The prospect of collecting rent accrued during the pandemic is not promising
We begin with an analogy. Groceries are essential, but can you walk into a Safeway and get bread, eggs, milk, meat, and other necessities and give the clerk at the checkout counter an IOU? Can you use the groceries and simply tell Safeway that you will pay them back way into the future and if you are still unable to pay for the groceries come spring, the store can take you to small claims court?
That is pretty much what California Assembly Bill 3088 does. Housing is obviously essential, as well, and while tenants are using the housing, there is no guarantee that the landlord will be paid for this essential service.
If the property owner gets a judgment in small claims court, it may not be worth the paper it is printed on. Whether you collect the money is still a story that will unfold. From our experience, actually recovering the money owed is a lengthy process with no assurance the debt will ever be repaid.
If the tenant remains unemployed, you can’t garnish their wages. There are attorneys who specialize in collections, but this requires additional out-of-pocket costs to retain them. Often, the debt is sold to a third-party that keeps 60 cents on the dollar.
Small claims jurisdiction expanded, but this is not a panacea.
Bornstein Law is encouraged that lawmakers have relaxed the rules in small claims court. That is, landlords can pursue rent debt over $10,000, and they can bring multiple lawsuits in a calendar year. We reiterate, however, that collecting the money owed after the landlord obtains a judgment is a whole different story.
Our firm can help you work smarter by negotiating deals to avoid the unfortunate scenario of having tenants remain in the rental unit months on end with no ability or being unwilling to pay back rent that was deferred during COVID-19.
A tenant buyout agreement might be worth exploring to effectuate a vacancy and in the end, prove to be cheaper, less acrimonious, and faster than filing an unlawful detainer action, especially if the tenant retains their own attorney who vigorously fights the eviction tooth and nail. In this webinar, Daniel Bornstein discusses this vehicle at length.