Tensions Arise Amid COVID-19 Impact on Property Owners
On March 16, 2020, California’s Governor issued an Executive Order (N-28-20), placing a state-wide moratorium on both residential and commercial evictions for non-payment of rent due to COVID-19. Currently, the Order will be in effect until May 31, 2020, directing local authorities to expand as needed. The ramifications of such an order will affect property owners for the foreseeable future. Following the Governor’s lead, most, if not all, city authorities quickly began to implement rules affecting commercial and residential evictions upon a written statement expressing pandemic related hardship.
These rules are designed to protect tenants and small business owners. Yet, more likely than not, property owners will experience the financial strain of chasing after unpaid rent when courts finally open. Even then, court delays will take a toll on collections. To complicate matters further, tenant activists are threatening the California Apartment Association (CAA) with rent strikes. In response, CAA urged owners to come up with individual plans to assist tenants in need while sponsoring legislation such as SB 1410, intended to ease financial tenants’ burdens as a result of the pandemic. May 1, 2020, is the targeted date for rent strikes.
California Governor’s moratorium did not prevent all evictions, just the ones pertaining to COVID-19. However, on April 6, 2020, California Judicial Council took it a step further and adopted an emergency rule banning all unlawful detainer filings for at least 60 days. CAA immediately issued criticism of the ban pointing out that almost everyone could simply choose not to pay rent, even those who can afford it. As a result, property owners will be unable to pay mortgages and taxes, impacting the economy as a whole.
In an effort to ease the growing concern over unemployment, individual localities issued Emergency Orders tailored to the needs of local citizens and small businesses. For instance, the mayors of San Francisco and Los Angeles each implemented an eviction moratorium on commercial leases arising out of business closures and reduced customer demand. In San Francisco, small business protections are made available to tenants that gross $25 million or less in business revenue. In Los Angeles, the County Board of Supervisors reportedly extended the eviction moratorium for tenants from March through May 31, 2020. Depending on the county, eligible tenants may have up to three or six months following the expiration of the Emergency Order to repay outstanding rent balances.
Until there is one single uniform policy in place, we encourage all property owners to become familiar with local ordinances and keep in mind that temporary measures are modified on a regular basis.
For more information or specific guidance, please contact Anna Greenstin Kudla or the Walsworth attorney currently working on your real estate matter.