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Part One: To Pay, or Not to Pay (Rent) – California Landlord-Tenant Regulations During COVID-19

In this two part series we will explore the various state-wide and local regulations in place governing the landlord-tenant relationship in California as well as practical guidance for both parties. In Part One we will begin by providing a detailed overview of the regulations in place today.

COVID-19 has flipped the landlord-tenant relationship on its head.  Prior to the COVID-19 pandemic, the relationship between landlords and tenants—and the payment of rent—was governed by the terms of the lease. If a tenant failed to pay rent, the landlord could recover possession through the predictable and expedited unlawful detainer process. Now, in an effort to stymie the social and economic fallout of social distancing measures, the state courts and local governments have put into place a patchwork of measures that impact both the timing of the payment of rent, and that halt all evictions until further notice. This post provides a high-level guide to the current situation as well as some practical pointers on how to handle the current crisis.

Overview of California COVID-19 Rent and Unlawful Detainer Regulations

  1. Statewide Regulations by the Judicial Council:

The Judicial Council of California—the policymakers for all California State courts—issued eleven Emergency Rules Related to COVID-19 on April 6, 2020. Two of these new statewide rules clearly prohibit unlawful detainers and foreclosures (except where the action is necessary to protect public health and safety) until 90 days after Governor Newsom declares that the state of emergency related to the COVID-19 pandemic is lifted, or until the emergency rule is amended or repealed by the Judicial Council. Even though California is starting to relax the statewide stay-home orders, there is no indication that the Governor will lift the state of emergency under Executive Order N-28-20 in the near term.

Emergency Rule Number One applies to all actions for unlawful detainer (whether commercial or residential), and (1) prohibits a court from issuing a summons on a complaint for unlawful detainer (although it does not prohibit a superior court from accepting the filing of an unlawful detainer complaint); (2) prohibits the entry of default or default judgment except where the defendant has not timely appeared; and (3) provides that trial dates will be set at least 60 days after the request for trial is made (instead of the current rule setting trial dates within 20 days after the request is made). Because no summons can be issued, the defendant would not be required to answer the unlawful detainer complaint and the litigation would be on pause until a summons can be issued and served. Practically, this means that landlords face an unknown amount of delay to the recovery of possession, unless the tenancy threatens health or safety. It is not yet known how courts will handle the backlog of cases, or whether courts will exercise their right to dismiss without prejudice cases in which the proof of service of summons was not filed within 60 days of the complaint. If not, it may mitigate delay to file unlawful detainer actions as they accrue, even if service cannot yet be effectuated. Notably, this emergency rule does not prohibit a landlord from pursuing non-judicial remedies under the lease, such as drawing down on a tenant’s security deposit, or calling on a letter of credit or a personal guarantee. However, some local jurisdictions may attempt to regulate these landlord remedies.

Emergency Rule Number Two applies to judicial foreclosures under California Code of Civil Procedure § 725a, et seq., and (1) stays any action for foreclosure on a mortgage or deed of trust, including any action for a deficiency judgment, and prohibits the court from taking any action or issuing any decisions or judgments; (2) tolls the statute of limitations for filing a judicial foreclosure action; and (3) extends the period to elect or exercise any rights under that chapter. Importantly, this emergency rule does not prohibit the vast majority of foreclosures, which are completed non-judicially[1]. However, if the foreclosed party refused to vacate the premises, removal would not be an option while Emergency Rule Number One is in effect.

These Emergency Rules apply throughout California. Some local jurisdictions have also passed eviction moratoria and foreclosure moratoria, which are generally more limited than the Judicial Council’s Emergency Rules, and supplement but do not replace the Emergency Rules. Below are examples of some local regulations.

  1. Local Regulations

San Diego

On March 25, 2020, the City of San Diego adopted Emergency Ordinance No. O-21177[2], enacting a temporary moratorium on commercial and residential evictions. The Ordinance expires May 31, 2020. Many other cities in the County of San Diego have followed suit and adopted similar emergency ordinances.

As long as a tenant complies with the Ordinance’s notice and documentation requirements, landlords cannot charge or collect late fees for the tenant’s failure to pay rent, or take any action to evict the tenant, including resorting to notice, filing or prosecuting any unlawful detainer action, or pursuing a no-fault eviction. Furthermore, tenants have up to six months from the effective date of the Ordinance (March 25, 2020), or the withdrawal of Governor Newsom’s Executive Order N-28-20, whichever occurs soonest, to pay all unpaid rent.

To comply with the Ordinance, a tenant must provide written notice to its landlord, on or before the date its rent is due, that it is unable to pay due to COVID-19-related financial hardship. Then, within one week of providing notice, the tenant must provide its landlord with documentation or objectively verifiable information of its financial hardship. If a tenant fails to provide the requisite notice or documentation, landlords may pursue any enforcement action in accordance with state and local laws.

It is important to note that the Ordinance does not prevent landlords from commencing or completing eviction actions against tenants who were already in default of their lease prior to March 12, 2020, or for any non-monetary lease defaults occurring on or after the effective date of the Ordinance. Additionally, if a tenant chooses to move out while the Ordinance is in effect, all unpaid rent is due upon move out unless the lease agreement says otherwise.

San Francisco

On March 17, 2020, San Francisco Mayor London Breed announced a temporary moratorium on commercial evictions for small and medium-sized businesses in the City and County of San Francisco. Originally set to expire on April 17, 2020, Mayor Breed extended the Order through May 17, 2020.

The Order applies to tenants with less than $25 million in worldwide gross receipts for tax year 2019, and prohibits landlords from evicting qualifying tenants for failure to pay rent due on or after March 17, 2020, without first providing notice and an opportunity to cure. Indeed, if a tenant fails to pay rent, the landlord must provide the tenant with written notice of the violation and an opportunity to defer the rent payment for a “cure period” of at least one month from the date the tenant receives the notice. The tenant then has the full cure period to either pay the rent or provide documentation to the landlord showing an inability to pay due to a COVID-19-related financial impact. If the tenant provides the requisite documentation, the cure period is automatically extended for an additional month so that the landlord and tenant can discuss the matter in good faith and develop a payment plan. If the landlord and tenant cannot agree on a plan, the tenant must, prior to the cure period expiration date, either pay the rent or provide additional documentation of its continuing inability to pay; thereafter the cure period will extend by one more month. This process can continue for up to six months after the original rent due date.

Like San Diego, the San Francisco Order does not prevent landlords from commencing or completing eviction actions against tenants who were already in default of their lease prior to March 17, 2020, or for any non-monetary lease defaults occurring on or after the effective date of the Order. Furthermore, San Francisco landlords are permitted to draw from an existing security deposit in the event a tenant has missed a rent payment if the lease agreement allows it. Finally, the Order grants the Office of Economic and Workforce Development authority to grant waivers from the Order if a landlord can demonstrate that being unable to evict a tenant would cause them significant financial hardship.

Orange County

Although Orange County has yet to pass a countywide eviction moratorium, several cities within the county enacted their own orders. To illustrate some of the varying orders, this section discusses Anaheim’s and Costa Mesa’s Orders. 

Both Orders apply to residential and commercial tenants and both prohibit landlords from charging late fees or penalties for excused unpaid rent. Furthermore, the two Orders require tenants to notify their landlords in writing of their inability to pay rent and provide documentation in support. Interestingly, the Anaheim Order requires tenants to pay the portion of the rent that the tenant is able to pay.

These Orders go one step further than the Judicial Council Order by not only prohibiting courts from issuing eviction notices but also prohibiting landlords from even filing unlawful detainer actions while the Orders are in effect. Additionally, the timing on these Orders differ. The Anaheim Order expires May 31, 2020, while the Costa Mesa Order expires when Governor Newsom withdraws his Executive Order. Finally, Anaheim and Costa Mesa tenants have 120 days after the expiration of the applicable Order to repay any owed rent.

Los Angeles

 On March 27, 2020, the City of Los Angeles passed a temporary Eviction Moratorium, shielding residential and commercial tenants alike.[3] The Ordinance is in effect until the City declares an end to the local state of emergency. Like many other eviction moratoria in California, this Ordinance prohibits evictions for tenants who cannot pay rent due to circumstances related to the pandemic. In fact, commercial tenants have up to three months following expiration of the local state of emergency to repay any owed rent. Additionally, landlords cannot charge interest or late fees on this owed rent.

Unlike a number of other California eviction moratoria, however, the Los Angeles City Ordinance does not require tenants to provide notice of delinquency to the landlord or provide documentation proving pandemic related financial hardship. The City, however, strongly recommends holding on to proof for any future lawsuit. This begs the question—what will lawsuits and the burden of proof look like under these circumstances?

Now that you understand the regulations, stay tuned for Part Two of the series tomorrow which will provide you with some practical guidance on how to approach your situation.


[1] Unlike in non-judicial foreclosures, a lender may pursue a deficiency judgment against the borrower following a judicial foreclosure. The disadvantage of judicial foreclosures it that they take more time to complete than non-judicial foreclosures.  

[2] As of May 4, 2020, the City’s link does not appear to load in Chrome, but does load in Internet Explorer and Safari.

[3] On April 14, 2020, Los Angeles County beefed up its eviction moratorium with an amended Ordinance applicable to the entire county except for areas with their own eviction moratoriums. This Ordinance, set to expire on May 31, 2020 (1) gives tenants 12 months to repay any owed rent; (2) prohibits landlords from charging late fees or interest; (3) requires landlords to accept a tenant’s self-certification of financial hardship relating to the pandemic; and (4) prohibits landlords from harassing or intimidating tenants for acts or omissions expressly permitted under the Ordinance.

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Authors

Antony Nash

Member

Antony Nash is a real estate litigator at Mintz. He handles foreclosure proceedings, eminent domain matters, lender liability and financing cases, easement challenges, and lease disputes. Antony's clients include developers, landlords, and tenants. He also handles complex business matters.
Gabriel works with commercial real estate, health care, technology, and energy clients in the acquisition, leasing, sale, financing and development of office, multifamily, industrial and R&D properties.

Alyssa B. Roy

Associate

Alyssa Roy is a Mintz attorney whose practice encompasses commercial and construction litigation and land use permitting and litigation.

Edward M. Fallas is a Mintz attorney who focuses on complex commercial litigation for clients in a wide range of industries. He was a Summer Associate at Mintz in 2018.
Michael J. Godwin is a Mintz attorney who focuses his practice on litigation matters, including complex commercial litigation and white collar defense.