Big-time changes for the rental housing industry after Assembly Bill 3088 is passed

With stop gate measures and extensions of eviction moratoriums becoming routine, we finally have some sense of finality and clarity with the COVID-19 Tenant Relief Act of 2020.

In an earlier broadcast, we said that after halting most eviction and foreclosure proceedings since April 6,  the policymaking arm of the Judicial Council made it clear that it is not its role to legislate, but that the hard decisions on how to deal with the effects of the pandemic fall into the lap of the other two branches. Flirting with a midnight deadline, the California legislature and Governor Newsom rose to the occasion on Monday by approving state legislation that consolidates a patchwork of local rules. You can get the thumbnail version in this video. 

Sprinkled with some of our commentaries, here are some things that jump off the page.

How long does it take to count to three?

We have seen an evolution in 3-day notices, with weekends and court holidays not counting. Now, Assembly Bill 3088 has substituted a 15-day notice if the landlord is seeking unpaid rent or other charges that have become due between March 1, 2020, and January 31, 2021.

Bornstein Law has prepared a declaration that tenants have 15 days to return. If the tenant makes an assertion under penalty of perjury that he or she is unable to pay the rent because of a financial hardship related to COVID-19, there are important dates to keep in mind:

Is rent due March 1, 2020, through August 31, 2020?

Landlords cannot evict for non-payment of rent during the pandemic. They are certainly entitled to recover what is considered a consumer debt, but failure to pay this debt cannot be used in an unlawful detainer action.

Is rent due September 2020, through January of 2021?

The tenant is allowed until January 31, 2021, to make a partial payment of 25% of the total rent due.  If the tenant fails to make this payment, the tenant can be evicted.

In case you were wondering, the national eviction moratorium announced by the U.S. Centers for Disease Control does not appear to affect the Golden State, as California already has greater protections in place, a sentiment echoed by Governor Newsom.

Small claims court as we once know it will be upended, as well.

The remaining 75% of rent owed is treated as a civil or consumer debt, just like the provision for missed rent from between March 1 and August 31.

Traditionally able to only hear cases when the amount of controversy does not exceed $10,000, small claims court can now address all COVID-related debt regardless of the dollar amount, with one caveat - the plaintiff may not be represented by an attorney, unless the defendant appeals. Bornstein Law can draft up the paperwork and coach clients, but we can’t show up in small claims court. Instead, we will work behind the scenes.

Owners still can elect to recover the debt through Superior Court and one advantage of going up the ladder is that attorneys’ fees may be recoverable. The cost of legal counsel can become leverage in a dispute. The landlord who prevails can recoup the cost of their lawyer in Superior Court, but not in small claims court.

In a previous webinar on landlording on the other side of COVID,, Daniel peels the onion further on recovering debt accrued during the pandemic.

A lukewarm reaction from landlords and tenants

As the definitive voice of the rental property industry and open to trade-offs, the California Apartment Association has endorsed the bill.

We applaud the Legislature and governor for advancing legislation with protections for tenants truly harmed by COVID, while ensuring that owners can evict nuisance tenants and residents who can afford to pay rent but choose to game the system instead.

~ CAA President Thomas Bannon

What Bannon is referring to is a means test. If a tenant earns 130% of a county’s area median income or higher, a landlord can ask for proof of a pandemic-related financial hardship such as a layoff or wage-reduction notice from an employer.

Other industry partners have taken a neutral stance but have privately urged members and the Governor to oppose the bill because of its impact on mom-and-pop housing providers. Many in the landlord camp assert that income lost between March 2020 and January 2021, even with the provision that tenants pay partial rent, will put small landlords at risk of losing their homes and retirement income.

With neither landlords’ advocates or tenants’ groups totally satisfied with the legislation passed, there is at least a universal consensus in the rental housing industry that the legislation is a far better alternative than Assembly Bill 1436, the original proposal floated to address the impact of the pandemic on landlords and tenants.

Informed guidance in every season

This has been a moving target. Never in our careers have we been asked to digest so many legal updates and ever-changing statutes, ordinances, and regulations than in the past 18 months or so. We can exhale somewhat with the passage of AB 3088 because it removes a lot of uncertainty - we have a legal roadmap to follow.

We will continue to produce materials on the nascent legislation and will be hosting a webinar on the topic later in the month. We invite you to register for this one-hour webinar on key takeaways from the bill and how landlords and property managers can survive and thrive in a new regulatory regime.