Landlord Survival During the Pandemic and After

Various executive and emergency orders at all levels of government have granted rent forbearance to both residential and commercial tenants.  While this certainly has all the attributes of a regulatory taking, these orders have been couched in terms of emergency orders.  So, while the Constitutional Law analysis of whether a Landlord can be ordered to not demand rent, not charge late fees, and interest while being precluded from utilizing the eviction process is intriguing, it will be the focus of another article.

Right now, it’s about understanding what the Landlord faces and what actions they can take now to better protect themselves.  This article is focused on San Luis Obispo County.  If you should wish information on various other cities or counties, we have that information available.

Per San Luis Obispo County emergency order #3.  As of March 18, 2020, through a termination date of May 31, 2020, any tenant whether residential or commercial has 30 days from the date rent is due to give notice that they cannot pay the rent and give proof that the reason they cannot pay the rent is related to the pandemic.  The time to repay the rent that is deferred is 6 months after the expiration of the County emergency.  This order applies to both residential and commercial tenancy.

https://www.emergencyslo.org/en/resources/Current-Emergency-Information/Documents/Local-Emergency-Order-3-Corrected.pdf

Landlords need to prepare for what is to come. 

Some cases may entail 60 days (2 months), for those whose rents were received for March and are only dealing with April and May rent. Our example assumes three months 90 days (3 months) of rent forbearance.  All these numbers can go up as Governor Newsom has been noncommittal on a reopening date for the state and the county can easily extend the emergency order.

The tenant has six months from the termination of the order to repay those 90 days of missed rent.

A landlord cannot file an unlawful detainer action against a tenant if the reason a tenant cannot pay the rent is related to COVID-19 and the tenant explains the situation to the Landlord in writing.  During this time a landlord cannot demand rents, late fees, or penalties

A landlord cannot evict a tenant for not paying the deferred rent after regular rent payments resume. So, the expectation is that 90 days (3 months) of deferred rent will be paid current in 6 months.  What tenant will be able to “spring back” and immediately be able to pay the regular rent plus another ½ that amount for six months to become current at the end of the six-month grace period?

Why wouldn’t a tenant who has reached the end of his lease simply vacate and move across the street where they will only be paying market rent?  The Landlord may keep the security deposit, but this will only cover one month rent if there are no other issues that the deposit would be used for.  Then, the Landlord must choose to pursue the remainder owed in small claims or simply write off the loss.

Clearly, problems are brewing on the horizon.

We suggest you utilize California Association of Realtor (CAR) form RPD (CORONAVIRUS RENT PAYMENT DELAY AND REPAYMENT AGREEMENT).  Which addresses the pandemic rent abatement issue with a form that can be utilized to memorialize any agreement made between the Landlord and the Tenant.  This form may not be dispositive in Court, but it will certainly lend credence to and support the Landlord’s claim for back rent.  It will also show good faith on the part of the Landlord for attempting to work with the tenant prior to filing any Court action.

If you are renewing any leases and you have been utilizing the CAR Residential Lease or Month-to-Month Rental Agreement (CAR Form LR).  Review this document closely.  Section 36 references “Attorney Fees” and the default is a cap of $1,000.00.  This amount will not go far when you are seeking professional help with an eviction.  We suggest you utilize the modification box and put $10,000.00 as the max for attorney fees.  This amount opens up broader options when it comes to pursuing recovery.   

The future will be a trying time for Landlords.  The executive and emergency orders, while good intended, have placed a substantial burden on Landlords.  The law is supposed to be stable with small incremental changes.  The stability is required so that planning for the future has at least some foundational underpinnings.  The pandemic and related orders have changed that.  Before this is over, new orders will be made that will force us to react once again.  But, at this time, we believe the above may be helpful in taking some affirmative steps toward protecting your future.