing tenant’s participation in any COVID-related advocacy as a basis for retaliation.

Late Fees: you may not charge late fees on any COVID debt, ever.

Security Deposit: you may not use a security deposit to pay COVID debt while a tenant remains in their unit, HOWEVER, once the tenancy is ended (i.e., when the tenant leaves), you MAY use the security deposit to pay unpaid rent, COVID or otherwise, as you normally would.

Unpaid rent from September 1, 2020 to June 30, 2021: While the deadline for the 25% payment of rent for September 1, 2020 to January 31, 2021 has arrived, the Legislature has delayed that deadline to June 30, 2021. This means that as long as a tenant is able to pay the 25% of all unpaid rent accruing between September 30, 2020 through June 30, 2021 by June 30, 2021, you will not be able to evict them for non-payment of the remaining amount. This is contingent on them filling out the declaration stating that they are unable to pay the rent due to a reduction in rent due to COVID-19 for each month for which you provide them a notice to pay or quit. If they refuse to sign the declaration, you are allowed to proceed with evicting them, but courts will allow them to state later that they inadvertently did not sign the form to get out of an otherwise defenseless eviction.

To be clear, you are not allowed to require the 25% rental payments on a monthly basis as this is a question commonly asked by on-site managers, nor may you evict based on the 25% payment through January even though the original notice that you previously provided may have stated that to be the deadline. As many of you have been using the notices provided by the California Apartment Association, we would presume that they will be issuing new notices to cover the time period through June. Even if you are giving a notice now that covers the period from September to January, you will also need to use an updated form as the form that you were previously using is outdated.

Governmental Rental Assistance: The new legislation provides for assistance to landlords if tenants apply for help in paying their outstanding balance. Funds requested by tenants may be used to pay rental arrears, prospective rent payments, and utilities (including arrears and prospective payments for utilities). The maximum amount of the rental assistance will be 80% of the unpaid rental debt from April 1, 2020 to March 31, 2021. If a Landlord chooses to accept this offer, they waive the remaining 20% that is due. If a Landlord chooses to reject this offer, the payment will be 25% of the rental amount due, which would be enough to stop the potential eviction, but would leave the remaining 75% as a collection debt that a landlord could proceed with an action to recover.

Assistance Priority: While the state was provided with a substantial amount of federal assistance, it is still unclear how much outstanding rent is owed and therefore, rental assistance shall be allocated on a priority basis, separated in three levels.

Level 1 – Eligible households of the Consolidated Appropriations Act, which is a Federal law targeted to households which make less than 50% of the area median income. Despite that this bill is meant to assist people who have lost income due to COVID-19, this will primarily impact people who were already in low to middle-income income households.

Level 2 – communities disproportionately impacted by COVID-19 as determined by the Department of Housing and Community Development. We would presume this will likely result in areas of diversity receiving a bulk of the assistance, with properties that are non-rent control or more luxury buildings likely falling into the final group.

Level 3 – Any household with an eligible household income of less than 80% of the area’s median income. This will be based on the 2020 statistics.

Informational Notice: Similar to the notice that was required to be sent in September, for any tenant that has a balance as of February 1, 2021, must be sent a notice no later than February 28 2021, informing them of their rights under this new legislation. As many of you used the forms distributed by the California Apartment Association, the informational notice will lay out these new rules and the 15-day notices will require this notice to also be included, similar to what you may have been using over the last 6 months.

Collection Cases – Small Claims: The beginning of cases to collect on outstanding balances in small claims court can only begin on August 1, 2021, instead of the originally scheduled March 1, 2021. This is in line with the delayed deadline of the 25% requirement.

Collection Cases – General Civil: For Tenants with a larger balance, you may be able to immediately bring legal action in civil court against them, which may encourage them to vacate as an option to help resolve their matter. However, you must attach to the complaint evidence that you have first made a good faith effort to investigate whether governmental rental assistance is available to the tenant, sought that assistance for them, and/or cooperated with the tenant’s efforts to obtain rental assistance from either a governmental entity or third party.

Rules Remaining In Place: There are many rules that have not changed with the new bill:

1. High-income tenants still must provide proof of their inability to pay.

2. Licensees (former managers) and forcible detainers (squatters) may proceed

3. No-fault evictions, such as those resulting from 60-day notices to terminate, may not be filed until July 1, 2021. This is essentially the extension of AB1482 which was put in place by AB3088 and shall continue to apply to all properties, both rent control and non-rent control. No-fault evictions include, but are not limited to, Ellis Act, Landlord or relatives of the landlord occupancy, resident manager, etc.

If you have further questions, please call our office at (818) 661-2420.