SLG Client Alert: Extensive new CA Laws Governing Evictions and Foreclosures, Effective Now! Eviction Update

Note: The following is a general discussion on the specified topic or issue and may not be relied on as legal advice in any specific case or matter you encounter. You should review any applicable case, or matter with counsel experienced in this area of law and should not generally rely on the discussion in this Alert.

Date: September 1, 2020
To: All Scheer Law Group Clients and Affiliates
From: Spencer Scheer
Subject: Extensive new CA Laws Governing Evictions and Foreclosures, Effective Now!

Overview: As economic fallout from C-19 intensifies, lenders and borrowers will be whipsawed by local state and federal regulations governing commercial and residential real property.

The CA legislature just expanded both borrower and landlord protections. The new laws are extensive and must be reviewed by all lenders.

Re Mortgages: The legislature expanded the CA HOBR. CC 2924.15 changes the definition of HBOR-covered borrowers to include borrowers owning no more than 3 properties none of which have more than 4 units. This now protects some landlords.

CC 3273.01, et al. addresses loan forbearance requests. If a forbearance request is denied due to a breach that the borrower can cure,, it allows borrowers to cure it. It also exempts lenders following GSE forbearance requirements.

Re Evictions: The new law limits evictions for non-payment of rent depending on when the rent was due and hardship suffered. Evictions can proceed on other non-payment defaults e.g., lease violations.

The following is an expanded recap of current eviction restrictions and the impact of the new laws by Jon Seigel. We will provide more extensive mortgage updates later on.

UPDATE ON EVICTIONS DURING COVID PANDEMIC

By Jon Seigel

In our last evictions update, we informed you that the prohibition on new unlawful detainer (eviction) actions in state court was expiring on September 1, 2020 and that, unless the state legislature intervened, new unlawful detainer actions could be filed beginning September 2, 2020. On August 31, 2020, the state legislature passed, and the governor signed, a bill extending the prohibitions on new unlawful detainer cases involving nonpayment of rent by residential tenants. All other unlawful detainer actions may be filed, subject to any local moratorium restricting evictions. We have discussed some of those moratoria in prior advisements.

In addition, the new law imposes certain provisions of the California Homeowners Bill of Rights to owners of smaller residential rental properties.

The key points of the new law are summarized below. This advisement is not intended to be an exhaustive analysis of the new law.

APPLICABILITY OF NEW LAW: The new law applies to residential cases for nonpayment of rent (including late charges) only. Therefore, there is no prohibition on the filing of unlawful detainer actions against residential tenants for something other than nonpayment of rent (for instance, lease violations, nuisance, or non-at fault evictions). In addition, there is no prohibition on the filing of unlawful detainer actions in any commercial case, including for nonpayment of rent.

The caveat to this is that some local jurisdictions have imposed moratoriums on evictions, most often the service of eviction notices. Those moratoria remain in effect, but, under the new law, cannot be extended by the local jurisdiction.

HOW THE NEW LAW WORKS: With respect to nonpayment of rent, the new law applies in different ways depending on when the unpaid rent accrued:

a. Rent Accruing Before March 2020: There is no prohibition on filing new unlawful detainer cases. Cases can be filed as soon as September 2, 2020.

b. Rent Accruing Between March 2020 and August 2020: Evictions may not be based on unpaid rent accruing during this period, as long as the tenant fills out legal paperwork, within 15 days after being served an eviction notice, attesting under oath to financial hardship resulting from the coronavirus. The tenant need not be stricken with the coronavirus, but must be impacted by it such as by a loss of income. Where tenants make more than 130% of the median income in their area, if it is above $100,000, property owners may ask the tenant to show proof of inability to pay rent due to the coronavirus.

If the tenant does not submit an attestation under oath to financial hardship resulting from the coronavirus with 15 days after being served an eviction notice or a tenant who makes more than 130% of the median income in their area, if it is above $100,000, does not submit proof of financial hardship resulting from the coronavirus after being requested to do so, then the property owner may file an unlawful detainer action beginning October 5, 2020.

If the tenant timely submits the paperwork discussed in the immediately preceding paragraph, then the unpaid rent will be considered to be “civil debt” and the property owner’s remedies will be limited to pursuing collection of that debt in small claims court. The small claims court’s normal jurisdictional limit of $10,000 will not apply to cases involving nonpayment of rent. Property owners may not file actions in small claims court to recover these debts until March 2021.

c. Rent Accruing Between September 2020 and January 2021: Tenants impacted by the coronavirus must pay 25% of rent accruing during this time period to avoid eviction, with the balance being considered to be “civil debt” recoverable in a small claims action. Payment of the 25% of the rent must be made by January 31, 2021. The 25% can be paid in different increments during this period or in a lump sum as late as January 31, 2021. For instance, if rent is $1,000 per month, the tenant need pay only $250 (25% of $1,000 for five months) and can wait until January 31, 2021 to pay it. If a tenant impacted by the coronavirus fails to pay the 25% by January 31, 2021, an unlawful detainer action may be filed beginning February 2021.

PARTING THOUGHTS: The new legislation is not necessarily the end of legislation regarding residential nonpayment of rent during the coronavirus pandemic. The author of the new law has stated that it was only an imperfect temporary fix and that the legislature should revisit it next year.

Please call or email or leave if you have questions.