SB91 – California COVID-19 Tenant Relief Act Extension and Amendment

SUMMARY

A.  Effective Date. Senate Bill 91 (“SB91”) was approved by Governor Gavin Newsom on January 29, 2021 and took effect immediately.

B.  Extension of the California COVID-19 Tenant Relief Act. SB91 extends the California COVID-19 Tenant Relief Act (Assembly Bill 3088) (“CTRA”) through June 30, 2021. Under SB91, the “transition time period” now means the time period between September 1, 2020, and June 30, 2021. Tenants now have until June 30, 2021 to tender one or more payments that, when taken together, equal an amount not less than 25 percent of each transition period rental payment demanded in one or more notices served pursuant to the CTRA and for which the tenant complied with the CTRA by timely delivering a declaration of COVID-19-related financial distress to the landlord. (Note: If the tenant is covered by a local eviction moratorium, the tenant may be entitled to additional time to pay.)

C.  New Mandatory Informational Notice. On or before February 28, 2021, a landlord must provide, in at least 12-point type, an updated informational notice to tenants who, as of February 1, 2021, have not paid one or more rental payments that came due during the covered time period (i.e., the time period between March 1, 2020, and June 30, 2021). This new informational notice contains information regarding SB91, including information regarding the new state rental assistance program. Failure to timely provide the new informational notice may affect the landlord’s ability to evict the tenant. The landlord may provide the notice in the manner prescribed by California Code of Civil Procedure Section 1162 (i.e., in the same manner as a Notice to Pay Rent or Quit) or by mail. A landlord may not serve a notice demanding COVID-19 rental debt (i.e., unpaid rent or any other unpaid financial obligation of a tenant under the tenancy that came due during the time period between March 1, 2020, and June 30, 2021) before the landlord has provided the new mandatory informational notice. The new mandatory informational notice may be provided to a tenant concurrently with a Notice to Pay Rent or Quit or Notice to Perform Covenant or Quit demanding COVID-19 rental debt that is served on or before February 28, 2021.

D.  New Requirements for Notices Demanding COVID-19 Rental Debt. Effective February 1, 2021, any Notice to Pay Rent or Quit or Notice to Perform Covenant or Quit that demands payment of unpaid rent or other financial obligations of the tenant that became due during the transition time period (i.e., the time period between September 1, 2020, and June 30, 2021) must include specified updated text in at least 12-point type. The updated text includes information regarding the extension of the CTRA and new state rental assistance program.

E.  Application of Security Deposit and Payments. For the duration of any tenancy that existed during the covered time period (i.e., the time period between March 1, 2020, and June 30, 2021), the landlord shall not do either of the following:

(1) Apply a security deposit to satisfy COVID-19 rental debt, unless the tenant has agreed, in writing, to allow the security deposit to be so applied. This rule does not prohibit a landlord from applying a security deposit to satisfy COVID-19 rental debt after the tenancy ends, in accordance with California Civil Code Section 1950.5.

(2) Apply a monthly rental payment to any COVID-19 rental debt other than the prospective month’s rent, unless the tenant has agreed, in writing, to allow the payment to be so applied.

F.  Late Fees and New Fees. A landlord shall not, with respect to a tenant who has COVID-19 rental debt and who has submitted a declaration of COVID-19-related financial distress, do either of the following:

(1) Charge a tenant, or attempt to collect from a tenant, fees assessed for the late payment of that COVID-19 rental debt; or

(2) Increase fees charged to the tenant or charge the tenant fees for services previously provided by the landlord without charge.

G.  Temporary Reduction or Unavailability of Services or Amenities. A landlord who temporarily reduces or makes unavailable a service or amenity as the result of compliance with federal, state, or local public health orders or guidelines shall not be considered to have violated the rental or lease agreement, nor to have provided different terms or conditions of tenancy or reduced services for purposes of any law, ordinance, rule, regulation, or initiative measure adopted by a local governmental entity that establishes a maximum amount that a landlord may charge a tenant for rent.

H.  Tenant Screening. A housing provider, tenant screening company, or other entity that evaluates tenants on behalf of a housing provider is prohibited from using an alleged COVID-19 rental debt as a negative factor for the purpose of evaluating a prospective housing application or as the basis for refusing to rent a dwelling unit to an otherwise qualified prospective tenant.

I.  Sale or Assignment of COVID-19 Rental Debt. SB91 implements the following rules relating to the sale or assignment of unpaid COVID-19 rental debt:

(1) No person shall sell or assign any unpaid COVID-19 rental debt for the time period between March 1, 2020 and June 30, 2021. This rule remains in effect until July 1, 2021, and as of that date is repealed; and

(2) No person shall sell or assign any unpaid COVID-19 rental debt for the time period between March 1, 2020 and June 30, 2021, of any person who would have qualified for rental assistance funding provided by the Secretary of the Treasury pursuant to Section 501 of Subtitle A of Title V of Division N of the federal Consolidated Appropriations Act, 2021 (Public Law 116-260), where the person’s household income is at or below 80 percent of the area median income for the 2020 calendar year.

J.  New Rules for Actions to Recover COVID-19 Rental Debt. In any action seeking recovery of COVID-19 rental debt (except unlawful detainer actions), the plaintiff is required to attach to the complaint documentation showing that the plaintiff has made a good faith effort to investigate whether governmental rental assistance is available to the tenant, seek governmental rental assistance for the tenant, or cooperate with the tenant’s efforts to obtain rental assistance from any governmental entity, or other third party pursuant to California Civil Code Section 1947.3(a)(3). The court may reduce the damages awarded to the landlord for any amount of COVID-19 rental debt sought if the court determines that the landlord refused to obtain rental assistance from the new state rental assistance program, if the tenant met the eligibility requirements and funding was available. An action to recover COVID-19 rental debt that is subject to this rule cannot be commenced before July 1, 2021. This rule does not apply to an action to recover COVID-19 rental debt pending before the court as of January 29, 2021. However, such actions are stayed until July 1, 2021. This rule does not apply to any unlawful detainer action to recover possession pursuant to California Code of Civil Procedure Section 1161. Actions for breach of contract to recover rental debt that were filed before October 1, 2020, are not stayed and may proceed, subject to certain restrictions.

K.  Limitation on Attorney’s Fees. In any action to recover COVID-19 rental debt brought as a limited or unlimited civil case, the court shall not, under ordinary circumstances, award reasonable attorneys’ fees to a prevailing party that exceed $500 if the matter is uncontested and $1,000 if the matter is contested. In determining whether a case was litigated under ordinary circumstances, the court may consider the following criteria: (1) The number and complexity of pretrial and posttrial motions; (2) The nature and extent of any discovery performed; (3) Whether the case was tried by jury or by the court; (4) The length of the trial; and (5) Any other factor the court, in its discretion, finds relevant, including whether the tenant or the landlord, or both the tenant and the landlord, would have been eligible to receive a rental assistance payment from a governmental entity, or other third party. This section of SB91 remains in effect until July 1, 2025.

L.  New Requirement for Entry of Unlawful Detainer Judgment. In any unlawful detainer action seeking possession of residential rental property based on nonpayment of rent or any other financial obligation under the lease, the court cannot enter a judgment in favor of the landlord unless the landlord verifies all of the following under penalty of perjury: (1) That the landlord has not received rental assistance or other financial compensation from any other source corresponding to the amount demanded in the notice underlying the complaint; (2) That the landlord has not received rental assistance or other financial compensation from any other source for rent accruing after the date of the notice underlying the complaint; (3) That the landlord does not have any pending application for rental assistance or other financial compensation from any other source corresponding to the amount demanded in the notice underlying the complaint; and (4) That the landlord does not have any pending application for rental assistance or other financial compensation from any other sources for rent accruing after the date of the notice underlying the complaint.

M.  Small Claims Actions. An action to recover COVID-19 rental debt brought in small claims court cannot be commenced before August 1, 2021.

N.  State Rental Assistance Program.

1.  Administration. The Department of Housing and Community Development (the “Department”) will administer the State Rental Assistance Program. Local governments that have a population that exceeds 200,000 will receive money directly from the federal COVID-19 Emergency Rental Assistance Fund and will administer their own separate program in a manner consistent with the State Rental Assistance Program.

2.  Eligibility. To be eligible to receive rental assistance funds, a tenant’s household must meet all of the following criteria: (a) one or more individuals within the household has (i) qualified for unemployment benefits, or (ii) experienced a reduction in household income, incurred significant costs, or experienced other financial hardship due, directly or indirectly, to the novel coronavirus disease (COVID-19) outbreak, which the applicant must attest to in writing; (b) one or more individuals within the household can demonstrate a risk of experiencing homelessness or housing instability, which may include a past due utility or rent notice or eviction notice, unsafe or unhealthy living conditions, or any other evidence of such risk, as determined by the Department; and (c) the household has a household income that is not more than 80 percent of the area median income for the household as determined by the federal Department of Housing and Urban Development (HUD).

3.  Prioritization of Funds. The State Rental Assistance Program will prioritize funds as follows: First, to eligible households with a household income that is less than 50 percent of the area median income. Second, to communities disproportionately impacted by COVID-19, as determined by the Department. Third, to eligible households with a household income that is less than 80 percent of the area median income. Household income is determined as either the total income for the calendar year 2020 or the household’s monthly income at the time of application. For household incomes determined using monthly income, income eligibility must be redetermined every 3 months.

4.  Landlord May Apply Directly. The State Rental Assistance Program allows a landlord to apply directly to the Department for the payment of rental arrears.

5.  Amount of Assistance. Assistance for rental arrears is limited to compensation of 80 percent of an eligible household’s unpaid rental debt accumulated from April 1, 2020, to March 31, 2021, inclusive, per eligible household. “Rental debt” includes rent, fees, interest, or any other financial obligation under a lease for use and occupancy of the leased premises, but does not include liability for torts or damage to the property beyond ordinary wear and tear. Funds used to provide assistance for prospective rent payments for an eligible household shall not exceed 25 percent of the eligible household’s monthly rent.

6.  Agreement. As a condition of receiving rental assistance from the State Rental Assistance Program, a landlord is required to accept the rental assistance payment as payment in full of the rental debt owed by any tenant within the eligible household for whom rental assistance is being provided for the specified time period. The landlord’s release of claims takes effect upon payment being made to the landlord of the rental assistance. As part of the agreement, the landlord is required to release any and all claims for nonpayment of rental debt owed for the specified time period, including a claim for unlawful detainer, against any tenant within the eligible household for whom the rental assistance is being provided.

7.  Limitation of Assistance If Landlord Does Not Participate. If a landlord refuses to participate in a rental assistance program for the payment of rental arrears, a member of an eligible household may apply for rental arrears assistance directly. In such case, assistance for rental arrears is limited to compensation of 25 percent of the eligible household’s unpaid rental debt accumulated from April 1, 2020, to March 31, 2021, inclusive.

8.  Source of Income. For purposes of the protections against housing discrimination provided under the California Fair Employment and Housing Act, assistance provided under the State Rental Assistance Program is deemed to be a “source of income,” as that term is defined in subdivision (i) of Section 12927 of the California Government Code.

9.  Receipt. Assistance provided under the State Rental Assistance Program will include a receipt that provides confirmation of payment or forgiveness, or both payment and forgiveness, as applicable, that has been made. The receipt will be provided to both the eligible household and the landlord.

The law firm of Wallace, Richardson, Sontag & Le, LLP represents landlords, property management companies, institutional and private lenders, employers and insurance companies throughout the State of California in real estate, business and employment litigation. The information provided herein is for general interest only and should not be relied upon or construed as legal advice.