COVID-19 Rent Delinquencies
Due to COVID-19 mandates, there have been some changes to the legal notification process landlord must convey to tenants. The Tenant Relief Act was passed in California stating that tenants could not be evicted if they did not pay rent for reasons related to to the COVID-19 Pandemic. The effective period for the initial phase of the eviction moratorium was March of this year through the end of August . September 1, 2020 marked the start of a second phase to the moratorium where tenants are required to pay a minimum of 25% of the contracted rent amount even if the reason for failure to tender the full rent is COVID-19 related. This period will continue through the end of January 2021. A landlord cannot evict a tenant for non-payment of rent if the resident submits a ‘Declaration of Financial Distress’ to the owner.
Landlords are still owed the back rent, which remains deferred, and there are legal remedies some are utilizing. There is the option to sue in small claims court if the amount is $10,000.00 or less. Starting in March 2021, landlord will be able to sue a tenant for COVID-19 related back rent for more than $10,000.00. If it can be proven that the tenant failed to pay rent for a reason other than COVID-19 such as: no job or revenue loss, or a tenant on government guaranteed recurring payment (social security, disability, or AFDC), the tenant can be evicted for non-payment of rent even with the Tenant Relief Act in place.
The 3-Day Notice to Pay Rent or Quit cannot be used as a rent demand notice through February 2021. Now, one of two 15-Day notices is required. If the tenant did not pay any rent from March through September, the tenant should be served a notice specific for the ‘protective’ period. A landlord is required to serve notice with language specific to the ‘transitional’ period, which commenced in September and will continue through February 2021. The 15-day period provides an opportunity for the tenant(s) to answer the notice by submitting a Declaration of Financial Distress due to COVID-19. If they respond with the Declaration, the tenants cannot be evicted unless they failed to pay the 25% during the ‘transitional’ period.
Additionally, if a tenant owes utility fees, late charges, return check bank fees, or fee related to replacing deposit amounts used as rent, there will be a separate set of 15-Day Notices for failure to adhere to monetary covenants. It would depend on whether the breach in covenant was during the ‘protective’ period or has occurred during the ‘transition’ period. Tenant who failed to pay rent prior to March can be evicted if properly served a rent demand notice.
There is also a disclosure regarding the Tenant Relief Act that must be sent to tenants who have not paid rent. The form should be submitted prior to the issuance of the 15-day rent demand notice. When the tenant and landlord come to an agreement on how the back rent is to be paid, there is a form that can be utilized that has required provisions for a legal agreement of this sort. A form has also been developed to calculate the back rent so that the payments are properly applied.
Another agreement has been created for tenants who chose to move out due to COVID-19 reasons. This agreement is similar to the cash for keys agreements used in residential sales transactions.
While most of the issues during the Pandemic have been with non-payment of rent, some tenants have violated other provisions and covenants of the lease, such criminal activity, and nuisances. Landlords will not use the standard Three-Day to Cure Covenant or Quit. A new form has been drafted to comply with the COVID-19 Tenant Relief Act. This form will be used through February 2021 but can be issued right away especially if the violation of the lease adversely affects the health and well-being of other residents of the building.
Some landlords of single-family residences may need to get their property to back to move into the dwelling or to place the property on the market. Single-family homes previously deemed exempt from local and statewide rent control measures are excluded from the exemption since the start of the Pandemic; however, a seller is within their rights to lawful serve a tenant with a 30-Day Notice to Terminate Tenancy under the Tenant Relief Act. Any landlord may legally ask a tenant to move out if they take the property off the rental market, perform a substantial rehab or remodel or the property is deemed uninhabitable by a government agency. Landlords are required to pay the equivalent of one month’s rent as a relocation fee. The fee is not required if the landlord or their family member is moving into the property or if they are selling the property. The property must be under a purchase contract to evict the tenant.
If you have any questions about your rental property, tenants, and how to maintain the stability of your property, feel free to contact our office.
Blog by M.A. Williams
Broker, Global Realty Group