In the final week of the California legislature, the governor and lawmakers reached an agreement on eviction relief for home renters and foreclosure protection for small landlords financially affected by the COVID-19 pandemic. California Assembly Bill (AB) 3088, known as the Tenant, Homeowner and Small Landlord Relief and Stabilization Act of 2020 (the Act), received legislative approval before midnight on Monday, August 31, and Governor Newsom briefly signed the bill after that . The new law, which comes into effect immediately, allows the state to delay the likely resumption of illegal detention by California courts on September 1, 2020. Congregation member David Chiu, the draftsman of the law, stated that AB 3088 is a temporary solution designed to provide tenants with some level of security, modest protection for small landlords, and time for the state to determine what additional facilities are needed in the future could be. In particular, protective measures for commercial real estate tenants and landlords are missing from the bill.
However, for apartment tenants, the law provides protection from unlawful detention for unpaid rents for the period March 1, 2020 to August 31, 2020 due to financial issues related to COVID-19. For the period from September 1 to January 31, 2021, a tenant affected by COVID-19 is responsible for at least 25 percent of the rents due for this period in order to receive such eviction protection. The law does not waive unpaid rents, but converts that amount into consumer debt that can be collected in a small claims court from March 1, 2021. To the extent that a tenant affected by COVID-19 cannot meet this minimum of 25 percent AB 3088 would only offer evacuation protection until February 1, 2021. It is important that a landlord who resorts to out-of-court self-help, e.g. For example, shutting down utilities to force a renter to vacation will result in new fines ranging from $ 1,000 to $ 2,500.
To qualify for the bill's protection, most tenants simply need to sign a statement stating that they are financially affected as a result of the pandemic. The law contains a number of implications within the concept of "COVID-19-related financial distress," including increased spending due to health effects, increased childcare or elderly care responsibilities, and loss of income. In contrast, higher-income tenants (tenants with a household income greater than $ 100,000 or over 130 percent of the median household income) may be required to provide specific documentation proving financial loss. AB 3088 also allows lawful evictions unrelated to unpaid rent to be carried out as early as September 2, 2020, and evictions for unpaid rent not related to the pandemic to be carried out from October 5, 2020 can be.
The law does not protect landlords from foreclosures and does not require banks to be lenient. Instead, the protection set out in the existing Homeowners Bill of Rights will be extended to small landlords (ie home ownership with up to four units). Mortgage servicers must reach out to borrowers prior to any foreclosure proceedings to provide potential forbearance options. The law prohibits double tracking when a servicer initiates foreclosure proceedings considering loan changes with the borrower. Finally, when a small landlord is denied indulgence, the law requires the mortgage servicer to provide a written statement of the decision. The foreclosure protection for small landlords applies until January 1, 2023.
Legislators are still hoping for additional federal measures to combat COVID-19 that could help address issues in the housing markets. However, the framework provided by AB 3088 allows the state to avoid a dramatic increase in residential evictions until early next year.
Grace Winters and Dina Tecimer are partners of Manatt Real Estate, and Delilah Clay is a legal advisor on Manatt's government and regulatory practice.