Eviction Moratorium Updates for California Commercial and Residential Landlords
Since the beginning of the COVID-19 pandemic, a variety of eviction moratoriums have been enacted by the local, state, and federal governments. The California state moratorium has recently been extended and modified, and it gives landlords the ability to opt-out of a newly-created rental assistance program. In addition, commercial eviction moratoriums enacted by many cities and counties remain in effect, including in San Francisco and Oakland. This article provides an update on eviction moratoriums, including recent changes to the state and federal moratoriums, as well as the current status of commercial moratoriums.
SB91 COVID-19 Relief: Tenancy: Federal Rental Assistance
On January 29, 2021, Governor Newsom signed SB91 extending California's eviction moratorium, which applies to residential (not commercial) tenancies. The moratorium was scheduled to expire on January 31, and the new law extends it through June 30. Under the new law, if a tenant declares financial hardship due to the pandemic and pays 25% of the rent owed from September 2020 through June 2021, the tenant cannot be evicted. As a practical matter, this means that so long as 25% of the rent for that entire time period is paid by June 30 (even if all of it is paid on the final day), it prevents the landlord from evicting for the unpaid rent. A landlord can still go to small claims court to recoup the unpaid rent, but eviction for nonpayment is not an option.
SB91 has a rental assistance component but gives landlords the ability to opt-out of the program, which utilizes $2.6 billion in federal funds that California received from the recent federal aid package. If the landlord chooses to participate in the program, the state will cover 80% of a qualifying tenant's unpaid rent from April 2020 through March 2021, so long as the landlord forgives the rest of what is owed and does not pursue an eviction. Should the landlord decline to participate, the state will cover 25% of a qualifying tenant's back rent for that time period, which, in theory, would allow the tenant to avoid being evicted under the eviction moratorium.
Federal Executive Order / CDC Eviction Moratorium
SB91 comes on the heels of President Biden issuing an Executive Order on January 20, 2021, which extended through the end of March the federal residential eviction moratorium imposed last year by the Centers for Disease Control and Prevention. Like the California moratorium, the federal moratorium had been scheduled to expire at the end of January. The federal moratorium allows tenants to complete and provide to their landlord a CDC Eviction Declaration Form, which certifies that the tenant has been specifically affected by the pandemic and has exhausted all other avenues for help. Unlike SB91, the federal moratorium has specific income requirements that tenants must meet. It is not clear, however, whether the federal moratorium is applicable in California given that the state has passed SB91.
Local Commercial Eviction Moratoriums
While the state and federal moratoriums only apply to residential tenancies, last year many Bay Area municipalities enacted eviction moratoriums that apply to commercial tenancies, many of which are still in effect.
In San Francisco, the commercial eviction moratorium covers commercial tenants that are registered to do business in San Francisco, have worldwide gross receipts in 2019 at or below $25 million, and missed a rent payment between March 16, 2020 and March 31, 2021 due to COVID-19 related financial impacts. However, it does not cover tenants (other than 501(c)(3) nonprofit entities) that occupy space in property that is zoned or approved for office use. Where a tenant qualifies, the landlord must give the tenant written notice and at least one month to cure before seeking to recover possession of the premises. In addition, landlords must provide covered commercial tenants time after the moratorium ends (referred to as the “Forbearance Period”) to repay the missed rent, with the length of time varying depending on the number of full-time equivalent employees (FTE) the tenant has. Moreover, so-called "Tier 1" tenants – i.e., tenants with 10 or fewer FTEs – have the option to terminate their leases early if they are unable to pay rent due to COVID-19-related financial impacts. In addition, commercial landlords may be able to recover possession early (i.e., before the end of the Forbearance Period) if the landlord owns less than 25,000 square feet of gross floor area and can demonstrate that a significant financial hardship is created by the inability to evict.
Oakland's commercial eviction moratorium covers "small business" tenants, defined under Gov. Code § 14837(d) as a business having fewer than 100 employees, average annual gross receipts of $15 million or less and principal office located in California. Under Oakland's moratorium, a commercial tenant cannot be evicted if non-payment of rent was caused by “a substantial decrease in income (including but not limited to a decrease caused by a reduction in hours or consumer demand)” caused by COVID-19 or governmental response to COVID-19, and it is documented. The moratorium extends through the end of the "Local Emergency" as declared by the City of Oakland last March, which presently does not have a defined end date.
If you are a residential landlord in California, you should familiarize yourself with SB91 and give some thought to whether it would make sense for you to participate in the rental assistance program. And if you are a commercial landlord in a city that has enacted a commercial eviction moratorium, you should be aware of whether you have tenants that qualify for the moratorium and be prepared for the possibility that they may seek to take advantage of it.