COVID Rent Debt, Bill Updates

“In most cases, those collecting COVID-19 rental debt in court must submit documentation…”

For residential owners and managers that have not received rent payments from tenants for several months where tenants remain in possession, the laws are scheduled to dramatically change in a matter of months unless the Legislature extends tenant protections once again.

The California Department of Financial Protection and Innovation (DFPI) which was formerly known as Department of Business Oversight will begin to license applicants under the Debt Collection Licensing Act (DCLA). What is notable is the licensees will be required to comply with California’s renter protections associated with COVID-19 rental debt. Under that law, rental debt includes any “unpaid rent or other unpaid financial obligation of a (residential) tenant” that came due between March 1, 2020, and June 30, 2021. There are several protections for tenants that everyone needs to know, including:

  • The rental debt cannot be sold or assigned to a debt collection entity.
  • Beginning July 1, 2021, COVID-19 rental debt cannot be sold or assigned if that debt pertains to a person “who would have qualified for rental assistance under … if the person’s household income is at or below 80 percent of the area wide median income (AMI) for the 2020 calendar year.”
  • Creditors (owners and managers and their agents) cannot charge or attempt to collect late fees for the COVID-19 rental debt if the renter has submitted a “declaration of COVID-19 related financial distress.” This form can arguably be submitted at most anytime including the date of a court hearing on the matter at issue.
  • In most cases, those collecting COVID-19 rental debt in court must submit documentation showing that they have made “a good faith effort to investigate whether governmental rental assistance is available to the tenant, seek governmental rental assistance from any governmental entity or other third party.” This, we might add, is a very comprehensive section of law that attempts to restrict how an owner or agent may collect past due rent (see Code of Civil Procedure §871.10) using any third party to collect COVID-19 rental debt.
  • Owners and agents may not start to recover the debt before August 1, 2021, and any action to recover the debt that was pending as of January 29, 2021, is “stayed” until August 1, 2021, unless the Legislature extends that deadline.

As a reminder, under the COVID-19 rental assistance program owners can receive 80 percent of unpaid rent owned from April 1, 2020, through March 31, 2021, from the state or qualifying local governments if they agree to forgive the remaining unpaid rent for that period if the tenant(s) are not earning more than 80 percent of the local AMI. Several webinars and written advisories have been previously provided regarding the process and procedure to follow should an owner believe that the tenants are qualified, remain in possession, and have not paid rent during the time period noted in this article.

The DFPI recently issued an advisory to debt collectors, et al., that the federal Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Act (CFPA) which is part of the Dodd Frank Wall Street Reform and Consumer Protection Act protect consumers from unfair, false, deceptive or misleading representations and harassment or abusive conduct in rental debt collection.

The DCLA was enacted last year to protect consumers and provide the DFPI with licensing and examination authority over debt collectors which includes debt buyers. DFPI will begin licensing later this year. Unquestionably, owners and agents will want to determine if a debt collector is licensed by DFPI.

Now for the update regarding the California Legislature:

  • 2,615 – the number of bills that have been introduced this year to date.
  • 119 bills we are tracking pertaining to residential property management.
  • Of the 119 bills, half of them are “Tier 1” measures.
  • Of those bills, there are 18 bills that are extremely important to the industry.

Yes, there are bills that may intrigue you which include:

  • Effectively ban owners from going out of business;
  • Require a comprehensive rent registration form which includes information about each tenant, square footage, and an unbelievable amount of detailed information about renting each unit, evictions, terminations, amount of rent, number of occupants, etc.;
  • Would impose a special tax for being in the business of rental housing;
  • Require water consumption to be reduced to 40 gallons per capita per day in residential properties;
  • Would add homelessness to our discrimination statutes; and
  • Make it an unlawful practice for an owner to inquire about an applicant’s criminal history during the “initial application process.”

Ron Kingston may be reached at [email protected]