California landlords rejoice because neither the Senate nor the State Assembly modified the COVID-19 Tenant Relief Act on September 30th!
The Problem facing California Landlords
California has repeatedly modified the “covered time period” since the State legislature first passed the COVID-19 Tenant Relief Act into law. (Code of Civ. Proc., § 1179.02. See also “California Sides with Nonpaying tenants.”) Similar changes have kept nonpaying tenants in their rented units and caused financial distress to many.
Smaller home investors felt the uncomfortable pinch more than others. The investors who have been damaged most are the investors who purchased real estate with their life savings. They hoped that real estate was a sound investment that would provide for retirement income. But, now they find that the real estate “investment” comes with a forced burden to pay for multiple other families out of their own pockets.
Under the COVID-19 Tenant Relief Act, tenants still owed the unpaid rents. (Code of Civ. Proc., § 1179.03, subd. (b).) Nothing discharged the debt owed. (Code of Civ. Proc., § 1179 et seq.) However, landlords often realized that their tenants were “judgment-proof,” meaning that even though nonpaying tenants owed the money, the tenants could never realistically pay the debts, ever.
What has Changed for California Landlords
When the calendar switched to October 1, 2021, without a new law, Landlords across California officially exited the “covered time period.” Although the laws protecting tenants for the “covered time period” continue to protect them (until 2025, in most cases), missing payments in October 2021 were not “covered,” The landlord could evict based on nonpayment of October 2021 rent alone!
What does this mean? Consider a rental unit that would have collected $10,000 between September 2020 and the end of September 2021. If the tenant paid just $2,500 of the $10,000, a landlord could not evict the tenant. If the tenant started paying rent dutifully on October 1, 2021, the landlord still could not evict that tenant, but traditional rules apply if the tenant is late on the October 1, 2021 payment! Finally, landlords who are unable to pay their mortgages have a method to evict nonpaying tenants.
What do Landlords need to be careful about?
Firstly, Courts are backed up still. Kern County has a judicial form that notes: in response to the backlog, the unlawful detainer process has been extended by as much as 3 months! The Court first holds a hearing to determine if the landlord has merit for the claim. Only after determining a claim’s merits can the landlord file a traditional unlawful detainer suit.
Secondly, the legislature can retroactively “fix” their mistake. Although there are potential claims to an unlawful taking when the law works retroactively, the State could make a strong argument to support a new law that passes during the next session and applies “as if” it went into effect on October 1, 2021.
I find this second risk to be unlikely but possible. The first risk is just a headache that landlords must deal with, much like the COVID-19 protections themselves.
Ultimately, the law gives the landlords the ability to be landlords, and the State that defines that law has the right to define the terms under which it will allow the institution to continue. Even in America, “freedom” is tentative and contingent.