The information in the following blog post was provided by our colleagues at the Law Offices of Todd Rothbard.
As the pandemic lingers on, so do the economic challenges facing landlords wrestling with diminished income and loan obligations due to residential tenants who are unable to make rent payments during these COVID times. With most of the rent-forbearance moratoriums across the U.S. already expired, the state of California moved to pass new sweeping legislation on September 1, 2020, extending relief and protection for tenants through January 31, 2021 for those who declare an inability to pay all or part of rent due to a COVID-19 related reason.
Like with most new pieces of legislation, the devil is in the details and there are details aplenty with this new law, titled the COVID-19 Tenant Relief Act (CTRA). We thought this information might help you understand how CTRA will impact tenants and landlords alike. From California Governor Gavin Newsom’s website we have captured some of legislation’s specifics:
Under the legislation, no tenant can be evicted before February 1, 2021 as a result of rent owed due to a COVID-19 related hardship accrued between March 4 – August 31, 2020, if the tenant provides a declaration of hardship according to the legislation’s timelines. For a COVID-19 related hardship that accrues between September 1, 2020 – January 31, 2021, tenants must also pay at least 25 percent of the rent due to avoid eviction.
Tenants are still responsible for paying unpaid amounts to landlords, but those unpaid amounts cannot be the basis for an eviction. Landlords may begin to recover this debt on March 1, 2021, and small claims court jurisdiction is temporarily expanded to allow landlords to recover these amounts. Landlords who do not follow the court evictions process will face increased penalties under the Act.
The legislation also extends anti-foreclosure protections in the Homeowner Bill of Rights to small landlords; provides new accountability and transparency provisions to protect small landlord borrowers who request CARES-compliant forbearance; and provides the borrower who is harmed by a material violation with a cause of action.
Additional legal and financial protections for tenants include:
- Extending the notice period for nonpayment of rent from 3 to 15 days to provide tenant additional time to respond to landlord’s notice to pay rent or quit.
- Requiring landlords to provide hardship declaration forms in a different language if rental agreement was negotiated in a different language.
- Providing tenants a backstop if they have a good reason for failing to return the hardship declaration within 15 days.
- Requiring landlords to provide tenants a notice detailing their rights under the Act.
- Limiting public disclosure of eviction cases involving nonpayment of rent between March 4, 2020 – January 31, 2021.
- Protecting tenants against being evicted for “just cause” if the landlord is shown to be really evicting the tenant for COVID-19-related nonpayment of rent.
Existing local ordinances can generally remain in place until they expire, and future local action cannot undermine this Act’s framework. Nothing in the legislation affects a local jurisdiction’s ability to adopt an ordinance that requires just cause, provided it does not affect rental payments before January 31, 2021.
The author of the CTRA, California Assembly Member, David Chiu, has described the legislation as “a temporary solution meant to provide some level of certainty to renters, modest protections for small landlords and time for the state to determine what additional relief may be needed in the future.”
The bill does not provide any protections for landlords or commercial real estate tenants.
Most tenants can easily qualify for bill’s protections simply by signing a declaration indicating they have been impacted financially due to the COVID-19 pandemic. Those impacts defined within the concept of “COVID-19-related financial distress” include:
- Loss of income
- Increased expenses due to health impacts
- Increased childcare or eldercare responsibilities
Renters with household income over $100,000 may need to provide documentation proving financial loss.
CTRA does not provide protection for landlords from foreclosure, nor does it require lenders to provide landlords forbearance. However, the bill provides some relief for small landlords by extending the protections provided in the current Homeowner’s Bill of Rights. If you are considered a small landlord, you should seek legal council on these specific protections.
We hope this brief overview of the CTRA legislation, also known as AB 3088, has been informative. There are many more details to the bill which you should familiarize yourself with. We encourage you to contact your attorney to learn more, or do not hesitate to give us a call at 866-398-1031.
Our team at First Guardian Group will continue to monitor and report on new legislation that may impact landlords. Feel free to contact us at any time with your questions and we will do our best to provide answers or refer you to others for assistance. You can also schedule some time directly on Paul's calendar, here.
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