What a Difference a Few Hours Make

In “seventy-two little hours,” August 31, 2020, marked the date California’s Governor signed into law the most restrictive set of laws on residential rental property owners the State has seen in decades. It was presented to him for signature by the Legislature after passing AB 3088 —and on the heels of 2019’s passing of AB 1482.

Under AB 3088 tenants can largely remain in possession from March 1, 2020, through January 31, 2021 (termed the “Covered Period” under the new State law). If that did not get your attention, the new law also allows tenants to personally deliver or mail just twenty-five (25) percent of the rent due for the months from September 1, 2020, through January 31, 2021.

By now, let’s hope you are generally familiar with the new law. If not, let’s look at some of the most important aspects of the law. There are other laws (including federal and hundreds of local government ordinances and regulations) that change the manner in which we collect rent when it is due, provide notices regarding non-payment of rent, seek to recover unpaid rent and, if necessary, eviction during the COVID-19 pandemic. There is the CARES Act, the CDC Eviction Moratorium, hundreds of local ordinances, and the provisions of AB 3088 to follow. The combination of the new changes in law cannot be ignored or avoided, unless the owner/agent wants to be subject to substantial penalties and attorney fees should violations be determined.

AB 3088 affects the ability of an owner to evict tenants due to non-payment of rent from March 1, 2020, through January 31, 2021, should a tenant state they have experienced a financial hardship that is related to COVID-19. Notices to tenants and declarations by tenants are different due to certain time periods.

The first time period to follow is termed the “Protected Time Period” which begins on March 1, 2020, and ends on August 31, 2020. During this time period tenants cannot be evicted due to nonpayment of rent should they receive a specified notice and declaration (which you were to deliver) by September 30, 2020, and submit a completed declaration within 15-days.

The next time period, termed the “Transition Time Period”, you are to deliver a separate notice and declaration to a tenant who does not pay all of the rent due to the pandemic. Should the tenant complete the declaration and submit it to you within 15 days, the tenant is largely protected from eviction due to non-payment of rent. Should the tenant fail to complete and deliver the declaration to you, the tenant is, for the most part, not protected by the new law. There is a provision in AB 3088 that allows an owner/agent to evict “high-income” tenants to be evicted. The high-income tenant provision in the new law may not be useful in most cases.

While the courts are to “re-open” as of October 5, 2020, there are other laws that will not allow you to proceed due to non-payment as well. But on that date the court is authorized to issue summons and entering default judgements or proceeding with cases alleging “just cause” and other non-payment of rent cases.

Let’s look at a few more specifics regarding nonpayment of rent.

During the “Protected Time Period” the owner/agent is to serve tenants who owe rent a 15-day notice (court days which exclude Saturdays, Sundays and other judicial holidays) unless the service is restricted or prohibited by local ordinance. The notice is to include specific language that the legislature wanted to have served on the tenant. In addition to the notice, a declaration form is to be served on the tenant. The tenant has 15-days to complete and return the notice to the owner/agent.

For those that like small claims court, the bill should be of great assistance. Starting March 1, 2021, if a tenant does not pay their transition time period rent (September 1, 2020, through January 31, 2021) the monetary jurisdiction is lifted until February 1, 2025. Owners can file an unlimited number of small claims actions during this time. Remedies in small claims court have a number of risks.

During the “Transition Time Period” (September 1, 2020 through January 21, 2021) the owner must serve a 15-day notice to pay or quit. The notice is to include specific language and a declaration form to be completed, signed and delivered to the owner/agent within 15 days. The declaration form states the tenant has experienced a financial hardship during the pandemic.

Also, during the Transition Time Period the tenant is to pay the owner/agent at least 25 percent of the rent due by February 1, 2021.If a local ordinance does not permit the tenant to pay even this percentage amount, the tenant can avoid paying the 25 percent of the rent.

If the tenant completes and delivers the declaration to the owner/agent during the Transition Time Period, and pays 25 percent of the rent, the tenant is once again largely protected from eviction due to non-payment of rent. Tenants that have not returned the completed declaration within the 15-day time period can file the declaration with the court once the tenant is served with an unlawful detainer.

Should that occur, a court hearing is to be “scheduled” within 10 days prior to the underlying action. A judge is to determine at this hearing if the failure to return the notice was due to “mistake, inadvertence, surprise or neglect.” This gives the court tremendous discretion. As in a tennis game, we would say, advantage tenant!

In the event that the tenant does not file the completed declaration with the owner/agent and does not appear in court, the owner/agent can proceed with an eviction where rent accrued between September 1, 2020, through January 31, 2021, on and after February 1, 2021.

The new law also provides for protections for every financial obligation under a rental agreement. The same statutory language in the 15-day pay or quit notices must be included in cure or quit notices. Owners/agents must serve the notices and declarations for each of the periods (protected AND transition). If the property is subject to the CARES Act, there may be as many as eight (8) notices. For cure or quit notices regarding financial obligations, there will be an additional four (4) notices.

The impact of local ordinances MUST NOT be overlooked. If the moratorium ordinance was in effect as of August 19, 2020, the terms and requirements remain in full force and effect until and unless there is a sunset clause that expires before January 31, 2021. Amendments or new ordinances that are adopted on and after August 19 will not take effect until February 1, 2021. It is important to note that the new State law does not permit a city or county to extend a full repayment requirement beyond March 31, 2022.

Not to be forgotten, the CDC stepped into the game by prohibiting evictions through the end of the year.

It does, however, allow State and local governments to adopt and enforce laws that are more restrictive than the CDC order that published in the Federal Register on September 4, 2020. Violations of federal laws may expose owner/agents to significant fines that range from $100,000 to $500,000.

There is little question the new State and federal laws are complex. Owners/agents should seriously consider retaining competent counsel.

If you got to the end of this article, you must ask why did local, state and federal law change so drastically during the pandemic? I am still scratching my head and asking why didn’t the Newsom Administration, State Legislature, and federal government provide rental assistance? And then you may want to ask yourself, why did a State apartment association support a bill that allows tenants to pay 25 percent of rent due for five consecutive months and permit tenants to remain in possession for over a year and barely pay rent?

Think of this, AB 3088 is a screaming deal for tenants by allowing tenants to remain in possession, continue to incur interest-free rental debt and make it impossible for future rental owners/agents to discover the debt was never paid.

Ron may be reached at Ron@CalStrategic.com